PRICE PER POUND - REVISITED
From the amount of phone calls that I have been getting lately - it is time to revisit Price Per Pound (PPP). I developed PPP many years ago and it is used by many heavy duty towing companies across the country. I will be making some comments about PPP that are rather direct and some may be downright blunt. But they need to be said because of the issues and mis-applications of PPP that I am seeing.
PPP is a pricing system that should be in your toolbox. However, PPP should not be considered a 'one size fits all' type of tool. When you go to your toolbox to work on a truck you have an assortment of tools. Whether you use an open end wrench, box end wrench, or a ratchet, you try to select the best tool that fits the need. The PPP system is not to be used with every application.
First of all - this system is designed to be fair. It should be fair to the towers and fair to the customers. How do you determine fair? The best way to determine fair is to ask this question 'Can you justify it?' If you were called into court would you be able to explain and justify your bill and how you arrived at the bill? So how do you justify your bill? That is very simple. Just pretend that your heavy duty wrecker rolled over and you're on the receiving end of the bill. How would you feel? I do not mean how do you feel about having your truck roll over. I mean would you feel that the man was being fair about the bill amount? Lets face it - you are not going to like getting a bill for setting up your own truck or having it towed during a break down anymore than a trucking company would or does. That is my whole point. It is not about liking or not liking that bill - it's would you feel he was fair about charging what he did? Now turn around and look at your bill and pretend it is your truck that rolled over. Would you feel your bill is justified and that it would hold up in a court of law? If you can - then it is justified and probably fair.
Next, as I said earlier, using PPP is not what you would do in every single situation. So how do
you know when to use PPP? First of all there is a two part test that needs to be taken. The two questions in the test are:
(1) Is the truck drivable when you complete the recovery?
(2) Was the incident severe enough that the insurance company or in the case of a self insured company their safety department had to get involved?
If the answer is YES to #1 and NO to #2 - then it is not a PPP job. As a general rule #1 should be answered NO and #2 should be answered YES for it to qualify for PPP. (If the truck is driveable on completing the job and insurance or safety is not involved it is probably not a PPP job.)
Let's look at some examples:
1. You get a call for a nose down trailer - NOT a PPP job.
2. Tandem has rolled off into the ditch from the driver cutting the corner to sharp - NOT a PPP job.
3. Driver pulls off the side of the road and sinks his trailer in the mud, you winch him out and he drives off - NOT a PPP job.
What about cars? In my opinion using PPP for cars is not proper. One of the things that I tried to do while developing the system, (and this was a business principle that you would use when dealing with any customer regardless of the business,) is relate to the customer in a method and means that they understand. Do your automotive customers know what a 50 ton wrecker is? Do they know what a 25 ton wrecker is? Do they care? The answer to those questions is 'no' and they shouldn't need to care. What they care about is that their car or truck be set up quickly, efficiently, as soon as possible and with minimum damage done to their equipment. That is all they care about.
Second of all - what do they understand? If they do not understand your equipment (and they
really do not care) then why are we charging for our equipment? If we have a means of charging
them that relates to something that they not only understand but in many cases charge their own
customers with - then we have something. That something is PPP.
Your trucking customers live and die by weight - at the scales, if they are a LTL they charge for
each package by the pound, if they are a truck load carrier then they often charge not only by
mileage but they have to make sure that the weight meets the constraints they have and they all
look at the pace report and gauge their trucking company against others on the revenue per ton
mile.
So what about the car owner? He does not know what his car weighs nor does he care. So you are confusing that poor customer with the facts. He does not understand. Not only does he not
understand your tow truck he does not understand the way you are charging him. So why confuse him? Life is hard enough so make it easier for them.
The other area that I have seen many problems with is called 'double-dipping.' Can you justify
why you are charging the man for something that you would not sit still for? For example - I have
seen people charge 'X' cents per pound for showing up within a 50 mile radius. Now wait a
minute. If you're billing a flat rate to show up with your equipment to do a job why in the world do
you want to turn around and charge them again for showing up when you already charged for that
in the base rate?
We charged for 50 - 100 mile zone because we traveled outside our normal trade area. But this was a minimal charge that barely covered expenses on our equipment to get there since I wanted these out of town jobs. Another thing is charging for the speed limit. There are the two schools of thought on that. The first, is that we are supposed to determine how fast the truck was going when it had an accident. I am sorry - but we are not accident investigators or accident reconstructioners. Other than a morbid curiosity as to how the driver got into a wreck, it is none of our concern. The accident is what it is. It is lying where it is lying. We have to recover it.
