How to Effectively Charge Customers for Travel Time

travel-time

Tackling any topic related to rates is likely one of the most debatable areas to touch with a ten foot pole. Technicians are stoutly protective of their pricing structures when the discussion comes up. However, I’m admittedly adventurous in this realm and believe that the more open we are with effective ways to address travel costs, the better we can serve our customers in settings fees that are appropriate for both sides. I took a chance to address proper self-worth valuation when it comes to pricing a little while back, but let’s see if we can tackle travel costs this time around.

My goal here is not to say that my methodology is necessarily better; it works for my computer repair company FireLogic and I’m open to sharing it fully with fellow techs. The overarching goal with this article is to merely establish a friendly debate on all of the available methods for charging on travel, and weighing the pros/cons of each. There is no single method or rate that fits all technicians. We’re all disparate in our own ways: serving different communities, working with different customers, and operating within distinct socioeconomic regions.

The Technibble forums are generally host to some interesting discussion on travel fees and how to determine them. A few particular threads hosted some great insight like this one, a thread related to call out charges, and this discussion on how to charge for visits that are out of area. I’m going to admittedly pull a mixture of ideas from various forum postings below to give people an idea of what various techs have concocted to meet this growing need. Let’s take a look at the different ways you can charge your own customers for travel time.

The flat hourly rate

I’ll cover this one first since this is how FireLogic handles travel costs. I like this model because it’s simple for a customer to understand and doesn’t require any extensive tracking/recording besides time. My view is that if someone is willing to pay for us to travel out to visit them, a flat hourly travel rate properly compensates the tech that needs to make the trip and covers gas expenses. Our travel rate is currently $20USD/hr (about 1/4 of what our hourly onsite rate is) and has proven to be a happy medium for our customers and techs. We do not charge for return travel, as the notion goes that the next customer being visited will pick up the subsequent trip as their visit charge. Some forum goers admit to charging their full hourly rate for travel, which is understandable depending on your situation. Do your research before establishing anything, but for the Park Ridge and suburban Chicago area (USA) this system has been very successful for us with little customer pushback.

Enforcing minimum onsite service fees

This is an roundabout to charging outright travel fees or an hourly trip rate. In this method, you notify your customer that they will be paying, for example, a one hour minimum of service for the visit. More than a few techs on the forums prefer this approach as it keeps travel fees out of the customer’s sight, and also cuts back on excessive abuse of onsite labor for small tasks. From the consensus I could gather, it seems that rural techs tend to like this method as travel fees are frowned upon in such locales but customers take positively to this approach. I don’t think it would be a bad idea to use a hybrid approach of a travel rate with an onsite minimum. Again, your circumstances and competition’s methods will have a big bearing on your own attitude towards this model.

Staggered travel flat-rate fee

Yet another way to charge for travel is to create a graduated, or staggered, trip charge schedule that is based upon the number of miles from your home base to the customer location. The benefit of this model is that it directly segregates shorter trips from longer ones, and gives the customer an easy way to estimate their final total. However, the downside is that if traffic catches a technician, even a short 4 mile trip in an urban area could turn out to take just as much, if not more time, than a 10 mile journey in the countryside. I personally frown upon this model since I service the suburban Park Ridge region of Chicago, and traffic can be dicey depending on time of day and the direction of a customer location. For rural techs, this may be more appealing.

Charging “by the mile” based on a standard rate

A similar method as the staggered model above, but this one ties exact mileage or distance traveled to a standardized rate “per mile” or “per kilometer.” For the United States, I have heard of many techs tie their rate to correlate directly with the mileage rate used by the federal government. As with the staggered method, I don’t believe it fully takes into account the time spent traveling to a customer in busy, traffic-drenched areas. But for techs that want a simpler, streamlined way to present their travel rates to customers, this is about as clean cut as it gets. Tying your travel rate to the same as the government uses cuts down on arguments from clients because you can merely point them to the higher authority for why you charge what you do.

Utilizing different onsite vs offsite service rates

My company uses this notion for how our prices are set. For our case, it’s not directly to take into account travel costs. We differentiate hourly rates moreso because of the simple fact that when I am onsite, I am dedicated solely to that single customer. I cannot multi-task in any way like one can do in-shop or from their home office. For this reason, a different price is justified. But some techs claim that merely forgoing a separate travel fee and charging an inflated 20-30% of their regular rate is effective. The benefit is that you can mask your travel costs to the customer. The downside is that such a massive difference in rate may sway more customers than you wish to use your services at the “discounted” rate and stick to remote support or the like. Good or bad, it’s up to you to decide how this may work out.

Whichever method you ultimately decide to use, remember that doing some competitive analysis is always key to a rate structure that customers will be open to. You don’t want to blindly change your travel fee methodology without sniffing around to see what your local techs are charging, and how they are structuring their fees. Systems that may work well for rural areas are not always suitable for urban areas as I described above. Do your homework, reach out to some customers for their feelings, and make an informed decision. How you publicly account for travel expenses using any of the methods above may be just as important as what amount you charge a customer.

Feel free to post your own ideas or comments on what you think is the best way to charge for travel. What works? What doesn’t? Let us know!



