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
52 Replies
Most contractors price for survival, not growth. And when you do that, even a good month leaves you broke.
So here’s how I approach it:
1. Build your price from the ground up.
Start with your real costs, not your feelings.Labor (your time AND your team’s time)
Materials (with markup)
Overhead (truck, insurance, gas, dump fees, software)
Admin (quote time, phone calls, customer service)
Profit (15–30%) — non-negotiable
If you’re not adding that last line, you’re doing it wrong.2. Communicate value before price.
When it’s time to raise prices, don’t open with “Sorry, we had to...”
Lead with the value:“We’ve upgraded equipment, improved turnaround times, and added better materials — which means a smoother job for you and a cleaner result.”
Then say it straight:“To continue offering this level of quality, we’ve updated our pricing to match today’s costs.”
Clients respect clarity. Not excuses.3. Don’t fear the price walkaway — fear the resentment.
You’re afraid of losing a client over a price bump?You should be more afraid of resenting the client because you’re working for scraps.
If someone flakes over $100… they were never your client.
If they respect your work — they’ll respect your growth.4. Put it in writing, not emotion.
Julie, Jobber should do a webinar on building a budget for your company / I would be happy to help. I think it would help a lot of people. Could include things like common budget %'s. Things like typical %'s on budget items like marketing / management / gross margin / net margin where should people be on these items. It was really eye opening for me when I learned these things. Helped my own business quite a bit. It's one of the most important things that companies should do that they don't.
Pricing your services for profit in today’s economy requires a strategic approach. Here are some steps to consider:
- **Research the Market**: Analyze what competitors are charging for similar services. Look for industry standards, and consider local economic conditions that might affect pricing.
- **Calculate Your Costs**: List all your expenses, including fixed costs (rent, utilities) and variable costs (supplies, labor). This will help you understand the minimum price you can charge without losing money.
- **Determine Your Value Proposition**: Identify what makes your services unique. Consider the quality, expertise, and additional benefits you offer. Be prepared to communicate this value to your clients.
- **Set Profit Goals**: Decide on your desired profit margin. This could be a percentage of costs or a specific dollar amount you aim to achieve.
- **Test Your Pricing**: If possible, experiment with different pricing strategies. You can offer introductory prices, package deals, or tiered pricing to see what resonates with your clients.
- **Be Flexible**: Stay aware of changes in the economy and your industry. Adjust your pricing as necessary to remain competitive while ensuring profitability.
- **Solicit Feedback**: Ask customers for feedback on your pricing and perceived value. This can provide insights into whether your pricing is appropriate or if adjustments are needed.
- **Communicate Clearly**: Make sure your clients understand what they are paying for and why. Transparency can build trust and justify your pricing.
By combining these strategies, you can find a pricing model that works for both your business and your clients in today’s economic landscape.
Make sure you are including all costs and expenses in your quote. Some of the small, missed expenses can really cut into your bottom line. I typically multiply the cost of parts x 3. Labor is quoted at 2.5 x the hourly rate. I make sure that I am quoting about 60% gross margin so I have room for contingencies that may come up.
Hello - new here and to running a landscaping business. When you are purchasing from retail stores at a normal price, how can I mark up an item by 60% (as seen in comments above) and not have customers give the hairy eye? Do you also charge for time sourcing these materials, plus this markup?
Thanks in advance for your input!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.This is a great response and also gives me more clarity for my business as well. Thank you! This is another reason why understanding my numbers in my business is so important.
Very true but its a very important step to actually be profitable. You cant look at it like a burden to your customer, you have to understand you cant serve your customers properly if you are not profitable.
This is a great question! Ive heard people survey their clients but you can always do price analysis to your competitors as well and then price according to what feels right for you. You can adjust as you go.
Hello Im new here and i read the comments and thanks all was very imformative and helpful with the economy increase and tariffs fees when ordering supplies outside of the US.
Based on what I create and the materials and time it takes to turn them into a functional piece of art, I price my pieces at anywhere between $300 to $1100 a piece. Most people would say that my products are overpriced but I’d say most of what I create is art first and then functional and art is subjective. If someone is willing to pay for the cost of my products, then it becomes the worth and value. Just my line of thinking.
I had to see what the going rate was for Residential Cleaners in my area. I did this by looking online for the top companies that offered instant quotes. I plotted the quotes and did as many as I needed to gauge size and type of service. From there, I had more of a sense for what i should charge, taking into account my time and materials.
