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The Myth Of The “Going Rate or Recommended Rate” For Plumbing Services

The Myth Of The “Going Rate or Recommended Rate” For Plumbing Services

Is there a going rate for plumbers to charge?

Unfortunately, the myth that there is a going rate for plumbers or recommended rate for plumbing services is one of those lovely urban myths that will never go away. Some consumers promote it to avoid paying for plumbing services after completing the work.

Even more disturbing is the fact that it is also promoted by some plumbing contractors who are:

  • lacking in necessary business skills and cannot do basic accounting equations to work out the cost of running their business and provide quality service at a fair profit
  • engaged in payback against other plumbing contractors to undermine their competitors by claiming they are overcharging

Every plumbing company has different costs

Every plumbing business is not the same. Every plumbing business has different cost structures, overhead, and productivity levels required to set a selling price or a break-even price.

It is illegal under the Competition and Consumer Act 2010 for businesses to collude in setting prices or for any set or recommended rates by master plumbers associations.

When many one-person plumbing businesses start, it is far too complicated to put a budget together and calculate the cost of doing business. However, they need to do it to ensure they charge a rate for their services that covers the business’s cost. Unfortunately, most of the time, these one-person plumbing businesses decide to set the going rate for plumbers and be done with it.

So how do these one-person businesses determine the going rate for plumbers?

Very simply, they ring around all their competitors, pretending to be a prospective customer and find out what they are charging for their services. As no professional plumber can give a price over the phone, they tend to only get prices from like-minded one-person businesses promoting a whole undercutting philosophy based on some mythical hourly rate which then becomes the fictitious going rate.

The myth of a going rate is self-perpetuating by plumbers

To see how this whole myth of the going rate for plumbers becomes self-perpetuating, consider the following scenario, which is exactly what happens all the time.

Consider the scenario where  Trevor bought a van, got a new mobile phone, used the tools supplied by his former employer, and opened up “Trevors Plumbing Service.” Trevor knew his old employer, “Gold Coast Plumbing”, was charging $130 per hour, but he knew that his former boss had lots of equipment and paid his employees above the award wages, so he decided to charge only $80 an hour.

A couple of weeks later, Jason, who does not like Trevor, hears that Trevor has opened up his plumbing business. He figures he’s much more intelligent than Trevor, plus he’s sure he’s faster and quicker at plumbing work than Trevor, so he decides to buy a ute, too and open up “Speedy Plumbing.” Jason gets his girlfriend to phone Trevor pretending to be a customer, to find out his charges. Again, Jason does not like Trevor, so he figured he could knock him out of business by charging $20 less and getting all his business. So “Speedy Plumbing” is now in business charging $60 per hour.

Plumbers start undercutting based on the mythical going rate 

Meanwhile, Stephen had opened up “Super Coastwide Plumbing” a year earlier and had just had a builder who supplied him with 90% of his work tell him that he would be using another plumber to do his work in the future. This is despite Stephen providing excellent service but at $100 per hour was way above the going rate for plumbers. Stephen panicked on hearing this and decided to call around his competitors to see the going rate for plumbers. Stephen discovered that it ranged from $40 to $160 per hour.  Stephen decided that to keep his business going, he needed to match the going rate for plumbers and, based on where most of his competitors were, opted to drop his rate to $65 per hour to be under the rate charged by “Trevors Plumbing Service” who appeared to pick up lots of work.

Meanwhile, over at “Gold Coast Plumbing”, the owners are having a meeting. “We aren’t making enough money to cover our costs!” They say. “Well, we can’t increase our rates because we’re already one of the highest in town — $70 higher than some after ringing around to find out the going rate for plumbers is.” The owners are frustrated because they’re gradually watching their business go down, a company that’s been in their family for three generations.

The going rate for plumbers myth destroys businesses and families

What happens next is textbook accurate and repeatedly occurs in the plumbing industry causing unemployment, financial hardship and family breakups.

“Gold Coast Plumbing” started cutting corners by using cheaper materials, cancelling insurance cover, not replacing old equipment, not replacing old utes and vans, charging clients for hours that were not worked, and using labourers and apprentices instead of qualified plumbers. As a result, their plumbers become disillusioned and start looking for jobs elsewhere. This forces “Gold Coast Plumbing” to use more labourers and apprentices to undertake the work that requires licensed and experienced plumbers.

Over at “Speedy Plumbing”, Jason is struggling to cope with all the work but cannot hire any licensed plumbers because he’s discovered he can’t afford to pay them plus buy more utes and equipment because his rates are too cheap and don’t cover the costs of running the business.

