BILLING...FLAT FEE versus HOURLY RATE

So with much reported down time in US have  you reviewed your billing procedures and rates?


Do you charge out an hourly rate  fee for service or do you set hourly rates for crew members plus expenses?


I generally get flat fee request.


The sell is in the pitch .

For my work, where time constraints is a factor I believe that you have to pitch that really percentage for survey fee dollars is extremely low, so that your perceived higher fee comes with a guarantee that you will complete the survey in a minimum of time, with an overall saving for the project that is far greater than choosing the cheapest quote, THE SAVING COMING FROM interest saved due to an earlier settlement.

I actually prefer flat fee, with proviso for unforeseen circumstances....

While I know it is illegal to tout hourly rates I have wondered about listing all the items that should be incorporated in determining a charge out  hourly rate for different crew?


RADU

While I know it is illegal to tout hourly rates

In the U.S. there's nothing illegal about publishing hourly rates. It is, however, illegal to conspire with others to fix hourly rates.

If I wished, I could put up a web page with my rates on it, and other land surveyors in my area could do the same thing. As long as there's no collusion in the establishment of those rates, no laws will be broken.

Personally, I was surprised that the feds got a conviction on that Arkansas bunch.  As I understood it, no fees/rates were "fixed".

Just shows that we need to replace nearly all of the politicians and most, if not all, of the bureaucrats.

SJ

Jim, I was thinking more on chatting about rates , rather than publishing. Not conspiring, Burt i believe if I say I chartge X , you say Y and somebody says Z then it can be contrued as conspiring as the highest will be assumed to say to the lowest well now you know you are not charging enough...

Reality is that business men should be testing water to increase real profitability by appropriately allowing for all contingency costs and not submitting a fee just to stay alive and keep their head just above water.


RADU

In the past, here, time constraints used to be a selling point, and it still is to some extent, but now, there are plenty of surveyors available and willing to jump on any work, so we are not able to compete on time of completion as well as in the past. Anyone price shopping can get any number of bids from surveyors willing to jump on the project immediately.

If you knowingly post your rate then you are asking to be cut off at the knees ;)

In answer to the initial question, no, Sir Richard, I have not seen a great shift in how surveyors are pricing their services.  I have been trying to convince my fellow professionals all around this nation that this is exactly what we need to do.  To date I have heard lots of folks say that they couldn't possibly do things the way I described in my pricing class.  They complain that the only thing clients want is cheap, cheap, cheap.

A few folks have begun to shift toward a "project specific" pricing model.  The problem is this is something new to surveyors.  Sadly we have seen that anything new is greeted with huge resistance by the surveying community at large.  (See the huge numbers of folks whining and crying about how this very board changing was a sure sign of an impending apocalypse.)

We even have well known and otherwise respected persons in the profession going around the country advocating a pricing method that calls for taking labor cost and using a standard multiplier to arrive at a rate.  That is so much hogwash and a big part of what is holding the profession back today.

Mr. Frame is right, there is nothing wrong with publishing standard rates.  But why in the world would you want to do that.  Publishing a rate tells an individual client nothing of value.  It reinforces the notion that surveying is a commodity and the way to choose between providers is price alone.  That is exactly what we need to move away from.

Mr. Johnson has it slightly wrong.  The Feds did not get a conviction in the Arkansas case.  It was settled before trial.  There are some that believe the NW Chapter would have won the case.  Having talked to several folks directly and personally involved, I'm not so sure the Chapter would have won at trial.  One person in that area (an Attorney and PLS) sent out a letter stating that the minimum price for lot surveys would be no less than a certain amount.  Several folks started charging no less than that amount.  Humm.  Seems to me like the Feds might have been right in that case.  The real shame is that not all the persons in the area nor all the persons in the NW Chapter were involved.  In fact it was a very small number of folks who participated and yet everyone suffered terrible long term consequences.

