I’ve spent a lot of time talking with different business owners, primarily in the trades, about pricing their services.
Most roofers I meet price by the square, drywallers by the sheet, fence installers by the foot and flooring installers by the square foot. Pretty much all of them multiply that number by “the going rate” and that’s their price.
Is there a “going rate” in your industry? Where are you compared to that rate?
While I would agree that it’s valuable to know the going rate, I think it’s value is just that of the knowledge of what’s going on in your industry. Trying to price your work based on the going rate is a mistake in my book.
It’s ironic how many of the people I talk to try and convince how much better they are than everyone else in their field and then shoot a price which is the same “going rate” that everyone else is charging. If you’re better, shouldn’t you be getting more?
When I challenge them with questions like that I normally hear in return all about how the customers won’t pay more. I normally follow that up with stories of Starbucks, Chick Fil A and Ukrops. Hopefully, you can see where I’m going with that.
Every once in a while I run across someone whose system offers them the opportunity to be the lowest cost provider and that can be a good thing as long as you are set up to operate that way. McDonalds, WalMart and Harbor Freight are some good examples of this.
The key is to truly know and understand your business, your goals and most importantly, your numbers.
When you know your numbers and you can see where you’re spending, where you’re profiting and where you’re losing you can make much better decisions.
Someone helped me through this process many years ago and now I get to help others through it and it can be quite eye opening to see someone who has been in business for years when they figure out where they have been making and losing money and who their best and worst clients actually are.
It’s gratifying though to take someone from that mode of just working their asses off to stay afloat to relaxing, having a clear picture of their future and enjoying the true benefits of entrepreneurism.
In short, know your business, know your numbers and set your prices according to that and not according to someone else’s business, ie. “the going rate”.
Of course, if you need any help with this, just reach out and talk to me.
Have a fantastic week