How do you go about pricing your services for profit?
Communicating cost increases to your clients aren't the easiest yet it has to be done as a business continues to grow. Thoughts?
Forum Discussion
Good thread. On commercial electrical, our pricing has to absorb a lot more variability than a typical residential flat-rate model — so we've built ours around three layers:
1) Known cost floor — fully burdened labor (wage + taxes + WC + GL + vehicle + tools + non-billable time), material at landed cost with a waste factor, and a line for permit/inspection/coordination time. If you don't know your true burden, every "good" margin is an illusion.
2) Target gross margin, not markup. We aim for 35–45% GM on service and 20–30% on project work, and we back-check every completed job against that target. Jobber's job costing makes that loop a lot tighter than the spreadsheet gymnastics I used to run.
3) Annual escalator baked into the proposal language. Rather than shocking a client with a mid-year increase, our service agreements and multi-phase proposals include a fixed annual escalator (material index + labor COLA). Clients sign up knowing it's coming — no awkward conversation later.
On communicating increases: I've found framing matters. "Our rate is changing" lands badly. "Here's what's changed upstream (copper, conduit, controls, insurance) and here's how we're keeping the change small for you" lands fine — especially when you tie it to the value they're already getting (response time, cleanup, documentation, code compliance).