Sir Richard, I slightly disagree with you that we should be discussing rates.  I contend having rates is a big part of the basis of the problem.  Why have any rate at all when the goal should be to treat every job like it was a tailor made suit.  No two jobs are alike and the value to no two clients is exactly the same.  If you price each project individually, you suddenly are providing a much better service to the client because they know a realistic cost before the project begins.  Tell them an hourly rate and they know nothing -- except that they can compare the rate of a firm across town who may or may not be using comparable technology.

Sam,  why is it clients focus on price alone?  It is because that is what we allow them to focus on.  Shouldn't we instead help them to focus on the more important things like value?  Having rates you quote does nothing to promote the value of your service.

Mr. (or Ms.?) Cushion, exactly right.  I say you should never publish a rate.  Again, telling a client a rate per hour tells them nothing of value and allows them to focus on the wrong things -- money alone.  I hope no one here would contend the way to get the best possible value in a professional service is to compare posted hourly rates.

(rant over)

Larry P

I think most of us prefer to quote a fixed fee, that we base on our estimated time, value to the client, and what the market will allow.  Which has been tough lately.  One thing I usually will do when I don't get a job is politely ask the now non-client, who is doing it and how much they are charging.  Most of the time they will tell me.

One exception is construction staking.  That gets kind of tricky to estimate, even with a well defined scope.  Another is totally unforseen conditions or expenses.

I have to agree with Larry. I never do an hourly rate, people tend to look at that as a no win situation (at least in my neck of the woods). People want to know up front what the costs are going to be, it's up to the surveyor to finish the project in a timely manner as to not loose money in the process. I have gone over my bids several times, usually to do some extra surveying of adjoiners to be absolutely sure my client will not end up in court, dragging me along. I tell my clients up front that I take my time and go beyond the scope of work to be sure no problems arise later. Just my 0.02 cents worth....and I'm sure the construction surveyors will charge by the hour...which makes sense to me...

If you offer hourly rates, standard fees for surveys, charge by the foot, or itemize your invoice then you are WAAAAAAY behind.

Hourly rates are not good, nuff said.
Standard rates do not help your business or your clients.
Charging by the foot? seriously are you still doing that? wake up!!! it is 2010
If you itemize a proposal/contract/invoice you have opened yourself to get beaten down.


Your new flat rate fees can be calculated using estimates of your former fee structure and include a range.

example:

• ESTIMATED CONSIDERATION FOR PROFESSIONAL SERVICES:

As consideration for the services to be rendered by SURVEYOR under this agreement, the estimated cost to CLIENT will be a minimum of $__________ and a maximum of $__________, subject to any adjustments in Paragraphs 5 and 6.
 
 

• ADDITIONAL CONSIDERATION:

In the event of additional, unforeseen, but necessary services are required of SURVEYOR in order to complete this agreement, and the cost of such additional services exceeds the maximum estimated consideration in Paragraph 4, SURVEYOR will obtain oral or written authorization from CLIENT before performing and charging for said additional services.
If additional, unforeseen, but necessary services are required of SURVEYOR in order to complete this agreement, and the cost of such additional services exceeds the maximum estimated consideration in Paragraph 4, and CLIENT declines to pay for such services, CLIENT will pay for services performed up to that date, SURVEYOR will forward CLIENT all work product pertaining to CLIENT’S account, and thereupon, this agreement will be terminated.
 

While historically most of my work has been performed on a lump-sum basis, I have several multi-year contracts -- awarded as the result of a QBS process -- that require time-and-expenses invoicing.  In the last year, one of these contracts has been responsible for the majority of my billings. 

Hourly rates plus expenses seems like an eminently sensible means of relating the work performed to client cost in these cases.  If some technological or work process change were indicated to more effectively or efficiently perform the work, an addendum could be executed to alter the charge structure.  Until that happens, I'm quite content to continue billing on a per-hour basis.

It is all about showing value. We strive to have a consultative relationship with our clients versus a commodity relationship.
 
Over 2/3rds of our work is repeat clientele and the remainder is typically word of mouth. We are in the phone book. When someone calls shopping prices we typically refer them to someone else.
 
