How small contractors can raise prices with a smile!

Nov. 13, 2013
You must face facts, let go of old false ideas, and embrace sound business concepts; or quit reading now and go back to your old ways so you and your family can continue on the path to poverty. I can hear all the excuses from those who let fear run their lives. Yeah, FEAR! Call it what it is. For whatever seemingly rational reasons you've decided to close your mind and stay exactly the same. For you others who have the guts to change, who have begun building businesses based upon proper systems and methods, life's beginning to take on a rosy glow ... and I ain't referring to Happy Hour on Fridays. I'm referring to making the money you deserve.

What-in-flamin'-blazes made you decide to go into business anyway? Way-deep-down, layer below layer, did you ever admit it might be for — ta da! — to have a better life? Well, if so, I have some news that may shock you, Bunky — in your town, in our culture, at this time in human history “better life” is spelled M-O-N-E-Y. Oh darn! Oh, root of all evil! Oh, “Tis easier for a rich man to ...” blah-blah-blah!

Nuthin' wrong with all other high-falutin' reasons to enter business, but — and I almost dislike giving you this next piece of info — if you ain't in it for the bucks, you're in for a world of hurt because you will never achieve the Great American Dream. Oh, yeah, your family will suffer too ... or don't you care about them, Bunky?

Be absolutely crystal clear: If you don't start practicing proper business methods, the real, ugly, personal truth is, you and your family are economically lost. No sugar coating: You're a failure.

You must face facts, let go of old false ideas, and embrace sound business concepts; or quit reading now and go back to your old ways so you and your family can continue on the path to poverty. I can hear all the excuses from those who let fear run their lives. Yeah, FEAR! Call it what it is. For whatever seemingly rational reasons you've decided to close your mind and stay exactly the same.

For you others who have the guts to change, who have begun building businesses based upon proper systems and methods, life's beginning to take on a rosy glow ... and I ain't referring to Happy Hour on Fridays. I'm referring to making the money you deserve.

Simple has been my concept in the last five articles, so consider: How difficult is it to raise your rates if you're T&M? Answer: very, if everyone else is selling their labor the same as yours! But consider the process of raising a Flat Rate price. It's simple math. You average five billable hours a day and decided to raise your Flat Rate labor $25 more per hour. That's $125 more per day!

Remember that garbage disposal? That 1½-hour installation means you would have to raise your total price from $350 to $387.50. Excessive? Seems hardly worth mentioning and I doubt it would shock any client, but consider the ramifications:

That $25 extra per hour adds up to $31,250 a year. What!? $31,250 a year more by raising my rates $25 an hour and my clients wouldn't even blink!

Yep, that's the magic of Flat Rate. For a 50-week year @ $125 per hour you're now grossing $156,250. Jeez, that looks great! What a nice living that would be! Would! Would? What happened to “is”? What the ...? Where's the fly-in-the-ointment now!? You're killin' me, O'Connell.

Uh, well, there's some few business expenses we should mention, like phones; trucks; licenses; advertising; multiple insurances; depreciation; local, state, and federal business taxes ... and them's just a few. Then there are the hours wearing all the hats needed to support those five hours you actually spend working with the tools — bookkeeper, estimator, parts runner, call taker, dispatcher, scheduler, etc. — or is your wife an unpaid slave doin' these chores?

All of a sudden that overpriced Flat-Rater down the street who's goin' fishing this weekend while you write up estimates doesn't look so unethical. So, I've painted a picture — some good stuff, some not. If you're not into Flat Rate by now you should feel, well, depressed. You're toast. If you've had the guts to change you should be hopeful, and more hope is comin' next article. Next time I'll dish up two decisions that will affect the rest of your life. Both will be perfect for your financial future. Both will save you from the agony of mediocrity — a fate worse than outright failure. Oh, yeah, there'll be a third decision — don't decide. That one will mess you over. Stay tuned.

Retired master plumber Ed O’Connell, Fairfax, Calif., is a Business Coach for smaller contractors. He can be reached at 415/453-2291 and by email [email protected].

Voice your opinion!

To join the conversation, and become an exclusive member of Contractor, create an account today!