- After two or three years, profits are still strong - but the customer base is dropping off, suggesting more advertising dollars are required. The advertising dollars do the job - for a while; and at a substantial added expense - forcing another price increase.
 After five years, the advertising budget and pricing methods need to be stoked yet again. Direct mail and aggressive marketing campaigns are needed to prop up the lost and longstanding customer base which now dwindles. The rates are raised still again to cover spiraling overhead - resulting in even more serious complaints about price gouging - the inevitable nasty letters and calls become more frequent.
- This typically and simultaneously evolves into cross training service techs to become salesmen - not uncommonly at the expense of legitimate advanced technical training. Flat rate owners and managers come to believe that sales will drive profits - not technical excellence and the highest quality work possible. Occasionally sales quotas are imposed on techs - implicitly suggesting they condemn equipment, rather than repair it because of the financial rewards involved. The ethical issues and reputation of the company are subordinated to the bottom line. The profits from such practices are undeniable. The end result however, is frequently and ultimately debilitating - and irreversible.
- The problems that flat rate created were heretofore unknown because quality work at reasonable cost; and the referrals it generated, were the best, most efficient and least expensive forms of advertising possible. By introducing flat rate pricing, the once formidable and pre-existing customer base is simultaneously exploited to its fullest, while being destabilized and diminishes over time. Those who think this inevitable, or even acceptable, expose their business to being blindsided by exponentially negative forces.
- The continuation of lost customers and narrowing client base make the flat rater think long and hard about retirement or selling out while the books are still showing good returns. Most prospective buyers that will look at the books, will not notice the customer base has dropped off some 30% or more over time.
- By around the tenth year, the customer base declines are serious enough to do more than just think about retirement or selling out. The business and cash flow become unsustainable and the shrewd flat rater knows it. The reasons are two-fold. The "economic boom" times of the 90's are gone. Having capitalized on both boom times and the flat rate profit surges of years past, he may also fail to realize the boom times - coupled with flat rate, are now dependent on flat rate alone. The contractor naively believes flat rate was the basis of his economic improvement - not the general economy and not the fact that before he knew nothing about costs and now at least - knows the basics.
 Now it's 2002 and the economy is relatively soft. The upscale customer who thought little about an $800 water heater price now does. The T&M shop has picked up the customers the flat rater lost during the heyday of a vibrant economy - and now enjoys the windfall of the flat rater's diminishing customer base. If the flat rater stops the high cost ads - the very basis of the business plan quickly unravels. In rural areas where the potential customer base is much smaller, the flat rater's reputation of "replace - rather than repair" tactics, coupled with typically higher charges - is incapable of being overcome by larger and more creative ad campaigns.
- After the tenth year, the flat rater is incapable of sustaining any customer base growth at all (with the exception of those who just moved into town) and is content to simply continue the death spiral tactic of increasing margins on the few remaining clients he can continue to keep.
- Around the same time, the ever escalating need to advertise to overcome the ever diminishing customer base frequently mandates the sale of the business - before there's little left to sell. The frequently multi-generational family business that likely went before in building a one man shop into the enterprise the flat rater exploited - teeters on the brink of financial collapse.
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