I came across this article and felt that I needed to share it with you. Whenever I go out and meet with Roofing Contractors I hear the same thing over and over again, ‘I just got beat by another Roofing Company by a few thousand dollars, and my bid was low!’
Has this been happening to you, or are you the one undercutting the market? Here is some food for thought from USA Today:
Entrepreneurial Tightrope: Making sure your price is right.
Most often quality of service is associated with the cost. In other words, your prices have invoked the “you-get-what-you-pay-for” idea into the minds of your customers and potential customers. They are fearful of what they might get for that low price.
Not all the time, but sometimes it is reasonable to think that if the price is cheap the work will reflect the price. Recently, my daughter was searching for a plumber to install a new kitchen sink. She told me that my plumber was too expensive, so she went looking for a lower-priced plumber. After getting several bids, she selected the lowest bidder. But in the end, she wound up paying both the plumber she had selected and also my plumber, who had to brought in to correct the multitude of errors the first plumber had made.
I met a man in the lawn care business who walked into a gold mine after repairing the damage of one lawn done by a cheaper priced lawn care company. After seeing how good his work was compared to the lower-priced lawn care company, almost everyone in that neighborhood signed up with the more expensive company.
I will assume that you do a quality job. With that in mind, maybe the person who refused to give you work based on your low price has had a bad experience with low bidders.
Setting prices too low can make you look like less than an expert. And yes, a janitor has a certain expertise that is used to get the job done correctly. There are many horror stories told by entrepreneurs and company managers about the sloppy jobs done by the janitorial companies they have hired. I won’t spend time with my own personal stories; however, I must have had at least a dozen cleaning service nightmares.
Another thing that you might want to consider is how you arrive at your prices. And, are your prices fair and correct for both you and the customer?
Several years ago my young nephew started a carpet cleaning business to help him through college. He was determined to be competitive, so he quoted the same price as other companies in his area – 30 cents a square foot. Turns out he didn’t know how to properly measure in square feet and consistently gave prices that were too low.
He landed a contract at a local restaurant. The owner questioned the method that he used to come up with his price and helped my nephew figure out the error of his calculation. This may be the reason that a customer has asked you to come back and do another walk-through: Maybe he wants to be sure you aren’t cheating yourself.
Here’s another story you might want to consider. I was visiting my mother last summer when a gardener she hired to trim two lengthy hedges came by to be paid. She handed him $20.
How long did it take to do this job? About two hours, he said. He felt $10 an hour was about right.
But what he didn’t consider was the use of his equipment, the cost of advertising and promoting his business, the cost of traveling to the site, various insurance policies and other expenses not readily seen. And most important, he didn’t take into consideration the woman back at his place of business who took my mother’s phone call, handled the appointment and mailed the bill.
My mother admitted after he left that all of the other people she had called wanted between $50 and $75 for the same job. Imagine that!
Many people who have left the corporate world to start businesses get confused when it comes to pricing. Some feel successful by billing clients for the same amount of money as they earned before. But they forget the added financial obligations they have taken on as a entrepreneur.
Have you reviewed your financials lately? Are you making a reasonable profit after expenses? When you created your price, did you consider all your expenses? Perhaps the time has come to consult an accountant to help you identify all of your expenses and to make certain all of them are factored into your pricing.
Let us know your thoughts about pricing in your market.