Being Busy Doesn’t Mean You’re Making Money

One of the easiest ways to screw up a home service business is to confuse being busy with making money.

Your phone is ringing.

The schedule is full.

Your guys are working overtime.

Money is coming in.

From the outside, everything looks great.

Then you get to the end of the month and wonder where the hell all the money went.

I’ve been in business long enough to know that revenue can hide a lot of problems.

And one of the biggest is bad pricing.

A lot of business owners are scared to charge more because they’re scared they’ll lose the job.

So they lower the price.

Throw something in.

Match the other guy.

Give a discount nobody even asked for.

And then celebrate when they close the deal.

But getting the job doesn’t mean you won.

Sometimes the best job you ever got was the one you didn’t take.

First, know your damn numbers

Before I talk about charging more, let’s get something straight.

You need to know what it actually costs you to do the work.

Not just labor and materials.

I’m talking about everything.

• Payroll and payroll taxes
• Insurance
• Fuel, vehicles, and equipment
• Software
• Marketing
• Credit card fees
• Office staff and rent
• Mistakes and callbacks

All the little expenses that somehow turn into a whole lot of money by the end of the month.

If you’re pricing jobs without understanding your real costs, you’re guessing.

And that’s dangerous.

But knowing your costs doesn’t mean your customer needs to hear about them.

That’s where I think a lot of business owners get pricing wrong.

Your costs determine whether the job makes sense for you.

They don’t determine what the service is worth to the customer.

Those are two different things.

Your customer isn’t buying your labor hours

Let’s say someone’s AC goes out in Phoenix in July.

It’s 115 degrees outside.

They’ve got kids in the house.

They’re not sitting there thinking about your technician’s hourly wage.

They want the damn AC working.

That’s what they’re buying.

Same thing with a roofer when there’s water coming through the ceiling.

Or a plumber when a pipe bursts.

Or a junk removal company when somebody has to get a house emptied before closing.

The work has value because of the problem it solves.

Speed has value.

Convenience has value.

Showing up when you said you would has value.

Having somebody answer the phone has value.

Doing it correctly the first time has value.

Cleaning up after yourself has value.

Standing behind your work has value.

Taking a stressful problem off somebody’s plate has value.

That’s what the customer is paying for.

The actual labor is only part of it.

Cheap isn’t the advantage you think it is

I understand why business owners compete on price.

Especially when you’re starting out.

You need work.

You’ve got bills.

Maybe the trucks aren’t busy enough.

So when somebody tells you another company is $500 cheaper, your first instinct is to start negotiating against yourself.

Be careful with that.

Because once being cheaper becomes your competitive advantage, you’ve built yourself into a corner.

There’s always somebody willing to do it for less.

Always.

Maybe he’s working out of his garage.

Maybe he doesn’t carry the insurance you carry.

Maybe he doesn’t have employees.

Maybe he doesn’t spend money on marketing.

Maybe he doesn’t even know he’s losing money yet.

You cannot build your pricing around what that guy charges.

Let him have the job.

Seriously.

You don’t have to win every customer.

That was a hard lesson for me to learn in business.

Not all revenue is good revenue.

If you want customers who pick you for something other than price, they have to be able to see why. That’s what a professional website and showing up properly on Google Maps are actually for.

Some customers cost more than they pay you

Every business owner reading this already knows exactly which customers I’m talking about.

They negotiated the hardest before buying.

Then they wanted a little extra after buying.

Then another little extra.

Then they called five times.

Then they questioned the invoice.

Then they wanted a discount.

And somehow they’re also the person most likely to leave you a bad review.

That’s another reason to handle unhappy customers privately before they go public and to build reviews into your process instead of hoping for them.

Meanwhile, some of your best customers barely negotiate at all.

You tell them what something costs.

They understand what they’re getting.

They pay you.

You do what you promised.

They’re happy.

Then they send somebody else to you.

Which customer do you want more of?

Pricing doesn’t just determine your margin.

It helps determine the kind of customer you attract.

That’s something I wish more business owners understood.

You need enough margin to actually run a good company

There’s another reason I don’t believe in trying to be the cheapest.

Being good costs money.

Good employees cost money.

Training costs money.

Insurance costs money.

Good equipment costs money.

Marketing costs money.

Customer service costs money.

Fixing something when your company screws up costs money.

And eventually, the owner should make some damn money too.

There’s nothing wrong with that.

You didn’t start a business so you could work 70 hours a week, carry all the risk, personally guarantee everything, deal with every problem and then pay yourself whatever happens to be left over.

Profit isn’t something you should be embarrassed about.

Profit is what allows you to build a better company.

If your pricing doesn’t leave enough money to reinvest in the business, eventually the customer feels it too.

You stop replacing equipment.

You hire whoever you can afford instead of whoever you want.

You cut marketing.

Service starts slipping.

Then you wonder why the company isn’t growing.

Margin gives you options.

Stop apologizing for your price

I’ve watched salespeople do this.

Hell, I’ve done it myself.

You tell somebody the price and immediately start explaining why it costs so much.

Nobody even objected yet.

“$3,800…but that includes this, and we have insurance, and our costs have gone up, and…”

Stop.

You just told the customer that you don’t believe the price.

Why should they?

Give them the price and shut up.

Let them process it.

If they have a question, answer it.

If they don’t understand the value, explain it.

But don’t apologize for charging enough money to do the job correctly and run a healthy business.

Confidence matters.

And confidence doesn’t mean being arrogant.

It means knowing what you provide and being comfortable saying what it costs.

“That’s too expensive” doesn’t mean you need to discount

You’re going to hear it.

“That’s more than I expected.”

