How Do I Know I’m Charging the Right Amount For My Service?
If you run a field service business, your days are busy! From communicating with clients to managing your service team, your hands are full from dawn to dusk. You want to be in the field providing hands-on leadership, but you often find yourself behind a desk negotiating pricing and handling client issues.
Then, you have to know how much to charge for your services.
Many new businesses haven’t been around long enough to establish uniform pricing plans. This means many job bids fall well short of what you should earn. Sure, customers love the value you provide. However, how much money do you lose each year by not charging what your services are worth?
Accurately pricing each service offering involves four steps.
Step One: It Starts With Revenue
A majority of small business owners start their enterprises to meet income and lifestyle goals. Yet, you’ll never meet or exceed your income goals, if you don’t establish small business revenue goals. Your revenue goals should be realistic, especially if you work in a seasonal industry.
You can’t charge the right price for your services until you have devised a revenue goal that takes into consideration all the expenses your small business incurs. Start by calculating how much net income you need to meet your lifestyle goals. Then, work in the business expense numbers. Don’t forget about taxes and regulatory fees.
Step Two: How Many Clients Can Your Small Business Handle?
Many business owners overestimate the number of clients they can handle each year. The result is projecting revenue that isn’t a realistic figure. Moreover, taking on too many clients diminishes customer service, and hence the value your small business delivers.
Let’s assume you run a lawn care business. With the number of team members on your payroll and equipment available to perform jobs simultaneously, you should be able to figure out how many clients you can handle each week. Knowing how many clients you can handle provides you with an important number that determines whether you charge the right amount for a service.
Number of clients + Pricing = Revenue Goal
Step Three: Play With The Numbers
You should play with the numbers of the three components listed in the equation above. You might lower your revenue goal, which means you adjust either the pricing or the number of clients to account for the lower revenue projection. In addition, you might gain a few clients, which allows you increase your revenue goal.
The key here is staying on top of this important equation throughout the year, as running a small field service business requires you to adapt to rapid economic changes. After you play with the numbers, spend some time working on a presentation that you plan to give to a client that includes a service offering, along with pricing.
You’re probably not sure how the customer perceives value, so let’s move on to step four.
Step Four: Research the Competition
If you work in a field service industry that includes several nearby competitors, you run the risk of overcharging for your services. Clients prefer to do business with field service companies that offer value.
Spend some time searching what the competition charges, especially if your field service business recently opened its doors. The last thing you need is for inaccurate pricing to drop your small business from customer consideration.