T&M Pricing vs. Xactimate

From the desk of Toby Clem

In the restoration industry, choosing the right pricing model is crucial for both contractors and clients. It is rare that a restoration contractor takes time to explore options because the overwhelming majority believe that there isn’t a choice.

While Xactimate pricing has been a staple in the industry, the Time and Materials (T&M) model is gaining traction for a few reasons. This blog post explores why T&M is an excellent pricing model for restoration and mitigation contractors, focusing on its advantages over Xactimate pricing, its transparency, and how it can help restoration contractors with increased efficiency and a better customer experience.

There are many examples of successful organizations using Xactimate, but many of those finding success are larger organizations who have the resources and expertise to create have a broader middle management team thus room for more overhead.

Smaller organizations who are looking for ways to manage day to day operations and need to free up time due to smaller staff sizes and expertise challenges find that the Time & Materials model is large reduction in time spent on administrative function but also easier to delegate.

A Closer Look at Time and Materials Pricing

Time and Materials pricing is straightforward: clients pay for the actual time spent on the project and the materials used. This model stands in contrast to Xactimate pricing, which relies on pre-set rates for specific tasks and materials, often the same across the industry regardless of the region, actual costs or time involved.

Benefits Over Xactimate Pricing

1. Flexibility: T&M allows for greater flexibility on projects. Restoration and mitigation work can be unpredictable, with the scope of work often changing once the project is underway. T&M pricing accommodates these changes without the need for constant renegotiations or adjustments to quotes.
2. Accuracy: Since payment is based on actual work done and materials used, there’s a higher level of accuracy in billing. This means clients aren’t overcharged for work not done or materials not used, a common critique of the Xactimate system where estimates can sometimes be off.
3. Simplicity: Since there aren’t complex codes to remember and layered combinations and factors for each line item, putting together estimates and invoices are far less complex. The simplicity also allows this task to be delegate to another member of the team for cross checking and verifying, rather than the owner or other high paid member of the team spending hours sketching and creating estimates and invoices in a complex software. The simplicity also erases the need for negotiations. The invoices show exactly what was used, how much was used, and the time logs of everyone who worked on the job. It’s completely transparent.

Transparency and Customer Experience

One of the standout benefits of the T&M model is its transparency. Clients can see exactly where their money is going. This naturally builds and maintains trust between the contractor and the client. This transparency ensures that:

1. Clients Understand What They’re Paying For: Detailed billing breaks down labor, materials, and other costs, making it clear what the client is paying for. This clarity is often lacking in Xactimate pricing, where the basis for costs can be opaque.
2. Enhanced Trust: When clients can see the work and resources being paid for, it enhances trust and satisfaction. This transparency can lead to repeat business and referrals, which are invaluable for contractors.
3. Better Communication: The need to track and report time and materials can lead to better communication between contractors and clients. Regular updates on progress and costs keep clients informed and engaged in the project.

Ease of Use and Increased Efficiency

For restoration companies, the T&M model can also lead to increased efficiency and ease of use:

1. Simplified Billing: T&M billing is straightforward, reducing administrative burdens. There’s no need to constantly reference Xactimate codes or negotiate with insurance companies over pricing discrepancies especially if you have the client sign your price list along with their contract.
2. Faster Project Start: Without the need to agree on an extensive, detailed estimate upfront, projects can start more quickly. This responsiveness is crucial in emergency restoration work.
3. Adaptability: The T&M model allows contractors to adapt to unforeseen challenges without the need for extensive contract modifications. This flexibility can lead to faster project completion and reduced downtime.

Conclusion

While Xactimate pricing has its place in the restoration and mitigation industry, the Time and Materials model offers compelling benefits that can lead to better outcomes for both contractors and clients. Its flexibility, accuracy, and transparency foster a positive customer experience, building trust and satisfaction. Moreover, the model’s simplicity and adaptability can increase operational efficiency for restoration companies. As the industry continues to evolve, the T&M pricing model stands out as a viable, customer-friendly alternative to traditional pricing methods.

If you would like to learn more about T&M, How it works, and how you can implement it in your restoration company should you choose, please register to attend a live virtual workshop with Klark Brown on Thursday Feb 29, 2024 at 0900 ET.

You can find out more here. https://www.restorationadvisers.com/pl/2148239030