Forum Discussion
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?
36 Replies
I think gradual increases are not uncommon. People know that almost everything cost more money and those cost continue to rise.
Cost increases are tough. Jobbers email campaign feature is a great way to communicate changes to all clients across the board. Most importantly, be authentic about it. Customers know it costs money to run a business
I built a calculator in excel with formulas to convert measurements into amount of materials necessary. It simultaneously will factor in our supplier's pricing to the materials and calculate labor based on the size of the job and other factors. I keep the material pricing and labor rates up to date, giving us a good idea of the internal cost will be before we even quote a job.
Everything starts with building a budget! This budget is going to show you what margin you need to make to complete your budget goals at the end of the year. So if your budget is telling you that you need a 50% gross margin then now when you quote you know you need to at the very least add up your costs and double them. I would say if your budget says 50% then you are quoting around 60% gross margin. This give you a profit buffer for some bad jobs and things like team days and just general slippage. Get that gross margin as high as you can and you will be a very happy business owner.
I agree and am working on my budget now.
How do you avoid having a 50% markup on parts without having to be taxed on that markup. You know needing a business tax license?
Sorry there, I don't quite understand the question. I don't do our bookkeeping either. I'm in Canada, so we do pay PST on materials we purchase and we charge + pay for GST on all our invoices.
I'd love to chat with you sometime. I just joined the community and I'm an electrician in the Denver area. I have found it difficult to build a budget in my type of service based electrical work.
Absolutely, my email address is cory@vancityelectric.ca reach out and we can hop on zoom. Cheers.
This is one I would love more feed back about. I just went from a 3 person team, me and an installer, to a 5 person team. Now I have a person answering the phone, making the schedule and doing gofer tasks for me as well as an install team that can work without my labor contribution. Now that I am off the tools and the phone I have time to sell way more than I ever have before. However, my payroll cost is way up and my profit has disappeared. I raised my prices today but worried how to tell my long term clients.
It's not easy to tell the clients you're raising prices but it has to be done. you can't stay in business while losing money. most people realize that the cost of everything has gone up and it had to be passed onto the customer unfortunately.
I've done similar this year in that I am stepping away as much as I can from the active production side of the business, and like yourself we're seeing payroll really bite, but I think its all part of what you might call growing pains in our industry. You have to find a sweet spot where the ratio of production to non-production staff works for you. I think for a small business like ours the ratio is around 4:1. In practical terms that looks like 8-9 employees on production with non-production being myself (production manager, sales and marketing etc) and my wife (admin).
There’s a sweet spot you need to find after hiring full time assistants.
Better customer service will create new customers and with the right protocols and setup you can increase income without increasing your customer service budget. Virtual assistants are a good way to keep that budget down as well. I use virtualsolutionsmb.com
Finding a VA is top of my list right now. Thanks for your answer
I utilize a budget to make sure we are properly recovering costs and passing them on to our clients.
Smart approach. A solid budget can really help with staying on top of costs for sure. How do you typically communicate those price adjustments to clients?
Always explain reasons why and include your team as part of the driving force as usually they are!
price transparency 🤌 i love that. Not only does it foster understanding across your whole team but can potentially empower them, improve accountability, and increase satisfaction. 🙌
