Charging by the pound
By Norman Horton
In last month’s article, we talked about the problems we have billing a customer in a fair and equitable way. On a heavy tow or recovery the prevalent method of billing today are by the mile or by the hour. Obviously, if you have a heavy recovery most of that will be charged by the hour.
Where did charging by the mile, come from? Basically it came from the trucking industry. Keep in mind that fixed costs for trucking companies are generally spread over 100,000 miles per year per truck. A heavy duty tow truck that runs 100,000 miles per year is a rare exception.
So we charge the same rates or less per mile with a unit that can cost two or three times the brand new tractor we are towing. To top it off, we run 25 to 30 percent of the miles that the trucking company runs. Why? Because, the guy down the road charges 90 cents a running mile!
Since we know we’re going in the hole running up and down the road, we have to make it up on the truck wrecks. We have our nice $150,000 big hydraulic. Our arm is covered with patches saying we’re nationally certified. Armed with the knowledge from Ross Kinman, Mark Anderson, Tom Luciana, Joe Sroga, and WreckMaster schools, we proceed to work smarter, better, and faster than we ever have before. SO WE CAN CHARGE BY THE HOUR AND GET PAID LESS.
Maybe that’s why your heart surgeon (who you’ll need after smoking three packs a day for 30 years while eating hamburger for lunch every day) gets $15,000 for open heart surgery. It doesn’t take him all day to do the job, either. He’s smart enough to figure out that since he’s specialized he needs to charge for the job and not for the time.
Ross and Roger Kinman sometimes charge by the “What.” But, how do you explain to your customer how you arrived at that WHAT? Maybe we need to learn for pros in other jobs, who are successful and charge by the job. Let’s look at a repair garage.
If you have a garage, you have a mechanic. A good mechanic wants to work on a commission, because he knows he’ll make more money than ever could on a straight hourly rate. Also, if that job is flat rated then everybody knows where they stand. There are no surprises. For example, book time on a Cummins water pump is four hours. Your customer calls, “Hey, what’s it going to cost me to change my water pump?” Well, four hours times $45, you’re looking at $180 labor plus parts. Now many of us would get the job, if we said $45 an hour for no matter how long it takes, (and for each person that we have there).
By the way, for each toolbox that we roll over, (in case we need a wrench) we’re going to charge another $50 an hour. We have a supervisor, so we’re going to charge $60 an hour for him. Wait a minute, we have a shop light, and we have to charge for that. Oops, let’s charge for that air hose, we have 50 feet of air hose reaching over there.
Do you get the picture now? Your garage customer would feel the same way about your antics as you do about your attorney after he finishes charging you by the hour for the work he’s done. You don’t have a clue what he’s done or if you’re paying for somebody else’s work. You only know what he’s telling you.
Let’s go back and charge that water pump job the way it ought to be charged on a flat rate basis. You tell your customer $180. You pay your mechanic 40 percent of that $180. Your mechanic rolls over that Snap-On toolbox, one, mind you, not four or five. He pulls out a air ratchet and an impact gun. He goes to work and does that job in two hours. Same job, twice as fast!
The mechanic made more money per hour, (and so did you). The customer knew exactly what it was going to cost him. Not only is he tickled pink, because he’s on the road two hours quicker than he thought he’d be and back to making money. But it didn’t cost any more than what he was told. If the job takes longer, it’s not the customers fault. He doesn’t pay more because your mechanic’s air ratchet broke down or because he had to bring more tools to finish the job.
The problem with charging by the hour and the equipment that we have on the job is that it lands the responsibility for the bill squarely on your shoulders. If we didn’t have to bring five trucks out; if we could have the job done in three hours instead of 10; if we didn’t have to have so many people; and if – you get the picture.
The bill is our problem. It is our fault. A mechanic I had working for me, with years of dealership experience, taught me a valuable lesson. He said, “Don’t let other people make their problems your problem.”
