You might have the best team in the field. Maybe your clients rave about your outstanding customer service. But if your pricing is wrong, you won’t make the money you deserve.
Price your services too low and you won’t earn enough to keep your company afloat. Too high, and your clients will run away.
It’s hard to price your lawn services right. Pricing is a complex part of running a service business. There are dozens of factors that will influence your calculations, and some of these factors aren’t exactly concrete.
Follow these five steps to get your services priced just right:
1. Understand Your Overhead Costs
The first step to optimizing your pricing is to figure out how much your jobs cost YOU.
Every service you perform will cost some amount of money. You’ll have to pay employees, maintain equipment, cover travel expenses, etc.
Once you nail down these costs, you’ll have a much clearer image of how much it costs to keep your business afloat.
2. Uncover Hidden Costs
After you’ve discovered the obvious costs of performing a service, you need to think about the hidden numbers.
Do you offer discounts? Free services? You’ll need to increase the costs of your services accordingly. Or, consider cutting out the freebies altogether. Callbacks and warranties can also wear down on your earnings, especially if you’re dealing with particularly difficult clients.
Always calculate your hidden costs, because once you lose track of them, they will eat into your profits. That’s money that could be spent growing your company.
3. Research Your Market
If you were in the desert, you would think twice about offering mowing services. Research your customers, use these questions to figure out what your market is:
- Who has money?
- What do they want?
- What do they need?
- What are your competitors doing?
- What are your competitors NOT doing?
Answer these questions, and you’ll have a much better idea on how to price your services.
4. Track Your Time
Let’s say, right now you charge a flat rate for cleaning a room. You’ve just acquired a whole set of new clients with HUGE rooms. If you keep charging a flat rate, you’ll waste more time to get paid the same.
Don’t do this to yourself! Price your services based on the time they take you.
Time your crews when they’re out in the field. How long does it take for them to perform a service? To travel from location to location?
Remember to track your non-billable time as well as your billable time.
5. Set a Goal
You are in the business of selling time. You have the labor, you have the special skills, and you have the equipment. Now, you have to sell your time so you can make money. But you don’t just want money-
You want profit.
Think about how much you NEED to keep your company afloat, and how much you can ask your from clients before scaring them off.
When raising prices, remember that it’s better to increase them by service, instead of all at once. If customers see ALL of your rates going up, they might take that as a sign to find someone else.
When lowering prices, don’t underestimate how much money you need to keep your business profitable.
Once you’ve priced your services just right, you’ll start to see more money from more customers.
Then you’ll have to make one of the best, toughest choices of your career: do you take home a bigger paycheck, or reinvest into your business?
Patrick Hoffman is Marketing Director at Service Autopilot. He specializes in managing marketing campaigns and giving marketing strategies to the Lawn Care, Landscaping, and Cleaning Industries. When he's not writing, he's reading books on marketing, self-improvement, or science fiction.