Keeping it fair: Irrigation service pricing

May 5, 2014 -  By

A look at how companies approach irrigation service pricing—with a flat rate or charging on time and materials—and why they favor their method.

If only irrigation professionals had X-ray vision.

It would eliminate that part of the service call that takes an inestimable amount of time. The part when they must dig up the yard to locate the underground glitch they were called to repair.

That might hearten more of them to charge on a flat rate for irrigation services like Colleen MacKinnon does.

While the co-owner of Able Irrigation in Vancouver, Canada, lost hope for X-ray vision a time ago, she has a hard stance on employees getting paid for every bit of time it takes to complete a job and giving customers no leeway to dispute it.

Flat-rate pricing accomplishes just that, MacKinnon says.

“Clients have a stopwatch mentality, but they like flat rates knowing what the cost is per repair,” she says. “Billable hours never amount to eight in a day,” she adds with mention that the average is five and a half billable hours per day, but you must account for “windshield time,” or travel to the job site, and allow employees some flexibility to locate buried problems, such as for pipe and wire repairs. “I’ll never go back to time and materials.”

Fairness to the company

Josh DePauw (pictured) favors time-and-materials pricing for irrigation services.

Josh DePauw (pictured) favors time-and-materials pricing for irrigation services. (Photo: Andy’s sprinkler, Drainage & Lighting)

A 40-year-old company, Able Irrigation converted to flat-rate pricing five years ago and spent four years prior preparing for the switch.

“It’s not easy,” MacKinnon says. “I’ll tell you that from the start.”

She enlisted the help of contractor consulting firm Grandy & Associates to create her model, which includes flat rates for basic repairs, primarily those above ground, and “custom flat rates” for more complex jobs. Technicians provide clients a “good case, bad case” price for custom flat rates, meaning they estimate the bottom and top price for the job upfront and, when the job is complete, present the actual price that can’t exceed the “bad case” cost, which is calculated from the minutes and materials it took to complete the job. 

“You’re going to lose some customers because your pricing is going up,” MacKinnon says. “It’s not an avenue to gouge the client. Really, what you’re doing is running your business so you can make a reasonable profit.”

Michael Oliveto uses a similar reasoning to justify why he charges on time and materials for service.

The vice president of operations at Rainfree Irrigation in Mt. Pleasant, S.C., says the company has used the structure for more than 25 years to “keep the customers honest” about the time employees are at the job site and to ensure employees are paid fairly for their time.

From their trucks, employees log in to a computerized network to report when they arrive and depart a job site. This way Oliveto always has an eye on them, and clients can’t dispute the time they’re charged for.

“When the guys get to a job I know they’re working constantly,” Oliveto says. “We get paid for almost all our time. I’m not losing money on hourly employees or jobs that take longer or are harder than they initially appear.”

The company includes travel time in its hourly rate, charging $75 for the first hour on residential jobs and by 15-minute increments after that.

Still, Rainfree Irrigation gives customers an anticipated amount for a job before it begins work. Oliveto keeps clients in the know if a job will cost 10 percent or more than the estimate, informing them before they receive their invoice.

Justifying the approach

The downside to time and materials, Oliveto says, is the intricacies of the invoice because you “must justify your time” to the customer.

“What we constantly struggle with is getting the technicians to be as accurate and descriptive as possible,” he says. “That’s something we’re always trying to drive home is you have to be accurate in what you’re saying. You can’t leave things out.”

Josh DePauw is another advocate for time-and-materials pricing, but the regional manager for Andy’s Sprinkler, Drainage & Lighting can pinpoint some challenges to it, too.

“A lot of customers like to hear that upfront cost being less,” he says, and adds how Andy’s gets over the hurdle. “Our office staff is the frontline of that phone call. We have girls who explain what we do and why we do it real easily. That’s a big deal.”

The Dallas-based company charges $109 for its first hour, including the travel time to the job site and, like Rainfree Irrigation, charges in 15-minute increments thereafter.

DePauw says he never sees the company going to a flat rate because the time-and-materials approach is what’s most fair for the company and customer.

On the other hand, profitability partly drives Robin Luce’s decision on service pricing. By the yearend he plans to switch to flat-rate pricing versus charging on time and materials as he has for the past 11 years.

“What it boils down to is what’s profitable to the company and what’s fair to the customer,” says the president of JubileeScape in Mobile, Ala. “Every time we get into an extended project, the hours can get high,” he says. “They see that meter running, especially a job that goes on two to three days, and they’re freaking out. The customer starts seeing these high prices.”

Luce recognizes the advantage of time and materials is it’s accurate. On the downside, it can leave the customer surprised if you charge them more than expected. With a flat rate, he anticipates customers will feel at ease knowing the job cost up front; plus, employees can’t get skimped on their time.

No matter the approach, Oliveto says customers should be the top priority.

“We make sure we’re fair to the person we work for,” he says. “Nobody likes surprises. Unless you’re like my wife—the only surprises she likes come in little boxes.”

About the Author:

Former Associate Editor Sarah Pfledderer is a West Coast-based contributing editor for Landscape Management.

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