Pricing is the most critical aspect of running your installer business , yet it ’ s often the worst understood . Competing on price tends to be the first strategy that people new to business adopt . As a result , under-charging is one of the most common causes of failure . This doesn ’ t mean that you can charge what you like . It simply means that price shouldn ’ t be the main reason that you win business . Better than that , smart pricing can be a key strategy to make you more successful . Hopefully , these tips can help .

Quote for all business

There are different ways that you can run your business . The first is simply charging by the hour . This means there is no risk to you . However long the job takes you get paid a reasonable amount . The problem is that customers don ’ t like it as they don ’ t know how much they will pay .

charging by the hour means that you will never get rich

If you aren ’ t particularly ambitious and your existing customers already trust you , this is a safe way to run your business . It ’ s also the only way to survive if you are very bad at estimating . However , charging by the hour means that you will never get rich and the rest of this article may not be of much use to you .

Quoting up front gives you the opportunity to make a much greater margin albeit with greater risk . This is because customers will rarely know what the job will involve as well as you do . They won ’ t have a feel for how long things will take so they will focus on the cost compared to the benefit . This switches them to thinking about value rather than cost . That ’ s in comparison with a rate per hour which everyone understands and about which everyone has an opinion .

Compete on value not price

It ’ s sometimes hard to believe , but most people don ’ t buy on cost , they buy on value . That ’ s why the roads are full of BMWs . The cheapest new car in the UK is the Dacia Sandero , which costs around six thousand pounds . But it ’ s not the only car you see on the road . It ’ s not even in the top ten .

Of course , it ’ s possible to compete on price by paying yourself ( and any staff you have ) a low salary . In addition , you can cut corners on the job . The first approach means immediate poverty . The second makes you poor later . You will also never get recommendations by word of mouth so you will be competing on price for ever . After drowning in a sea of unpaid bills and investigations from trading standards most people understand the problems with this approach .

The alternative , competing on value , is about explaining and demonstrating that you will do a quality job . Mark Goodchild of Electric-call . net explains it as follows : “ The aim is always to do a quality job and be highly responsive to the customer . In the last 12 months we haven ’ t received a single complaint . However , don ’ t try to compete on price as you can ’ t do that at the same time as providing a great service ”. Matthew Stevenson of The Landscape Company agrees : “ I always tell customers that we won ’ t be the

cheapest , but we will be the best value ”.

People will pay more if they feel that they will get a quality job . And remember , every interaction that they have with your company will add or subtract from their view of whether that ’ s what you will deliver . It ’ s why uniforms , smart vans , tidy appearance , being totally professional with prospects and producing great looking quotes can all help to establish that feeling . Qualifications , membership of trade associations , customer testimonials plus before and after pictures of previous work can all help too . The Landscape Company ’ s site at thelandscapecompany . org . uk is a good example of how to do this right . Another approach is to provide a service level that nobody else provides . One installer I know responds to emergency call outs within one hour , 24x7 and however small the job is . This is their way of generating new work as customers immediately start trusting them . Delivering service like this builds confidence . Often an installation with a problem needing a callout is an installation that needs a lot more work .

In fact , some companies are so against competing on price that they won ’ t even quote if they are in competition with anyone else . You do need a steady stream of leads to be able to work this way .

Understand and set expectations

An old colleague told me that the answer to the question “ How much will it cost ?” was “ How much have you got ?”

That isn ’ t a question that you can actually ask but it does illustrate a point . If you are doing a job in a large property ( or a commercial property ) where only the highest standards have been accepted in the past , you mustn ’ t be surprised if only the best will do . And that costs money which means that you need to price accordingly .

Most people will have an expectation about quality of work , but your customers will also have an expectation on price . Surprises kill sales , which is why it is important to make sure that your prospect is thinking in the right ball park before they get your quote . Failing to set expectations can lead your customer to angrily reject your proposal , then inexplicably sign up with a competitor who is charging even more .

Both understanding and setting expectations is key to winning a job and then completing it profitably .

Only engage in sensible competition

You can only use competition on price as a strategy if you have a cost advantage over competitors . However , it ’ s hard to see where that would apply for normal installers . Big supermarkets have a price advantage by squeezing their suppliers until the pips squeak , but I doubt that any of us have

this sort of power . That ’ s why we shouldn ’ t compete on price .

Estimating accurately is the key to competing while retaining a decent margin . This is because it enables you to confidently know how far you can go . The way that you can improve your skill at estimating is by reviewing each completed job and seeing what it actually cost you versus your original estimate . That ’ s hard work but it is key to success . Your pricing cannot be hopelessly out of line with competition but you should always walk away if it ’ s getting silly and don ’ t aim to be the cheapest unless the competition is Rolls Royce .

Avoid price-driven customers

Very often , customers who are obsessed by price are the most difficult customers too . If they are super keen on a ‘ deal ’ they are often unreasonable about other things . They see the price of everything but the value of nothing . They probably drive a Dacia Sandero . It ’ s best to let your competitors have them .

Maximising return

Think of things this way . How many times have you completed a job for a grateful customer who would have been happy to pay more ? That ’ s called leaving money on the table . We ’ re not talking about ripping people off here , we are talking about sharing the value that your great work generates in a fair way .

Getting pricing right is the key to getting the most out of your business and generating the cash to enable it to grow . Best of luck with your endeavours .

About the author Benjamin Dyer is CEO and co-founder of Powered Now . Powered Now ’ s mobile app aims to take the pain out of paperwork for installers and other trade businesses .

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