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
73 Replies
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.
How do I build a budget and set margins and build up my Residential and start to build a commercial business cleaning. I'm just starting out. I have one employee who doesn't have a vehicle which is hard to navigate. I just had my second surgery so picking her up and dropping her off isn't a problem for now. I start back to work June 1st.
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.
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.
Hey! great discussion and great question. I would look at this way, you didn’t lose profit… you just invested ahead of revenue.
You basically built capacity before demand caught up. You’ve got more payroll and a team that can run without you, which is great, now the business just needs more sales volume to support it.
Right now the focus should be filling the calendar as aggressively as possible. I'm sure you're already doing this, but reach back out to old leads, follow up on past estimates, reconnect with previous customers, and push whatever your best entry offer is to generate more work quickly. Idle labor gets expensive fast and just "keeping people busy" without any real ROI is kind of the worst.
On the pricing side, I wouldn’t overthink how to tell long-term clients. Keep it simple and confident:
“Hey [Name], quick update, we’ve expanded our team to improve speed, communication, and overall service quality. As part of that, we’ve updated our pricing to reflect that. We’re excited to keep taking care of you.”
You could also try locking them on a service plan for a year. Something like “Hey (og person) we’ll be adjusting our pricing in the next couple of months as we continue improving our service. Since you’ve been such a great client, we’d love to keep you locked in at your current rate before that happens. Let me know if you’d like to take advantage of that.”
I wouldn't apologize, just try to position it as an upgrade in your service and a reward for their loyalty.
The big shift here is that you’re no longer the one doing the work, (which is awesome btw!) so your role is now to drive sales and keep the pipeline full! That’s the transition point into actually scaling a business.
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).
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. 🙌
