#217 3 Things to Consider When Pricing a Job For Profit - Small Contractors

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I have a passion for the tradesmen and women who decide to go into business for themselves. Nothing burns my a$$ more than someone being taken advantage of when they first start out. It's always good to harm yourself with knowledge. 

You may know that labour + materials + profit = job price. But here are a couple of things to remember if you're either just starting out or you're scaling your business and want to compete on a more professional level.

1. Don't act like an employee.  Danny was a fella that worked for someone else for 10 years before getting pi$$ed one day and deciding to set out on his own.  He hadn't yet developed his business chops. So he looked at how much he made  as an employee, grossed that amount up a bit (a number he guessed at) and did his first job.....and he almost lost his shirt.  That's what happens when you're winging it.  You see Danny hadn't yet figured out all of the stuff about the cost of doing business. A sure-fire way to end up out of business is to undercharge for your services. Remember when you used to complain about not getting paid enough for the work you do? Remember how enraged you were when you found out how much your boss was billing out your time for? Well, there's this thing called the daily cost of doing business - overhead that needs to be factored into your pricing. Don't sabotage your biz by charging like you're an employee.

2. Put a standard costing procedure in place.  I know that if you are just starting out in business you're not going to have  an automated costing system in place but you still need to have some kind of system in place. There's nothing worse than being in a place where you're chronically cash-strapped in business and you get a chance to bid on a job and you pick a number out of thin air so that you can make it through the next payroll. That's not the way to do business. You need a standard system even if it is in a scribbler where you have figured out all of the numbers that matter. Time and material and profit. Don't wing it. 

3. Be ready to defend your pricing. When you get push back on the cost, you may have a tendency to just jump in there with a deeper than you can handle discount. Don't do that. Be ready to have a professional conversation around why you're charging what you charge. How did you come up with that number. "I won't make any money if I lower the price." tells the customer one thing - you're a rookie. Show up with confidence ready to have a discussion. 

They say that 8 out of 10 businesses fail in the first 5 years. Start doing what the professionals do on day one - learning what the other 2 - the 2 that succeed - did well. 

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