EP #9 – Pricing: Make or Break Your Business

Overview

Pricing strategy is one of the core fundamentals of running a business. Sure you could just pull a number out of thin air and see how it goes, but it’s always tempting to lower prices to find more work.

Your prices are a lot more than just a number, and play a huge part in the future success of your business. In Dan Voice’s words, “don’t be the cheapest fool in the village!”

Tune in to EP #9 with Dan to find out how his experiences have shaped how he thinks about pricing.

Listen to the episode:

Highlights

Background

• Dan walks us through his background working in pools, heating & filtration. (0:58)
• About 90% of the work Dan does is repairs and servicing. (1:47)

Pricing overview

• Dan walks through how he does his pricing. He looks at his overheads & costs, and a projected salary that he needs & wants. (2:28)
• You’ve got to be doubling your salary, if not more, to cover all the costs your customers don’t see. (3:15)
• Everyone makes mistakes, but if you’re not making any money on a job, there’s no real incentive to go back and fix it. (6:28)
• If you don’t know your own worth, you set yourself up for price bashing & for failure. (7:25)
• Dan looks at his numbers every 3 months based on his VAT. If you have to top up your VAT bill from savings, you’re pricing something wrong. (20:03)
• Set up another bank account with a standing order. This will keep you in touch with your bills and taxes. (22:10)
• Remember that not all the money that goes into your account is yours. It’s a business. (23:05)

Strategy

• Dan starts with all his costs and divides them up on the working days of the year, not 365 days. You need to get your forseeables & future needs costed in as well. (3:28)
• Hourly rates aren’t necessarily the best. You might be able to do something quickly, but it doesn’t factor in all the experience & training needed to do it that fast. (5:02)
• Don’t worry about what other people are charging. But if you’re charging above the average, look at overheads & wage expectation and tidy them up. But don’t be the cheapest fool in the village. (7:40)
• Don’t be scared of making money. That’s how business works. You’ve just got to decide whats fair and reasonable. (8:10)
• If it’s costing you that much to have a reasonable lifestyle, it’s costing your competitors the same. Why devalue a trade just for one-upmanship? You should be able to win on being an awesome engineer. (8:45)
• Avoid the price-based mindset. You don’t always lose a job because of prices. (9:37)
• If someone’s after a cheap job, you can always move on. (10:53)
• Know your work, work your costs out, and work to a good margin. As you go through your first 5 years, you should have nailed pricing strategy. (11:17)
• Break down the work into each indvidual element can help you work out the pricing. (17:25)

Vicious cycle

• Cheap jobs don’t earn you enough money, so you end up rushing them to get more jobs, you won’t get return customers. Cheap will cost you in the long run. (12:43)
• You want to get to a point where you have a solid customer base with an occasional new customer. (13:10)
• Dan shares his expeirence underpricing a job. (14:45)
• It’s cheaper to sit at home and do nothing than go to work for nothing. You end up getting a bunch of liabilities. (15:02)

Pricing for friends and family

• A friend that will pay a stranger complete price but won’t pay the same to their friend is a bad friend. (23:45)