Derrick Wlodarz

About the Author

Derrick Wlodarz
More articles by me...
Derrick Wlodarz is an IT Specialist that owns Park Ridge, IL (USA) based technology consulting & service company FireLogic, with over 8+ years of IT experience in the private and public sectors. He holds numerous technical credentials from Microsoft, Google, and CompTIA and specializes in consulting customers on growing hot technologies such as Office 365, Google Apps, cloud hosted VoIP, among others. Derrick is an active member of CompTIA's Subject Matter Expert Technical Advisory Council that shapes the future of CompTIA exams across the world. You can reach him directly at derrick@wlodarz.net.

Comments (7)

  • Your Friendly Neighborhood Computer Guy says:

    This was a sticking point for me for a while. Because there is a major interstate that runs right past me, 20 miles north or south can take only 20 minutes to drive, while 20 miles east or west can take 45 minutes or more.

    For that reason, the easiest way for me to do this was to charge a flat “travel fee” for any work done outside of my county. This is flexible, and depends on the work being done as well. If it’s a long-time client that I get a lot of work from, I may waive the fee. But I usually charge first time customers the travel fee just to make sure they’re serious about the job.

    This is a very situational issue, and you seem to have covered most of the scenarios. Great read!

    Matt
    http://www.yfncg.com

  • Tony Scarpelli says:

    Thanks Derrick, good article.

    One idea I thought was not directly stated in your article about the difference between bench rate and outside or the on-site consulting call is that they often require different levels of training thus have different levels of service in addition to the convince to the customer and different levels of cost to the provider. I can often schedule our bench with a brand new, out of tech school tech with minimal additional training and experience which we call a Jr. Tech who also BTW, makes minimal wages. I would never send this person to someone’s business or home not knowing exactly what he was walking into. On the other end I cannot send a senior tech to Cisco routing or Windows Server active directory/permissions issues. So there are at least three levels of training and experience required for these three types of service. We also have a fourth level tech which I pay on contract when things get above my head and I bill him out at $200 per hour.

    At Computer Fix-It we have four levels of tech. Jr bench tech, senior tech that can do all sorts of calls everything short of heavy networking/server permissions and a Consultant who does the network design and maintenance. We get three rates. $59.99 bench rate, also that is our most profitable as you stated we can work on three or more computers at the same time. This level is supervised by a manager or Senior tech or senior consultant. Our senior tech bills out at $99.99 per hour on site to your home or small office. We also charge one way travel within the county (about 20 mile radius). Then we have a Consultant who can do minor routing, server permissions or active Directory type issues at $120 per hour also one way travel. If travel is outside our county we have a one way travel added and a 2 hr minimum billing. Finally, we have a 25 year Novell CNE and senior consultant who we bill out at $200 per hour when we need him. He is a contract employee as most of my clients do not require his level of skills.

    With regards to travel, I inquired with one friend who owns a business in NYC “how you handle peak traffic and get across town which could be 1 hr or more travel?” He said that they schedule first of the day appointments which is during rush hour and they just show up at the clients site same as they would show up at their office so there was no additional travel and by the time they finished the first job it was no longer peak traffic so they go to the next appointment. Likewise for evening peak traffic they would schedule a job no later than 3pm so that they would be onsite working when peak travel began in the afternoons and then would just travel home same as if they left their office at 4 or 5pm. One thing they do is bill 2 hr minimum call no matter what time of work day which helps offset some of the additional travel expenses and they charge parking which is easily $25 per call.

    Derrick, I hope to see an article on how to set adjust your prices. I believe most members could benefit from that. When initially setting your prices, one should be careful and not give too much attention to the lowest priced competition. At least not pay attention to the small or new competition which have not taken care to professionally setup their operations. It seems every tech how has the idea to start his own company thinks he is going to undercut the market and steal always all the customers. I have seen many small startups price themselves out of business. I mean they are too cheap and even if they get the requisite business, cannot get enough revenues to sustain their company. Then new companies come in and also practice the art of followership thus set their prices at what they perceive is the going cheap rate and they all go off a cliff together like a stampeding herd of buffaloes.

  • Karl Marten says:

    I live in a semi-rural area – in the city I can be anywhere within 1/2 hour, even during our “rush hour”. I have several rural clients, which, as I live near the edge of town, I can get to just as quickly as I can to clients living cross-town. I charge a flat hourly rate, minimum 1 hour and charge in 1/2 hour increments, and include travel time (which is usually not a factor). For example, if I spend 15 minutes traveling and 1 hour on site, then I charge 1.5 hours; if I spend 15 minutes travel and 1/2 hour on site, I charge for an hour. However, if I spend 10 minutes travelling and 55 minutes on site, I only charge for one hour (one does need to use some discretion). In the end, it all evens out – I don’t even mention travel charges unless the time will be 1/2 hour or more.

  • elcompudoctor says:

    I add half hour at my hourly rate as long as the drive doesn’t last longer than 1 hour for the two way trip.

  • Derrick Wlodarz says:

    Interesting to hear about the different ways you all handle travel. I could never have covered every possible method, so good to see people chiming in with their own personalized styles!

  • John W. says:

    I think customers prefer to see a price breakdown for every cent charged. I like using the gas price to mileage formula. I feel that charging for traffic is unnecessary and traffic should be calculated and dealt with personally. Our customers should not have to pay for traffic. Calculate your routes according to traffic and time a day.

  • Thor Williams says:

    I charge a minimum 1 hour fee per visit. All my traveling across the city (Toronto) is by bicycle. Any job that it takes me less than 30 minutes to get to from my home I don’t charge a travel fee. Over than and I charge roughly half my hourly rate for the whole travel time (including return trip). All my customers are totally fine with this.