Trevor over at “Trevors Plumbing Service” is still working by himself, so he does not need a lot of work to keep him busy plus, the customers that hired him because he was the lowest price have left him and gone to “Speedy Plumbing”. Trevor is not concerned as he’s making more money than he did when he was an employee at ‘Gold Coast Plumbing” plus, he’s his own boss and doesn’t have to answer to anybody. However, Trevor has discovered that he’s got to cut corners to make sure he can pay the bills. He does not renew his QBCC licenses or take out public liability insurance. Trevor adopts a policy of never returning calls to customers who complain and starts using inferior quality materials.

Meanwhile, Stephen at “Super Coastwide Plumbing” struggled to pay bills since dropping his prices to the going rate for plumbers, with the losers being his family. Stephen’s wife is forced to return to her old job, supporting “the business” until it gets back on its feet. Even worse, cutting corners meant customers were not getting compliant plumbing work undertaken, with failures being the norm. Finally, employees started getting reduced or no training, with wages failing to be paid on time as there was never enough money.

No one ever wins in setting up a business based on the going rate for plumbers

Every successful plumbing business knows the starting point always is learning what it costs to run their business and setting charge-out rates that ensure they can make a profit for the long term, which is specific to their circumstances and business model. 

No one ever wins in setting up a business based on the going rate for plumbers or recommended rate because they are a myth. The only guarantee is that the company will close, leaving employees, suppliers and customers all out of pocket and worse off for the experience in myriad ways. 

Sadly, I repeatedly witness these “fictitious” scenarios on the Gold Coast amongst plumbing companies. There are no winners when you don’t operate a business to make a profit after covering every single one of your costs.

How much should a plumbers call-out fee cost?

How much should a plumbers call-out fee cost?

What is a plumbers call-out fee?

A plumbers call-out fee is a set amount charged by a plumbing business to come to your home or business.

The call-out fee covers all of the costs incurred for the time it takes to arrive. In addition, the call-out fee covers employee costs, vehicle costs and business overhead costs.

Generally, for those businesses that charge call-out fees, the call-out fee only allows for arriving at your home or business. It does not allow for any investigation work of your plumbing problem.

What is a plumbing diagnostic evaluation fee?

Here at Whywait Plumbing, we do not merely charge a plumbers call-out fee to arrive at your home or business.

Since 1999 we have charged on every job we are called out to diagnostic evaluation fee. We require this fee to be paid by credit card when you book your appointment with us.

When you call us, we guarantee that we inform you of our initial upfront fault finding/investigation diagnostic evaluation fee and what that fee is.

Once you are happy to accept our diagnostic pricing, we’ll secure your booking by providing your credit card to cover the initial fault-finding/investigation diagnostic evaluation fee.

What is the difference between a call-out fee & a diagnostic evaluation fee?

Plumbing companies that charge a call-out fee use it to cover the journey for a plumber to arrive at your home or business.

 Plumbing companies that charge a diagnostic evaluation fee cover the initial journey cost plus the cost to inspect your plumbing problems, diagnose the cause, and provide fully costed solutions.

No call-out fee plumbers

Some plumbing companies heavily advertise that they have a no call-out fee. It may sound suitable for budget-minded potential customers, but…..I guarantee you will end up paying the plumbers call-out fee anyway.

Remember, if something is FREE, it has no value to the plumbing business offering it or to the customer receiving it. No call-0ut fee plumbing businesses transfer the costs of getting to the job in their other costs plus a margin, so either way, you pay.

The perception that advertising a no-call out fee creates is that you are getting something for free, as it will be cheaper. Perception is never reality, as no business can work for free.

Think about it, would you go to work for free?

What you should you ask about a plumbers call-out fee?

Always ask on the phone what their call-out fee is and what it includes. For example, many plumbing businesses have a call-out fee and an additional minimum charge for their time.

Clear communication is paramount to avoiding disputes. Determine precisely what the plumber will charge you to arrive at your home or business and investigate what work is required.

Always ask on the phone what is their call-out fee and what does it include. Many plumbing businesses not only have a call-out fee but an additional minimum charge for their time.

Clear communication is paramount to avoiding disputes. Be very clear in your own mind exactly what the plumber will charge you to arrive at your home or business and investigate what work is required.

Why do call-out fees vary so much?

Contrary to popular urban myths, there is no such thing as a fixed rate, recommended rate, or the going rate for a plumbers call-out fee.

Every plumbing business is not the same. Every plumbing business has different employee costs, overhead, and productivity levels required to set a call-out or diagnostic evaluation fee. 

It is illegal under the Competition and Consumer Act 2010 for businesses to collude in setting prices. The Act aims to give all businesses a fair and competitive operating environment. It covers anti-competitive conduct, price-fixing, unconscionable conduct and numerous other issues, such as advertising. The Act also sets out consumers’ rights and responsibilities.

It is also illegal under the Act for there to be any set or recommended rates by master plumbers associations.