The second is to charge for the posted speed limit. I was told by the originator of the miles per
hour charge that the basis for the charge was not how fast the vehicle was going but rather what
the posted speed limit was posted on the side of the highway. So let's visit that for awhile. If, for example, you are out on the side of the road and you are setting up a rig for Ryder (one of your regular customers). The DOT is out there with their barricade trucks, pylons, light boards and the troopers and police are out there along with everybody and their brother providing a shield of lights around you while you do your work. Can you imagine justifying that in court …it would
probably go something like this:
Tower: We charged another $.02 a pound because the speed limit said 75.
Lawyer Well, Mr. Tower - how fast were those people going?
Tower Your honor they were not going 75 mph because of the traffic jam. They were actually crawling by at 5 mph because we had ½ the road blocked.
Lawyer: Okay Mr. Tower let me ask you this. Do you do any other work for Ryder?
Tower: Yes - we sure do.
Lawyer: Have you ever hooked up to a tractor trailer on the interstate on the side of the road?
Tower: Yes - we sure have.
Lawyer: Were the state troopers out there?
Tower: No sir - it was just a break down tow.
Lawyer: Were the DOT out there with light boards?
Tower: No sir
Lawyer: So did you have any protection other than the beacon light on your wrecker?
Tower: No sir
Lawyer: Well Mr. Tower did you charge that $.02 cent a pound for the hazard that you put yourself in by working on the side of the interstate with the 75 mph posted and the traffic going by at 75 mph?
Tower No your honor I didn't.
Quess what? You just figured out you have a problem justifying that charge. As you read earlier in this article I mentioned that you need to be able to justify what you are doing. If you cannt justify it - you surely do not need to be charging for it. Because you will be blown out of the water if you end up with anyone who has any kind of common sense.
Any of the PPP charges that are add-on charges need to be for work that does require additional equipment, time and labor, or if there is an additional risk to you or your insurance company, as would be with a hazardous material.
Another area that falls under the double dipping problem is that when using PPP you use PPP.
You flat rated the job. You do not charge by the hour, the man, the truck, front end loader or etc… on top of charging by the pound. It is either one or the other. Charge by the pound or charge by time and equipment.
It is really very simple. By the way - for those of you - and I know this from states and police
departments that have excluded PPP - if PPP is used properly it is not only simple but it is a very fair way of doing things. In some states like Florida who have their heads up their ….well, you know, they are paying thousands of tax dollars out of taxpayers pockets as incentive for the tower to get the job done quickly.
Let's stop and look at this. PPP enables the tower to be paid well for being fast and for being
good. So let's just pretend to be real smart and outlaw PPP because it must be the pricing METHOD causing problems, not the man holding the pencil and doing the calculations. No…in reality it is the man not the method. If someone is going to rip you off they are going to use what ever method is possible. So the government is going to try and outsmart the tower and we are going to tell them that they have to charge the hourly rate set in their zone for each truck AND we want that rollover done in an hour and we are going to pay that man $250 for a $500,000 rotator. He comes out and sets that unit up in an hour ½ and he charges $400. What a joke. Is it any wonder that towers are bringing out every piece of equipment, their aunts, uncles, brothers and convict labor so they can run the bill up to where it should be. And you wonder why you have to turn around and pay $5000 out of the tax payers pocket to get the tower to get the job done quickly - especially when customers will gladly pay a fair price to get the job done quickly and get it done well. I said fair price, I did not say rip off.
So you are wasting tax dollars because you told the tower that he has to work without getting paid. Somebody is not only a bureaucrat but educated beyond their intelligence. I hope someone in the state of Florida reads this and realizes that what they have done is created a monster that is costing them out of their pockets because they listened to some self-serving towers that had an agenda rather than letting a fair system take place. Now while I am on this rabbit trail - when
governments set prices for towing, which is a topic for another article, then I am sure that they do a comprehensive cost study like they do for utilities to make sure that the towers are guaranteed a profit. Or do they? You mean they don't?
So at the end of the day - most towers have the opportunity to use the PPP system correctly. It allows them to be fair and honest and to be paid for what they are good at. But please - for goodness sake - use it as it was intended, a simple system designed to treat you and your customer fairly and with integrity.
(REPRINTED FROM STORMIN'S WEBSITE - PRIOR PRINTED ARTICLES SECTION JAN 2007)
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