I’ve had many, many interactions over the years with business owners who are excellent craftsmen but struggle to make a living running a home improvement business.
They do good work, offer fantastic services, and appear to be doing all the right things. So, what’s missing?
The common problem I see with many of these small business owners is that they simply don’t know their numbers. In other words, they haven’t identified what they are worth. Instead, they charge a price they think a consumer is willing to pay instead of working hard to understand what it really takes (and costs!) to renovate, paint, or repair a property.
Don’t Fear the Consumer: Charge What You Need To!
I was talking to one general contractor this year who mentioned he was charging $35/hour. I asked if he was making money and a profit. He said he was not, and that it was a real struggle. He believed that $35 was a good rate that people were willing to pay in his area.
I was able to help him think a bit more about the cost to do a job.
We talked about how much time he spends in the course of a day, running to get materials, buzzing around town to do other estimates, project management, and so forth. It did not take long to realize that $35/hour was nowhere near enough to be charging a customer.
The thought of raising his prices to even $50/hour was hard for him to swallow. He didn’t think people would pay him that much.
If you cannot charge what you’re worth, it’s best to go work for someone else and not deal with the stress of running a business and losing money. That was my advice to him, and it holds true for anyone who is unwilling, or unable, to know their numbers and stick to them.
Time To Raise Prices? It May Be Better Received Than You Think
Many years ago, my dad told me that he was charging a certain hourly rate for painting. I don’t remember the exact amount when he told me the story; perhaps $35/hour as well. He then looked at his closing rate on estimates that he had worked on at the time. He was closing about 35% of the jobs he bid.
After attending a few business seminars, he realized he needed to raise his prices. He bumped up his hourly rate by $10 an hour. Nothing else changed. And, you know what? He still sold 35% of the jobs he looked at but had $10 more an hour in his pocket.
It was that one thing that began to change my dad’s thinking about running a painting business. He committed himself to hire a business coach and doing a deeper dive into knowing what to charge and why he is charging that amount. It completely changed his business, turning it into a sustainable and profitable company (and it still is).
Many of my blog readers already know their numbers. I’m preaching to the choir here!
But if you agree with me and know of a contractor friend who is still struggling to make it in the home improvement industry, forward this to him or her. Encourage that individual to seek out a good business coach.
You can’t afford NOT to!