How do you determine the price for your service?
- Is it led by competitors, making sure you can undercut to ensure you get the work?
- Is it more value led? Do you offer a better service so give value for money and charge higher prices for superior workmanship?
- Do you have different levels of pricing, from budget to premium, depending on the quality or scale of job required?
- Do you have a set price list for common works, or do you price on a job-by-job basis?
- Do you swap and change your pricing policy depending on the customer or project?
It might seem a given that trades businesses know how to price up a job effectively, but in our experience, it can often be approached in a bit of a haphazard way.
There can be merits to all of the above, but if you want to get a handle on the money coming into your business, you need to make sure EVERY JOB is making you enough profit to make it worthwhile.
How to price for profit
There are a number of things to consider to make sure you are pricing for profit. Here are a few.
- Covering your costs
Are you making sure you’re taking into account ALL of your costs when pricing a job? As well as the materials and labour, you should think about factoring in an amount for the general costs of running your business such as admin and accounting, tool costs (replacement or maintenance), van maintenance, sales and marketing activities, office and phone costs etc.
If you’re not doing this, any perceived profit you’re making is probably being lost paying for other business expenses.
It’s important to know how much your business costs to run on a monthly or yearly basis, so you can work out what needs to be covered with the money you make from projects. Your pricing should enable you to make over and above this for your business to remain in profit.
If you’re not sure how much it costs to run your business, please check out our post on fixed and variable costs here, or have this discussion with your accountant.
- Choosing projects wisely
Many of our trades clients when starting with us were caught in the trap of taking any project available, as and when an enquiry came in. They couldn’t understand why they were crazy busy, but the bank balance wasn’t looking any healthier.
While we understand the draw to want to have a busy order book and fill your diary with work, our advice is to make sure you fill your diary with work that makes you money.
Are you running yourself ragged doing faffy little jobs that you charge very little for, but are taking lots of time, for example? Think about not just the time taken to complete the work but the time you’ve taken to survey, quote and travel to and from the job – have you actually made much from it in the end?
Some jobs will always be low value and you have to decide if it’s worth your while taking these on. Or at least how many you’re willing to do alongside more profitable work.
Having a good idea of which jobs can make you more profit will help you chase the work that will benefit your business (and you!).
Would you be better putting more energy into looking for more lucrative projects? Knowing what work you want to win is the first step to getting more focused on how to find it.
Perhaps it’s worth considering tendering for a big contract that will give you sustained work for a longer period?
If you think this is out of your league, take a look at our tips for tendering for bigger jobs here.
- Quote for added value
Customers often don’t just want a job done, they want to know it will be done well and with the least hassle, stress and mess possible. They want an assurance that you offer quality workmanship and don’t just opt for the cheapest materials to keep the cost down. They want to know your work will be safe, will last and will be done quickly and efficiently.
This might all seem obvious to you. If it is, that’s great. It means you’re working with all this in mind already. But are you charging appropriately for the added value you give in offering all of this?
When choosing a tradesperson, it’s true that some customers will ALWAYS opt for the cheapest quote, but they’ll probably regret it in the long run as you get what you pay for – and they’re probably getting less than perfect work.
Many, however, will actively choose a more expensive quote if they feel they will receive a superior service. So, think about:
- Why are you the best person for the job? Do you have qualifications and accreditations that show you are an expert in carrying out the works?
- What proof do you have of your quality workmanship? Do you have a portfolio of case studies or testimonials you can show customers?
- What comes ‘as standard’ with your service? Do you include a comprehensive site survey? Do you do any preparatory work and remove existing fittings? Do you remove all waste after the job?
- Do you have a quality management process in place? Do you offer any guarantees of your work? What happens if the customer isn’t satisfied with the result – will you put things right at no extra cost?
- What materials do you use? Do the parts you use come with their own warranty? Do you use a specific make or type because it is more reliable, or safer?
- How do you make things easy for your customer? Can you bring in other contacts to complete any work you don’t cover? Do you offer a payment plan to spread a big cost? Can you help with any planning requirements?
Showing how you offer a better service makes you worthy of a higher price.
- Make quoting easier and quicker
Last but not least, think about how you can make the actual quoting process much simpler and quicker. The less time you spend pricing jobs and working out if they’re profitable, the more time you can spend doing projects or winning even more work.
Do you know how much time you spend working out your quotes?
If you’re spending hours of an evening or weekend, leaving it days before getting back to potential customers or sending them a quote that looks less than professional because you haven’t got time to format it properly, you probably need to rethink your quoting process.
There are some great software solutions out there, specifically set up for trades businesses, that can make this a much quicker and easier process. The benefits are not only in getting quotes to customers in a more timely manner, it can help make your pricing more accurate, more profitable and the whole process of managing your projects simple and efficient.
It will also create an accurate quote that looks utterly professional that outlines:
- the job brief
- how you will fulfil it
- exactly what is included in your service
- total cost (with breakdown if appropriate)
- payment terms
One of the software solutions we recommend is Tradify.
They offer a free trial period so it’s worth giving it a go and see how you get on.
All of the above should help you price jobs with profit in mind.
If you would like further help and advice on making sure the financial side of your business is working as well as your operational side – give us a call on 01902 212937.
We specialise in making trades businesses more profitable, so you can live the dream.