You didn’t roll that tractor trailer over in the ditch, neither did I! You know it’s their tractor trailer, it’s their accident, and it’s their driver that put it down there with the wheels higher than the roof. It’s our opportunity. The customer doesn’t give two flips about your trucks, the people you have out there and whether you used one truck or 10 trucks. All he wants is that tractor trailer sitting back up on its wheels, with the least amount of damage. Once it is on its wheels, the value of the service you performed rapidly diminishes.
That’s why your attorney wants his money up front. So let’s quit beating our heads against the way and charge by the job. Let’s pop him a number. “Sir this is a $7,000 job.”
“What do you mean $7,000? All you did is take a set of air cushions and a couple of trucks to set that right up. It didn’t take you but two hours.” Yeah, I figured you’d say that Mr. Customer, so that’s why we’re going to break this down to the lowest possible denominator. Let’s go back to high school to Mr. Muck’s math class, and let’s put the jelly on the bottom shelf. Let’s make it simple where even the most brain-dead of safety managers and insurance adjusters can figure out the rates.
Just like your cell phone people say, “Its only 25 cents a mile!” Yeah right! Check out my $900 cell phone bill. But what can I say? If I hadn’t spent all that time talking, we wouldn’t have had that high of a bill.
Back to the truck, it wouldn’t cost you that much if your truck didn’t gross 80,000 pounds. (I always assume it is grossing 80,000 pounds, unless, he wants to show me a scale ticket proving otherwise.)
Now, let’s take that $7,000 and divide it be 80,000. Hmm. That customer is going to have a real hard time trying to say you ripped him off. It doesn’t even sound logical for him to sit there and tell you that his $5 a pound T-bone steaks aren’t worth eight cents a pouund.
It’s like going to McDonalds. I know I’m going to spend too much money. But, it’s all there in black and white on the board. Each price adds up to a bigger total cost.
Several years ago we designed the system of charging by the pound. We have a base price for the air cushions and the trucks. Add-ons such as the wheels higher than the roof, back door open, tractor pulled out from underneath the trailer, all the different oddball stuff you run into are added on just like you would add .5 hours for power steering to your water pump job.
That’s all well and good. Except I had a job were I spent two days picking up lumber. If I had charged by the pound, I would have lost my shirt! So, don’t charge by the pound on a job like that. Our Price Per Pound rate sheet is in addition to our normal hourly rates for small recoveries, which outs, or oddball recoveries and our mileage rate sheet. Some additional benefits: Who pays you for the five to six hours you spend in the office figuring the bill out, sorting out all the equipment, personnel, and times on and off the job. Who pays for the time you spent arguing with the adjusters over five minutes you overcharge with one of your trucks. Uh Huh! That adjuster was keeping score, too.).
When the adjuster asks you to split up the bill because of the three insurance companies, (tractor, trailer, and cargo), don’t! At least, not until you get paid. Then instead of taking another three hours to break down the bill, tell the adjusters to take the weight of the tractor, trailer and the cargo times the Price Per Pound. Then he will have his figures. The tractor and trailer insurance company are going to be jumping up and down, they’ll be so happy. But the insurance company for the cargo will be ticked. They’ll have to pay their fair share of the load for a change.
Adjusters can be the world’s best at putting you against your competitors. So and so, only charges so much an hour, why do you charge per hour? I don’t, Sir. Nobody likes to look stupid. Least of all your adjuster, He has a college education and you’re just a tow truck man. But, he doesn’t know anything about charging by the pounds. He’s going to pay it and try to check it out, and maybe catch you on it next time.
But, since you have a rate sheet, and it’s on file with everyone, you didn’t pull a number out of thin air. Even when he does figure it out, he will just have to bite his tongue and move on.
(Article written by “Stormin” Norman Horton, owner of Stormin’s Towing, Ozark Alabama, and reprinted with permission of Towing and Recovery Phootnotes, and was printed February 1996 on page 14)
