How to go about price increases without losing customers. So it is one of those things where material price volatility, sub price volatility, employee headcount, people being overpaid for the same job as they were doing a year or two ago. Ultimately, your cost of doing business is going up and if you don’t start to make a change, you’re going to lose your business.
And I don’t want to be a dick about it, but I know many people right now that are afraid of raising their prices because what might happen. You might lose some customers, you might lose some of the wrong customers, but if you don’t make a change, you’re going to lose your business. This is not a joke. This is not me being high horse here. I’m telling you, if you do not adjust your pricing, you will end up losing your business and potentially losing some customers, which I’ll tell you, I’ve raised prices several times in my career as a general contractor, as a roofer, as a coach. You very rarely lose customers as long as the value you are bringing continues to increase.
So how do you start? One of the first things I did was I tried to just raise my average project size. So creep a little bit, maybe five or 10% in your pricing. Look, bottom line here: Someone’s going to hire you at 10,000, they’re going to hire you at 10, five or 11,000. Most people, 99% of people would make that decision. They’re not going to not choose you over that extra 500 to $1,000. But ultimately, your entire process then, the way to not lose customers is to level up the anticipated value or the general client experience from start to finish.
If you have a well-built out website, a fully dedicated social media strategy, truck wraps, employee uniforms or shirts or polos, your perceived value goes up. And I don’t care what you say, “Mike, not my market. My customers around here, they can’t afford more.” You’re wrong. There’s someone selling projects for probably twice as much as you and winning. There’s a reason for that. It’s the perceived value in the client’s eye. It’s the process, it’s the trust, it’s how you go about doing what you do, not just what you do.
So you have to get better at selling that. So go back, I’m not going to go all the way into this on this video, but I have plenty of videos on creating a sales process, creating that communication, creating social media, getting your website up-to-date. But ultimately, the first thing you need to do is you need to believe in the pricing. So you have to understand what it’s costing you to understand what you’re charging.
If you don’t know what your material pricing, labor pricing overhead, all of the bills, what it costs you per day to keep your business open. If you can’t answer that right now, you don’t even know what you should be charging. So I’m sure you’ve said this at some point, like, Hey, it’s going to be 15,000.” The customer goes, “That sounds a little high.” And you’re like, “Yeah, I thought it sounded a little high too. I was just kind of guessing at it.” Well, no wonder you’re not confident in charging the right amount of money.
So understanding your numbers is the first way to be confident in selling at a higher price. Confidence is key here. If you’re going into it second guessing or unsure or unconfident in what you are charging, the customer’s going to feel that whether you believe it or not. Just like confidence then has the same effect, it bleeds into the situation. It makes them feel comfortable, it makes them feel confident, makes them feel like they can trust you. So confidence is key and the best way to get confidence in a price increases understand why you are raising it.
And if you’re not tracking your numbers, if you don’t have job costing, if you’re not tracking material price and labor price and overhead and all those kinds of things, that’s where I would start. First way to do it is begaze to gain the confidence. Second, prepare your marketplace. A lot of times consumers and homeowners feel like they’re being misled. There’s information being left out. There’s a lot of different variables they don’t feel like they’re getting the whole story on.
Going in, willing to lose a job for the truth will get you more jobs than you lose. You might not get, you might lose some customers that are looking for the cheapest option, but you’ll gain customers in the process. I’d rather lose two or three projects at a 10% profit margin to gain one at a 30% profit margin. That’s good math. It’s a third less work or it’s two-thirds less work for the same amount of money, that everybody can agree that’s pretty beneficial.
So once you have the confidence, you have to start communicating it to your customers. Why is the price increasing? How did you get to that price? Creating some more transparency in your proposal. I was always big. I would give people the numbers for everything. I did per unit pricing, per square foot, per linear foot for everything from faucets to drywall to paint to flooring, everything was built out per unit so the customer understood what they’re paying for.
Some contractors are wildly against this. I don’t know why. Consumers want to have the information and make educated decisions. So if you break it out for them, “Here’s where this price came from, here’s the variables, here’s the measurements, here’s how I got there.” Not only now can they do a better apples to apples comparison and realize you included a lot more than the other guy, now they can make an educated decision on what they want to keep in, or what they want to take out.
If you say, “Hey, yeah, the kitchen’s going to be about 60 grand.” What about this countertop? What about this back splash? What about this appliance? How does that change the price? What if I want to do this extra thing? What if I want to add in this extra room or I want to do the floor over there? These are all questions your consumer has. They don’t want to have to come to you with every little piece of detail pre-contract to get the information you need to understand and make an actual educated decision.
So giving them more information to the right consumer who appreciates the value in that will win you more projects than you lose. I’m telling you this from personal experience. Stop pretending that giving them a lump sum number is any different than them not giving you a budget. You can’t do your job effectively without a budget, they can’t do their job effectively of making a decision without good details. So confident, understand your pricing, deliver more information to the customer.
And the last thing you need to do is make sure without a doubt that you are utilizing your social media, and your website to qualify in the right people, and qualify out the wrong people. So if you’re raising prices, your image needs to improve, your project size and what you’re doing with it, the quality of the content needs to increase. Again, perceived value.
Now you need to start talking about the new type of customer, the person that’s going to value your price point, or your experience, or your process the best. The more of that you do, the more confident you are, the more confident and value added your sales process is, the more details you give and the better you do on social media and your website of driving the message of who’s the right customer for me, you will grow and you will make more money as you grow.
If you’ve been penny pinching yourself and you’ve been afraid to raise prices, believe me, you can charge more. You probably need to be charging more. And if not now within the next year or two, you absolutely are going to have to start charging more. So implement some of that. Raise your prices five, 10%. Do it five or 10 times.
Here’s how I’ve always done it. Make a 10% increase, propose the next 10 people, analyze and adjust. Did six out of 10 still say yes? Try another 10%. But you have to have all those other things in place or it’s going to be very difficult to go through this process because if you’re walking in second guessing what you’re charging, I promise you the consumer’s going to feel that as well. And ultimately, if you don’t do a good job telling the story of who an ideal customer for you is proactively through your content and your website and through conversations you’re having, you’ll just get a lot of the bad leads, which turns into more lost projects if you raise prices, because there’s people out there right now that are willing to pay for quality and trust and confidence their project’s going to turn out correctly.
And in any business whether you do projects or not, there are people out there right now willing to pay premium to make sure they get a premium service, and people actually deliver on what they say they will. So you could be that person. I promise you it’s possible if you implement some of those things. Give it a shot, let me know. Reach out to me on Instagram @WinRate Consulting. I’d love to talk you through this or help you through this. I’d love to work with you.
Look, I coach business owners for a living. This is a great way to help offset the cost of coaching. I’m not even going to try to shy away from it. Me helping you charge where you’re supposed to charge helps make you more money for the same amount of work. That’s a great way to offset the expense of bringing a business coach to help fix a lot of the issues going on within your business. So again, I’m Mike Claudio, owner of WinRate Consulting, and I’d like to help you win fast and win often.
