How do I know if I’m charging enough for my services?
You’re working hard and are constantly busy but still don’t seem to have any money. Sound familiar? Have you considered that you may not be charging enough for your services? Setting a pricing structure is never easy but, by applying a bit of structure and science to the process, you can make sure your approach to price is based on facts and figures and not a finger in the air.
You need to know what your competition charges (and behaves) and how you compare. Identify no more than half a dozen competitors and given them a call (or get someone else to). Ask them all the same question – get the price for a particular product or service and notice how they deal with your enquiry. How quickly do they answer your call, can they give you the information you ask for etc.?
Remember, you don’t need to be the cheapest. It’s about perception of value and there’s nothing wrong with being more expensive than a competitor provided you can show why.
Give added value
Give your whole image an honest review. The aim is to present as professional and expert in your field at every opportunity. So, who answers your phone? This is probably the first impression you make. Is it a professional one? Are calls returned and enquiries followed up? You should have some useful information from your benchmarking exercise for comparison purposes on this.
Do you have professional branding for business cards, vehicles and clothing? Do you have a website and does it provide the information that clients will be seeking?
Giving valuable information away for free to your customers establishes you as the expert and they really appreciate it. Consider pulling together some ‘Top tips on how to select the right plumber’ for example and sending these out with quotes.
Know your numbers
What are your material costs as a percentage of sales? They should be 28-35%, any more than this and either you are not charging enough or there is wastage/theft in the business (something I’ll be covering in my next blog).
How much does it cost to run your business each month? And do you take this into account when you quote? Total labour – sub-contractors and employee costs – shouldn’t exceed 40% (although ideally it should be 35% or less). If we say that materials are also 35% and overheads are 20%, then this leaves 10% as profit.
Overheads don’t increase directly in line with sales, these are things such as rent and rates, IT costs, subscriptions etc so one way to increase your profit percentage is to increase sales, whilst keeping a close eye on overheads.
So, my top tips for reviewing your approach to pricing are to benchmark yourself against the competition, give added value and know your numbers.
If this information strikes a chord with you then there are lots more top tips and practical advice in my book ‘Build and Grow – How to go from Tradesperson to Managing Director in the Construction and Trade Industries’ And you can buy it from Amazon via this link http://amzn.to/2CBok2L.
The next blog will be all about wastage and theft in trade businesses.