Maintaining clientele means maintaining VALUE, which DOES NOT mean being the cheapest service provider. It means being the best value. The majority of our work is time and material with hourly rates, which in turns meaning being able to demonstrate how much our works saves our clients in their total project costs.
 
We try to do more lump sum work with new clientele.
 
 

Falk is right! That's right, I did say that. That is the way a "professional" business should be built, on qualitative client relationships. Professional services contracts with public agencies are rarely based on low bidder. They are based on qualifications and past performances in some cases. You compete for those contracts by making better presentations than your competitors, not cutting their prices. And compliance is expected once the process begins. These can be lucrative if you have the "right stuff". Read Jim Frame's post again.

If you are waiting at your phone for the engineers to call you to do some construction staking at hourly rates, you might start writing your Great American Novel. The way Machine Control is beginning to dominate that market you may finish that magnum opus before the phone rings. Or, you could do what I did yesterday and work on your stand up comedy act.
MLB

I agree with others about putting a value to what we do.  I often tell people that they have to "put a  value on my services" and then often tell them to compare it to a car.  Most people can see the difference between a $1000 car and a $10,000 car, but its hard to see the difference in the quality of a survey. 

Larry.

I believe that it is essential to determine an actual hourly rate cost.

That is why I suggested the formation of a  potential expense list as I confident that many surveyors either do not know of  what are hidden expenses.

Eg down time , research development of new procedures and equipment, attending conferences, you call it  E&OE insurance  etc.


That said I do not believe that surveyors  budget allocated percentages to each little expense box. Or  are in position to determine reasonable percentages. Then determine a number of billable hours per week, etc  to then start working out a budget . So that  then when flat feeing a job a profit line can be confidently aimed for.

pim cushion, who ever you are is on the money then stating an estimated fee with a disclaimer based upon current information and preconceived  site conditions.

To give confidence to clients and answer David Livingstone  I say that it really is extremely difficult to price a surveying project to the cent as there are so many variables.

I then say  that unlike a builder with a set of plans he/she can determine a take off and thus accurately determine cost of all material and from experience from prior jobs allow so much per square meter/ number bricks etc to then build the house to a fixed price. We on the other hand arrive on a site to find corner pins dozed out , cannot find all the old survey information, have been told the site is clear when it has 1m  high gauze and  in your case poison ivy on the site. ( conveniently omitted by  the client.

Yes rational DIALOGUE is a skill that must be learnt. You must set potential client at ease with out appearing arrogant, but  knowledgeable with experience.

Be brave to state to your client that you are not the cheapest surveyor in town ! But then follow up to say that you are extremely confident that they will get value for their spent dollars as in my case they access the experienced surveyor and decision maker!

Believe me there are client who appreciate the personal touch and they are the ones you want to team with as they are generally organized business operators or appreciate at least you are organized to take care of their problem and therefore  pay promptly!

RADU

Anybody read Dan Beardslee's excellent book "Business Management Handbook for Land Surveyors"?  Sage advice there...

lump sum all the way

With on-call Public Works projects (most of my work), you have a base contract with an hourly rate schedule. You then provide an estimated budget for any single project. Since most work is prevailing wage, you need to keep detailed time and billing sheets for the eventual audit.

But private, lump sum is the way to go..

I can't make a blanket statement about either method of billing.  I've got a couple of phone companies that just send me jobs and I bill them hourly, then sometimes they complain and I have to explain why that one was harder than the last one.  Then they pay, but I wonder if they're hunting for a low-baller for the next job. 

Since we've been in business in this area over 50 years (I've been the boss for 27) we have several clients that just call and say they need something done and they know we'll charge them a fair fee for services rendered.  I don't know any other way to do that than add up our time at our charge-out rates that are supposed to cover overhead and profit.  What else would I do, stroke my beard and divine a value to that work?

New clients - Flat fee is the best method because they don't know us, we don't know them.  They want something done and they know what it will cost up-front (with contingencies if necessary) and they have agreed to pay a certain amount in a written contract.  If you want to take advantage of previous knowledge and charge on a value basis or estimate the T&M, you can win or lose with a flat fee.