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
Hey Heather, first you should do yourself a budget. The budget is going to tell you what margin you need to charge. Yours with no overhead might be 40% gross margin. Who knows. This will also get you away from asking other people what they charge. It doesn't matter what they charge they would have different overhead.
Also this is margin not mark up, I would try to loose mark up from your vocabulary, it's not the same as margin. Markup doesn't mean anything and doesn't tie to your budget.
Now if your budget that you made is telling you that you need to make a 50% gross margin to have a profitable year then it doesn't matter how you get it but you need to get it somehow.... 50% means your doubling your labour base costs and doubling your materials. But don't separate these out on a quote. Write something like "5 yards of soil + pick up and delivery" so it's just one line item and a price.
If someone asks you to "break down your price" you say "sorry we don't do that" haha. Just like when you buy almost anything else in life, you don't get a breakdown of labour and materials and you don't know the margin the company is making on everything you purchase.
Incredibly helpful, thank you Byron. Sounds like I need to get a better grasp on markup versus margin and spend some time working out a budget.
Your note about clients asking me to break down the price, or give them receipts is also a big one, I've just been asked this and was not pleased with the request! Your framing of this makes sense and allows me to normalize saying no to this, so thank you again.
Awesome, reach out anytime mailto:[email protected] and look out for your self out there!