Whether it’s residential and commercial framework construction or the design and installation of a cabinetry system, carpenter skills are required to complete dozens of contracting projects. Alongside many other trades,…
One the biggest dilemmas that business owners face is, “How much do I charge for my service or product?” Even companies that have survived the three-year ‘do or die’ pinch continue to struggle with how to adjust the prices and at what rate. With the advent of what Forbes Magazine dubbed the ‘millennial startup revolution,’ endless debate and volumes of information have been written on this very topic over the last decade. Where much of the divergence in business rate analysis has come from is in actually crunching the numbers to a solid figure. What most experts do agree on, however, are all the contributing factors that determine your final price tag. There are lots of them. We highlight some of the most recognized below.
Leave it to a modern pop music group (Twenty One Pilots) to establish the foundational credo for a successful business. For whatever reasons, be it some perceived moral imperative (greed), character flaw (lack of confidence) or fear of success, it’s difficult to get startup business owners past the mental block of making money.Let’s be honest. You’re not greedy, and you’re not out to swindle your clients. Once you get past the stigma of making money, you will see that you’re building wealth, thus, building the empire that is soon to be your contracting company. This is not greed. This is smart business. Therefore, the question you should always lead off with is, How much money do I want to make this year? Once you establish a calculated figure, all other decisions can be broken down into a systematic game plan that includes how much you should charge. If this task is too difficult, then seek counsel from a trusted financial consultant who can help with the details while finalizing your company’s figures.
When most business owners hear the word ‘market,’ the first thought that comes to mind is demographic. And while demographic plays a huge role in determining the scope and range of your market, there are items on the checklist to consider. Elizabeth Wasserman of Inc. shares these bullet points.
A fundamental principle of pricing your contracting service is that you need to meet your expenses and then determine the profit margin. You need to know how much it’s going to cost provide your service. It’s also important to have a solid understanding of how much you need to mark up your service and how many projects you’ll need to turn a profit within a given time frame.Don’t forget that the cost of entering into a contracting project is more than your service fees. It will also include various overhead costs and fixed costs such office rental and utilities and variable costs such as equipment purchases and maintenance. You must enter these expenses in your assessment of how much it costs to perform any given job. This is where many businesses miss the mark. They either don’t account for all their costs, and offer rates that are too low, or they add items which are not essential for running the business and overcharge for their services. If you spend time giving free estimates and quotes, this needs to factor into your pricing as well.
One of the biggest mistakes that new contractors make in seeking their first few clients is to offer a bid that’s too low in hopes of landing the gig. But the rule of thumb of perceived value is the same for contractors as it is to any other industry. If you charge too low, you’ll cross the threshold of being seen as affordable into the valley of being perceived as cheap. The cost of your service should be in direct correlation to the quality of your work. If you can provide the same level of construction as an experienced contractor, then your rates should be reasonably competitive. Sure, take a few of the lower paying jobs, but don’t stay there too long. You may find that you’ll never get out of that bracket.To summarize, here’s what you need to determine how much money you should for your construction service.
· Embrace an entrepreneurial spirit and go make some money!