Mastering the art of pricing for trades jobs is not just about numbers; it’s about strategy.
As a tradesperson, understanding how to price a trade job effectively plays a big part in your business’s success.
At Fergus, we speak to so many people on the tools who find this part of the job daunting. Often, when we discuss in more detail with them, it’s clear that a lot of tradespeople are not making as much money as they should be.
In this blog post, we look at the best pricing strategies for tradespeople, ensuring that you’re equipped with the knowledge to make informed decisions that will benefit your business.
The most effective pricing strategy for tradespeople is one that covers all costs, ensures a profit, and aligns with customer expectations.
Quoting for a job is a delicate balance between being competitive and being profitable.
If you want to make this most money, its likely that value-based pricing is most effective approach.
This strategy involves setting prices based on the value of your services according to you customer’s point of view.
Ask yourself, what is your work worth to them?
This strategy requires a deep understanding of your customer base, their expectations of the job, and what makes your service unique.
By focusing on the value you bring to the table, you can justify your prices and enhance customer satisfaction.
One of the most popular method of pricing among tradespeople is cost-plus pricing.
This method involves calculating the total cost of the job (including materials, labour, and any overheads) and adding a markup for profit.
It’s straightforward and ensures that all costs are covered.
However, it’s important to be aware of market rates to avoid overpricing or underpricing your services.
Aside from value and cost-based pricing, and alternative way to quote a job in the trades is to piggyback off your competitors.
Competition-based pricing is a strategy for quoting jobs that involves conducting some market research to find out what you’re competitors are charging, and then quoting accordingly.
This method can be effective in highly competitive markets, but be wary of underpricing the job.
It may be tempting to undercut the competition to bring the work in, especially during quiet periods, but if you’re not making enough profit, you can soon find your business in trouble.
The best pricing strategy for tradespeople is often a blend of the three major approaches. It’s about understanding your costs (cost-based), the value you provide (value-based), and what your competitors are charging (competition-based).
Before quoting for a job, consider the following factors:
- Does the price reflect the quality of our work?
- Does the price cover all supplier and labour costs?
- Does the price align with what the market can bear?
It’s not a one-size-fits-all solution; it requires making changes based on your specific trade, location, and target market.
Do this, and you can create a pricing strategy that is both competitive and profitable.
To price a job, start by calculating your costs, then consider the value you provide and research competitor prices.
Always factor in a reasonable profit margin to ensure the sustainability of your business.
Here are 5 more ways you can get the best short and long term results out of your trade job quotes:
When it comes to pricing, transparency is key.
Being open and honest with your clients about how you arrive at your prices builds trust and credibility.
Consider including a section in your job quote that explains your pricing breakdown to clients, highlighting things such as materials, labour, and overhead costs.
By being upfront about money, you’ll create better client relationships and reduce the chances of misunderstandings.
Using technology can massively improve your pricing accuracy.
Software can allow you to input project details, adjust variables, and generate accurate estimates quickly.
They can also track changes, making it easier to update quotes as the project progresses.
Don’t limit your pricing strategy to the core service alone.
Explore upselling opportunities.
For example, if you’re installing a new kitchen, consider offering additional services like cabinet refinishing, hardware upgrades, or lighting installation.
Upselling not only increases revenue but also provides extra value to your customers.
Seasonal demand can significantly impact your prices.
Or at least it should.
Tradespeople often forget they can adjust their rates based on the time of year.
During peak seasons, when demand is high, consider charging a premium.
On the other hand, during slower periods, you may want to offer promotions or discounts to attract clients.
Repeat business and referrals are a huge part of running a successful trades business.
A satisfied customer is more likely to recommend your services to others, which is why you should focus on building long-term relationships rather than just one-off transactions.
Consider including loyalty programs or discounts for returning clients.
By actively nurturing your existing customer relationships, you can create a steady stream of work and establish a positive reputation in your industry.
If you want to save time, and make it easier to work out your profit margins, consider using Fergus to help you through job quoting.
Our job management software speeds up quoting with templates that allow you to build quick, repeatable quotes in seconds.
Simply upload your prices, enter in materials, add your margins and off you go.
Easy!