Other factors influencing call-out fees are the type of service required, the time of day, and which day. For example, significant variances will occur if you need plumbing service at night, on weekends or public holidays.

So how much should a plumbers call-out fee be?

The reality is that asking how much a plumbers call-out fee should be is akin to asking how long a piece of string is.

Remember, there are no recommended call-out fee rates, as every business has to determine what they charge.

As a rough guide, in my experience, a plumbers call-out fee during normal weekday working hours will vary from $0 to $150 to arrive on the job. However, for an emergency plumbing call-out, the costs increase dramatically, and you can expect to pay between $150 and $500.

I can only reiterate that you need to be clear about precisely what the plumber will charge you to arrive at your home or business and investigate what work is required. 

Rights and responsibilities

Both the plumber and the customer have rights and responsibilities. Sadly there is a culture of mutual distrust between customers and plumbers, each being wary of being ripped off by the other.

Here at Whywait Plumbing, we aim to be always upfront with our pricing starting with our initial plumbers call-out fee or diagnostic fee. So when we ask you to pay that diagnostic fee upfront by credit card, we are both committing from the beginning.

We guarantee and disclose our diagnostic fee up front and provide an upfront fixed price guarantee for all residential and domestic clients. As a result, there is no game-playing, our clients are always informed of costs upfront, and there are never any hidden costs or nasty surprises.

What Does a $0 Call Out Fee or No Call Out Fee for Plumbers Really Mean?

What Does a $0 Call Out Fee or No Call Out Fee for Plumbers Really Mean?

Be honest – would you work for free?

More and more Gold Coast plumbing businesses are advertising that they have no call-out fee or a $0 call-out fee.

This creates a perception that you are getting something for free as it will be cheaper. Of course, perception is never reality, as no business can work for free. Let’s face it would you go to work for free?

Call Out fees help ensure all costs are transparent

Legitimate, professional plumbing businesses charge a call-out fee because it costs $50 – $150 to arrive at your door.

A call-out fee is there to cover the expense of reaching your home or business. This is because employees are still paid for driving to your home, plus there is the running cost of the vehicle and all the other costs that never stop in running a business.

Simply the call-out fee helps cover costs, it’s not a profit centre, nor could any plumber live off a call-out fee.

If a plumber is not charging you a call-out fee, they will charge you the cost of travelling to your home or business elsewhere.

A no-call out fee is purely a marketing ploy

Advertising a $0 call-out fee or no call-out fee is purely playing with words.

A no-call-out fee is a marketing tactic to get you to call them to come to your job.  Plumbers that use this tactic know that you are unlikely to send them away once they are at your home because you want the plumbing work completed.

There are four separate tasks involved in undertaking a plumbing repair

·       coming to your home

·       inspecting the reported plumbing problem

·       diagnosing the possible multitude of possibilities for what is causing the problem

·       undertaking the repair

There is no such thing as a free lunch

Splitting costs into the above cost centres is sensible and transparent because every expense must be paid.

There is no cost advantage to you if you pay no call-out fee but are then charged $155.00 to inspect the blocked toilet that you already knew was blocked and then be informed the cost to unblock the drain is $660! It’s semantics and word games to get you to call them because you saw the word FREE.

Remember, if something is FREE, it has no value to the business offering it or the consumer receiving it.

Two old sayings apply when considering using a plumbing company that advertises no call-out fee:

·       there is no such thing as a free lunch

·       you get what you pay for

At Whywait Plumbing, we charge a call-out or diagnostic fee and provide an upfront fixed-price guarantee for all residential and domestic clients. As a result, there is no game-playing, our clients are always informed of costs upfront, and there are no hidden costs or nasty surprises.

Owning A Plumbing Business Is Easy. Isn’t It?

Owning A Plumbing Business Is Easy. Isn’t It?

The Challenges of Plumbing Business Ownership

Owning a plumbing business is easy, or so many people think. The reality is a plumbing business is a business, not a hobby or a charity. Owning any business is a challenge.

Owning a maintenance plumbing business has always been challenging, as so much of what we repair is a grudge purchase. For most experienced master plumbers, the biggest challenge is other plumbers.

“You have overcharged us because I rang three other plumbers and told them what you charged us for that job, and they all agree you have overcharged us and ripped us off.” This was a phone call we received at Whywait Plumbing last week.

The Issues with Unprofessional Quotations

A call like this always makes us wonder about the competence and integrity of the three so-called licensed plumbers who said we overcharged.

For a start, no professional plumber can or should or could give a price over the phone without thoroughly inspecting the job onsite and undertaking a complete diagnosis of the plumbing problem.

The Joe Bum-Crack Plumbing Business Phenomenon

Generally, the plumbers who indulge in giving prices over the phone use it to gain entry to the client’s home. Invariably, their final price always ends up being much more expensive because they find all these additional problems after they start the job.

