When you provide any home improvement, remodeling, or repair services, one of the toughest parts of running your business is knowing how to set prices for your services, and knowing when to raise those prices!
To set prices for home services, consider your costs, the rates charged by your competitor, any specialized services or advanced skills and experience you offer, as well as the average income in the area in which you work.
To make it easier for you to set prices for home services, consider a few quick tips to keep in mind when it's time to charge your customers.
One of the first considerations when it comes to how to set prices for home services is if you should charge by the hour or by the job. The best way to determine this is to consider the actual work you do, and if it will vary significantly from job to job, or if you'll be doing the same type of work for each customer.
Consider an example of what this means. A housecleaning company may offer the same type of service from one job to another; vacuuming, scrubbing toilets and showers, mopping floors, and so on. This type of service provider could then charge a flat fee based on the size of a home since the actual work and the materials used will be relatively unchanged from one job to another. All three-bedroom, two bathroom homes would be charged one price, all one-bedroom apartments given another quote, and so on.
However, if you repair residential furnaces, you don't know what type of work will be doing from one job to another. You may need to spend several hours at one job, taking apart the entire furnace to find a broken part or leak, whereas another job may be speedy and straightforward. Since your work will vary significantly from one job site to another, it might be good to charge an hourly fee versus a flat rate.
Using a pricing formula for services
There is no perfect pricing formula that you can use when determining a price for home services, but it can be easier for you to quote potential jobs if you create a method you can use repeatedly. To do this, note a few factors you'll need to remember when creating a pricing formula for your business:
When it comes to your rates for the materials you will use and sell to customers, consider charging half over again or doubling your own cost. This price will then cover the time you spend shopping for such materials, customizing them for your use on the job, and repackaging them if needed.
As an example, if you pay $2.50 for a certain amount of electrical wiring, you would charge your customer $5 for that same wiring. A house painter who pays $5 for a gallon of paint might invoice their customer half over again, or $7.50, for every gallon used on the job.
There are many other factors you might need to consider when setting prices for home services, so you know you're fair to yourself and your customers. As an example, a piano tuner might charge more money to tune a piano used for performances and instruction, versus ones used by hobbyists. A performer may be very particular about the sound coming from their piano, so the work may need to be more precise, whereas a hobbyist may not be overly concerned with getting an accurate, crisp sound from their instrument.
As another example, you may want to charge more money to service delicate or expensive household items, as they may need more care during those services. An old plaster ceiling or rare silk rug may need more delicacy when being repaired or cleaned than a standard plaster ceiling or everyday wool rug. An antique piano may be more delicate than a modern piece so that you need to exercise caution when tuning it, and old single-glazed windows may need hand washing so that they don't shatter under the pressure of a power washer; again, you might charge more for these services in particular.
Note if a particular job would require more work or materials on your part. Many carpet cleaners charge extra for carpets that are especially filthy, and a housecleaning company might do the same for a home that is extraordinarily messy and dirty. In some cases, you might even adjust your pricing for a particular time of the year when your jobs will require more work, such as window washing after storm season, or housecleaning after the holidays.
You might also be able to charge more money in a wealthier area. A homeowner with more money may be suspicious of a service provider who undercharges, perhaps assuming that their services will not be professional and reliable. Wealthier homeowners may also merely be accustomed to paying more for specific services, so they would never question if they get an estimate that is higher than those offered to persons in another area.
One way to grow your business is to offer flexible pricing for home services. This flexibility allows a potential customer to use your services even if your original quote is out of their price range. To offer some flexibility while still ensuring you maintain a healthy profit margin, note a few tips:
While you don't want to price yourself out of your chosen industry, you also want to be careful of too many discounts for home services. Undercutting your prices can mean working for virtually no profit, or for so little money per hour that you can't afford to pay your bills!
Note a few tips and precautions you might consider about offering discounts on home services:
Once you set your prices for home services, don't assume that they're written in stone, as you may need or want to eventually raise those prices. Consider a few tips when it comes to raising rates for home services, no matter your industry:
Remember, too, that it often takes time for a new business to become successful. If you're confused with how to set prices for home services and aren't sure when to raise them, be patient with your current pricing strategy, and then make some small changes if needed, and give those changes some time to work. Eventually, you'll realize the best price to charge customers so that they're happy to hire you while you still maintain a healthy profit from your business.
Once your service prices are consistent and stable, and you are ready to scale out your business, consider a lead generation company that specializes in home services. LeadsForward has generated thousands of high-quality, exclusive leads for contractors in a variety of niches.