5 Steps to Proper Pricing

5 Steps to Proper Pricing - Tucker® USA

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5 Steps to Proper Pricing

At least once a month we get a call or an email from a competitor asking for an estimate. Of course they don’t identify themselves, but it’s pretty easy to pick them out. Sometimes they want to give you the window counts without you coming out to the property and their numbers descriptions are very precise. Other times they are vague with questions like, “So how much is a normal 3 bedroom house?” after which they add in other items like a couple light fixtures and maybe a set of basement windows.

This is one of the hardest things for a rookie to figure out: how much to charge. You’re trying to balance out how much your work is worth, how much you need to make, and how much a customer expects to pay. You don’t want to leave money on the table, but you also want to be working steadily and not price yourself out of the market.

It’s especially hard for straight service businesses like ours because we’re just selling our time, talents, and experience. For a newbie that’s even more daunting because you don’t really know how you compare to others in terms of quality and speed.

Here I’m going to give you everything you need to come up with your own pricing based on my decades of mistakes and missteps.

Step #1 - Think of the future, not the present.

This is going to be the hardest bit of advice for someone just starting out. You’re hungry and you’re worried about making your rent or house payment. You’ve got bills and people who rely on you and some money today is really important, often more important than a plan for money in 5 or 10 years.

Years ago I was close friends with a guy who was probably one of the fastest window cleaners I’ve ever seen. He could knock out a house in half a day that would take my brother and I working together 5 or 6 hours to complete. Because of that, he priced his work based on his own speed and ridiculed me for price gouging. For example, if he could do a house for $375 in 5 hours he was making $75 an hour and he thought that was great, and it was. He was so proficient and he made such good money that he mostly worked short days, preferring to quit early.

He once said that if he charged my prices, he’d be making $125 per hour and that is obscene for a window cleaner.

As things happen though, I’m no longer cleaning windows. I know how and I’m really good. Eventually I reached his work speed, but these days I am running a couple of businesses and don’t have time to be out in the field. That window cleaner though? He’s still out there working short days and even though he tried to hire helpers a couple of times, his prices are just too low to pay someone else who isn’t close to his speed and quality. He still answers all the emails, phone calls, and texts. He still does all his own estimates and scheduling. He’s doing okay though, making a good living, but he’s not getting any younger and this work is hard on your body.

Step #2 - Get obsessive about timing yourself.

I have written before about getting a stopwatch and timing yourself. Well do it. Time yourself and your helpers if you have them. Figure out how long it takes you to unload your truck and prep the job. Figure out how long it takes to disassemble some windows and put them back together. Figure out how long it takes you to clean 25 panes of glass. Figure out how long it takes to clean a couple hundred cutups. Keep track. Instead of just copying other people, find out how much you’re really accomplishing an hour and don’t discount the time to get to the job and the time to pack up and leave when you’re done. Then double it. Your employees are always going to accomplish things at half your speed. Just expect it and don’t shame them for it. Your pricing must take that into account.

Step #3 - Quick and Easy Job Costing

How much does it cost you to do the job? I could write a lot on this subject and I will at a later date, but here’s what you need to know to get started.

In order to get to the job you paid for gas in your vehicle. You have some supplies that you used, even if it was just some soap and squeegee rubber. You dirtied some rags and towels and you probably should also wash that shirt you wore.

Add all that up but then also include your fixed costs, like your truck and your phone and your insurance. Maybe you have a shop or you’re working out of a garage, well figure out how much that costs your business. Did you spend anything on door tags, a website, some SEO? How much time did you spend working on your social media? Your clothes? Your shoes? Ladders and water fed poles and filters? Don’t forget taxes! Include that in your calculation. Ask for help with those numbers if you need it. All of those things cost money. Get a total for a year.

Now figure out how many jobs you can do in a year. Let’s say 200 for the sake of making an easy example. Every one of those jobs get charged half a percent of that total and now you’re really figuring out how much you need to make to cover all that stuff. As you get bigger and have more expenses and more employees, this calculation gets more complex and more important. Stick with it.

Step #4 - How much is an employee worth to you?

How much is an employee worth to you? There are a lot of books and advice out there that are going to give you “rules of thumb” for how much of your revenue should go to your employees. And I guess I’m just another voice in that crowd, but this is something you should think of from the day you start, when it’s just you and a lot of hope.

For every $100 you charge, figure out how much of that should go to a crewmember. When you’re first starting, that crewmember is yourself and I recommend paying yourself that number, keeping your profits in the business to work on growth. Is your number a comfortable wage? Is it liveable? Is it something that makes you feel important in this business you’re creating?

Don’t forget about adding in the payroll taxes and worker’s comp insurance.

Add this number into the job costing.

Step #5 - Set your prices.

Notice I never once told you to find out what your competitors are charging. That’s because it doesn’t matter. You can talk to them about it if you want, but take them to coffee or out for a beer and discuss things, don’t pretend to be a prospect and call them from your spouse’s phone.

I’m here if you have questions.

- Rick Wren