These “Joe Bum-Crack Plumbers” seldom last in business beyond two years. But in the short time they exist, they cause legitimate plumbing businesses countless problems with their shoddy business ethics and lack of business acumen. Sadly, another generation of Joe Bum-Crack Plumbers emerges with their brand-new QBCC plumbing licenses every few years.

Every day at Whywait Plumbing, we receive phone calls or emails from plumbers looking for a job. A significant number of these plumbers fit the category of Joe Bum-Crack plumbers who have been running their own plumbing business and discover it is much more complex than they thought it would be.

Joe’s Story: The Dream and The Reality

We have in the past employed such people, always to our detriment. The last person we employed, who could be described as a Joe Bum-Crack plumber, was a perfect textbook example.

In fact, let us call him Joe as he came into the interview perfectly dressed in answer to our advertisement for an experienced maintenance plumber. Joe was in his 50s and had done everything from working in construction to being an inspector to running his own business. When asked why he was giving up running his plumbing business, he replied that his wife had told him to go and get a real job.

Joe then described what it was like running his own plumbing business, which he had started with high hopes after 27 years as an employee of various large companies and a water authority. Joe described how he wanted to be his own boss as he knew there was a fortune to be made running his own business. Plus, he was in control of everything for the first time and could work when he chose and be at home when he decided.

Facing the Harsh Truths

The reality was much different from Joe’s perception of being the boss. Joe soon discovered that being the boss is much more complicated than it looks. Joe had found that running a business was more than being an excellent technical plumber.

Now, he was the boss. Joe was in charge of marketing, employee relations, customer relations, credit management, bookkeeping, answering the phone, dealing with plumbers merchants, and so on.

All Joe wanted to be was a wealthy plumber.

Joe knew running a plumbing business was not a path to instant wealth, as he had initially believed.

The opposite was the truth, with every minute of his time being spent on running the business. Joe was shocked at the reaction of Reeces Plumbing Supplies when his account was late being paid. Joe, as an employee, had used Reeces for years and the people behind the counter he considered as mates. He was shocked when his credit was suspended because, after all, these were his longtime mates, and he was sure they would understand that a client had not paid him, so he could not pay them.

Learning the Hard Way

Joe was well aware of Whywait Plumbing and confided that he had always believed we were ripoff merchants.

Joe was aware of our sign-written Utes, websites, Yellow Pages advertising, radio advertising, broadcast email, diagnostic charges and letterbox drops, which he had always regarded as a waste of money because everyone knows word of mouth gives you plenty of work, or so he once thought. He was astounded when word of mouth did not provide much work.

He was astounded to learn that to get his phone ringing, he would need to spend what he believed was a “shitload of money” on advertising and marketing to get his name out there.

A Change in Perspective

After 18 months of being the boss, Joe now understood why Whywait Plumbing spends what he called a “shitload of money” on advertising and was astounded when he was informed it was only 4% of our turnover.

Joe couldn’t believe the extensive safeguard measures we had implemented, spanning numerous insurance policies, WorkCover, and even trademark protection for our business name and logos. The trademark protection particularly caught his interest, a facet he had not considered previously. He was astonished to realise that, without a trademark, any entity could potentially use your business name, as technically, it isn’t owned by anyone.

His interest piqued even further when we introduced him to Squadhelp, a free online platform where you can conduct trademark searches to check for both exact and closely matching names. Joe appreciated the initiative, recognising the immense value in securing a unique and protected business identity.

Now Joe wanted us to give him a job because his wife had told him after 18 months of struggling to make ends meet to get a real job.

Joe’s Stint at Whywait Plumbing

Joe worked for Whywait Plumbing for three months but, in the end, was unable to adapt to a plumbing business that was upfront about the cost of the work before undertaking the work. Joe just wanted to turn on the taximeter, keep charging the client until the job was complete, and then let someone else worry about who was paying.

Ultimately Joe had the wrong attitude toward small business, and this was why:

  • Joe, the boss, had his credit stopped at Reeces.
  • Joe, the boss, had constant arguments with clients.
  • Joe, the boss, is just Joe, the disgruntled employee who still thinks he knows more than the boss.

Through Joe’s story, it’s evident that understanding your business’s costs and your potential clients, plus setting fair and transparent prices, are crucial.

The Fundamental Rule of a Plumbing Business

Very simply, there is only one rule in business: “To make a profit, you must first know your costs.” That is why at Whywait Plumbing, we price every job in advance, whether with a fixed quote or an estimated budget price….no ifs, no buts.

To experience reliable and professional plumbing service, contact Whywait Plumbing anytime because, as we always say, “Choose Whywait and consider it done.”