“Another company quoted me less.”

“Can you do any better?”

Business owners hear those words and immediately reach for the discount.

I wouldn’t.

I’d ask questions.

What were you expecting?

What did the other quote include?

Are you comparing the same scope of work?

Sometimes you’ll find out the customer doesn’t understand what they’re getting.

Explain it.

Sometimes the competitor isn’t offering the same thing.

Explain the difference.

Sometimes the customer legitimately can’t afford you.

That’s okay too.

Maybe there’s a smaller scope that fits their budget.

Maybe there isn’t.

But don’t take the exact same job you just said was worth $5,000 and suddenly decide it’s worth $4,000 because somebody made a face.

What does that tell the customer about the original $5,000?

If you can knock a thousand dollars off that easily, they’re going to wonder why you were charging it in the first place.

Give people options without discounting yourself

One thing I do like is giving customers choices.

Not 17 choices.

Nobody wants that.

Keep it simple.

You might have a basic option that solves the immediate problem.

A better option that includes additional value.

And a premium option for the customer who wants everything done.

It’s the same reason we publish our own pricing in two clear packages instead of making people guess.

The exact packages depend on what you sell.

HVAC is going to look different from roofing.

Roofing is going to look different from junk removal.

But the idea is the same.

Instead of asking:

“Do you want to pay $5,000?”

You’re asking:

“Which solution makes the most sense for you?”

That’s a completely different conversation.

And if the customer chooses the basic option, fine.

You didn’t discount anything.

They chose a different level of service.

If you haven’t raised your prices in a while, look at them

I’m not going to tell you to automatically raise everything 15% next Monday.

I don’t know your business.

Neither does some guy on the internet telling every contractor to raise prices.

Look at your numbers.

When was your last price increase?

What has happened to payroll since then?

Insurance?

Fuel?

Materials?

Marketing?

Software?

Everything else?

Then look at your margins.

If your costs have been climbing for two years and your pricing hasn’t moved, congratulations.

You already lowered your prices.

You just did it without changing the number.

Your margin absorbed the difference.

That’s why pricing needs to be reviewed regularly.

Not when you’re desperate.

Not after you have a bad month.

Put it on the calendar and look at it like any other part of the business.

Raising prices doesn’t require a press conference

This is another place business owners overcomplicate things.

For new customers, the new price is the price.

They don’t know what you charged six months ago.

You don’t need to make an announcement.

You don’t need to explain inflation.

You don’t need to write an essay.

That’s what it costs now.

Existing customers are different.

If you’ve got great customers who’ve been with you for years, take care of them.

Maybe you move them up slower.

Maybe you grandfather something.

Maybe the relationship is valuable enough that you’re willing to make an exception.

That’s a business decision.

But don’t let a handful of old prices keep your entire company stuck forever.

At some point the numbers have to work.

Pay attention to what happens after you raise prices

This is where your numbers matter.

Don’t judge a price increase based on the first customer who complains.

Of course somebody is going to complain.

Somebody complains when Netflix raises its price two dollars.

Look at the business.

Are you still booking enough jobs?

What’s happening to your average sale?

What’s happening to your gross profit?

What’s happening to your net profit?

Are you making more money with fewer jobs?

Are you attracting better customers?

Are your crews less overloaded?

That’s the information that matters.

I’d rather do 80 profitable jobs than 100 jobs that keep everybody busy and leave me broke.

Revenue doesn’t impress me if there’s nothing left.

Track the numbers that tell you the truth

You don’t need a finance degree.

But you should know some basic numbers.

• What percentage of estimates turn into jobs?
• What’s your average ticket?
• What’s your actual gross profit on the work?
• What’s left after overhead?
• How much does it cost you to acquire a customer?
• Which services make you the most money?
• Which services barely make anything?
• And which customers or job types consistently become a pain in the ass?

You might discover that the service you brag about selling the most is one of your least profitable.

I’ve seen businesses grow revenue and become less profitable at the same time.

That’s not growth.

That’s more work.

Here’s what I’d do this week

Pull your last 30 or 50 jobs.

Don’t just look at revenue.

Look at what you actually made.

Which jobs had the best margins?

Which ones went over on labor?

Which ones required callbacks?

Which customers took up the most office time?

Which services consistently make money?

Then pull your estimates that didn’t close.

Don’t automatically assume price was the reason.

Call a few.

Ask why they went another direction.

You may learn something. A lot of the time the answer has nothing to do with price, and everything to do with how you handled the lead in the first place.

Then look at your pricing.

If there’s a service where you know you’re too cheap, test a higher price on new customers.

Don’t change the whole company overnight because you read one article.

Test it.

Measure it.

If customers keep buying and the economics get better, you have your answer.

Then do more of it.

And if you’re raising prices, make sure the way you show up online matches what you charge. When somebody compares you to the cheaper guy, they’re usually looking at your reviews and your search results.

The goal isn’t to charge the most

I don’t believe the goal is to see how much money you can squeeze out of somebody.

That’s shortsighted.

The goal is to charge enough that the customer gets a great result and you can build a healthy business delivering it.

Both sides should win.

The customer gets their problem solved.

Your employees have a good place to work.

Your company has money to invest.

And you get rewarded for taking the risk of owning the business.

That’s what good pricing should accomplish.

So stop measuring success by how full the schedule is.

A full schedule can still lose money.

Know your numbers.

Understand what your service is worth.

Quit apologizing for your price.

Don’t be afraid to lose a job that doesn’t make sense.

And remember this:

You don’t need every customer.

You need enough of the right customers at the right price to build a business worth owning.

That’s a big difference.

✌️&❤️

— Sergio