While your prices should be fair to your customers, they should also be fair to your business.
HVAC, plumbing and electrical work isn’t easy. You’ve worked hard for your business, and you deserve to be compensated for the value you deliver. By charging less than what you’re truly worth, you’re essentially telling your customers, your employees, and yourself that you’re not worth much, and that is not the message you want to be sending.
Additionally, charging less than what you’re worth makes it difficult to make a profit without sacrificing the quality of your service. Think about it: ‘profit’ is the difference between the price charged and the cost of the service that’s provided. By charging low prices, you would have to find ways to do less to keep the cost of the services you offer cheaper than what you charge. When really, you should be trying to identify ways you can deliver greater service and more value to your customers so that you can charge higher prices and make a bigger profit.
What happens when you price low?
Ultimately, pricing low means you need to deliver less in order to make a profit. In doing so, you do more damage than good:
- You cheat your customers by offering poorer quality service than they deserve.
- You cheat your employees by paying them lower salaries than they might earn in other industries, or by skimping on benefits and training that they need.
- You cheat your suppliers when you fall behind on bills.
- You cheat your peers when you pull down the market price and damage the industry reputation through low-quality service, equipment and business practices.
To avoid the above, you need to ensure you’re charging enough for your services.
How much should you be charging?
Every contractor is different; each have different costs, number of employees, and goals for their businesses. When thinking about how much you should be charging for your services, consider the following:
- You should charge enough to pay rent, whether you work out of an office or from your garage.
- You should charge enough to pay yourself an owner’s salary.
- You should charge enough to pay your employees what they deserve and enough to cover their benefits and training.
- You should charge enough to be able to replace old equipment and to pay for callbacks or problems that arise.
- You should charge enough to generate funds for marketing, enough to pay for professional and legal advice, and enough to be able to reinvest in your business for future growth.
- You should charge enough to generate a financial return on the capital you invested into your business.
And while proper pricing won’t solve every problem that a contractor may face, charging enough will help ensure you can provide the service your customers deserve. The right pricing structure also affords you the ability to take care of your employees and suppliers and build a foundation for a stronger business. If you can’t confidently say that you’re charging enough, we recommend you view our recorded webinar, ‘Are You Charging What You’re Worth’ led by Profit Rhino’s Vice President of Content and Training, Jeremy Lowe. In this webinar, Jeremy explains 10 signs that you might not be charging enough, and how you can set profitable pricing that’s fair to you and your customers.
Watch the webinar now!