Certain situations negatively affect the contracting business arena; some are facts, while others are figments of the imagination. Consumers often complain that the price is too high in a ploy to instill in the contractor’s mind the thought that the consumer will probably not avail themselves of the contractor’s services at those prices. Obviously, this is done either because the consumer really can’t afford to pay the asking price or the complaint is a ploy to get the contractor to lower the price.

Fact: Many contractors, ignorant of their legitimate operational business costs, often fear not closing a deal because they think their prices are too high. 

Fact: Consumers always want excellence regarding the services contractors provide for them. 

Fiction: Consumers will accept any type of workmanship.

Fact: Consumers will not become repeat clientele of contractors who only deliver mediocrity.

Fact: Contractors, worrying about the price being too high, fool themselves into thinking they can perform any service in less time than it takes and with less expensive material than the delivery of excellence demands to keep the price low.

Fact: Excellence costs contractors more to produce than mediocrity.

Fact: Contractors often armed with, and implementing, the flawed practice of charging prices their competitors charge instead of mathematically calculating their own true operational business costs find themselves having self-inflicted difficulty in earning the reward they deserve. 

Fact: By not blending their true costs with a properly profitable margin, they put themselves in a situation that hinders their ability to accomplish the goals of a properly managed business: recovering their operational business costs and earning a profit.

Fact: The result is that consumers do not receive excellence in performance, while contractors wonder why they are not getting the results they want to get from their businesses.

So, what is the remedy for both the consumer and contractor? 

Business Person or Person in Business?

Obviously, it is imperative that contractors properly calculate their true operational business costs and apply a proper profit margin to those costs of any service they provide so they can afford to deliver excellence to consumers at their prices. This would allow them to recover the costs they incur for said task before quoting any prices. In turn, they can afford to deliver excellence to consumers.

However, the fear of losing jobs due to quoting higher prices often blinds contractors. They don’t see that they may be losing money by quoting prices at levels that don’t let them recover the true cost they incur to perform said jobs.

The lack of knowledge as to calculating their true business operational costs, and laziness, make it easy for them to slide down the slippery slope of finding out what competitors charge and charging the same or a dollar less. And therein lies the difference between being a business person or only a person in business.

To make it easy for these ill-informed persons in business, allow me to try to point them in the right direction. It surely beats traveling down a road that can only lead to, at the least, poor business results and, in some cases, total failure. 

To add insult to injury, either poor business results or failure only add to the stress and frustration all business people and those who are only persons in business face by being in business. 

What you are about to read can help people in business as well as business people. Adding a dollar to your existing selling prices for a tech hour of labor and overhead can help consumers possibly receive the excellence they desire while you, the contractors, get to where you want to go.

There are 1,708 potential revenue-producing tech hours in 2,080 hours per tech year. If you subtract 128 hours for vacation/personal/holiday time, plus a minimum of 244 hours for nonrevenue-producing tech hours, you get only 1,708 maximum revenue-producing hours per tech annually.

Adding one dollar to your hourly selling price per tech will allow you to bring in $1,708 more per tech annually. 

With two techs, the total amount becomes $3,416. With three techs, the number is $5,124, and so on and so forth.

Get On the Right Track

The benefit doesn’t stop there. Adding a dollar more per tech hour to your selling prices and realizing that you can charge more can build your confidence level in those prices. In turn, you may gain the hutzpah to charge two dollars more per tech hour. 

In which case, at one tech, your business has the potential to bring in $3,416 more than before you added the increase. With two techs, that amount becomes $6,832. And with three techs, the potential extra revenue is $10,248 annually. I don’t know of any contractor in business who would mind bringing in more money. 

However, you must keep in mind that only adding a dollar or two per tech hour doesn’t guarantee you will recover your true operational business costs and earn a profit above said true costs. For that, you must properly identify all the tangible and intangible business operational costs you incurred to run your business.

To make a profit, you must apply a profit margin to get you where you want to go; it’s as simple as that. However, as I have stated before, charging a dollar more per tech hour can put you on the right track. You must then buckle down and know your true operational business costs, apply a properly profitable margin, build your confidence and sell your services at prices that will recover your operational costs and earn a profit above said costs. 

Over the years, as I have consulted with many contractors, I concluded that many service contractors charge $30/tech hour less than what it actually costs them.

In that instance, they would need to charge, minimally, $30 more per tech hour selling price to cover the deficit in actual cost to the contractor. 

With one tech, that potential revenue becomes $51,240 annually. I don’t know any contractor who would balk at bringing in that much more per tech per year. With two techs, that number becomes $102,480; with three techs, the amount is $153,720.

Table 1 shows the potential resulting numbers at different dollar amounts per hour and different numbers of techs. It only goes up to four techs. Obviously, if you employ more than four techs, the potential amounts can be higher.

To get on the right track, it takes charging a dollar more per tech hour selling price in order to test the waters on the thought of raising your prices. I don’t think you would lose any jobs for one dollar more per tech hour. And it might give you the insight and courage to do what successful businesspeople do.

If you don’t want to try and see the difference a dollar makes in your business results, don’t do it. However, realize the following facts/fiction:

Fact: You won’t pull in that extra revenue.

Fact: You will feel extra stress and frustration in your business.

Fact: You will eventually run out of money supporting your hobby of poor business management. 

Fiction: You are a business person.

Fact: You are only a person in business.

Fact: An added dollar in selling prices can make a difference in business results. The proper amount of dollars added to selling prices can make a big difference.