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Reasonable time frame to update pricing and by what percent?

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  • Reasonable time frame to update pricing and by what percent?

    I was wondering if anyone has any sage advice regarding price change? I have a handyman business and want to increase my rate at the first of the year. I want to keep the customer base I currently have but I am sure I will loose a few with sticker shock. What is a good gauge as to how often I can increase my rate and by what percentage would be a reasonably fair increase so I do not get customers with eyes rolling back into their skull when they see the bill? Currently I only charge $30.00 per hour with a $60.00 min. I have two distinctly different areas I operate in. The first is a small town that provides a lot of opportunity but a lesser competitive rate. The other is a tourist area with a higher competitive rate but way too much competition especially from larger outfits. I am centrally located and felt my rate was somewhere in the middle. a SBA counselor thought my $30.00 per hour was too high for the small town but fine for the tourist area. I would like to be in the 45.00 range as an hourly rate but was wondering if that was too big of a jump at one time?

  • #2
    Hello Derrick,

    I would be careful about raising prices too high. Of course it depends on your customer base and how they view and value you and your services but $30 to $45 is a fairly large jump and may get them shopping around. 15% would be a good jump but not too high that would scare too many away. Maybe incorporate other ways to increase your bottom line such as fixed price services on things you know very well that you can complete efficiently.

    I don't know your market but maybe call around to other companies such as yours and pretend to be a customer requesting work and get their rates.


    • #3
      Gary, thanks for the input. I have been trying to find a way to offer my services at a higher rate but at the same time offer an incentive to get the customer to provide additional hours while I am onsite to complete more task. Basically offering a higher rate for the first hour and tier it down through an 8 hour period as a cost saving incentive to get all the honey do's down at one visit. Basically I would start out at my min charge and each hour subtract 5 dollars per hour over the 8 hour day and my average pay at the end of the day would be 42.00 per hour. Just a thought. I think this might fly in one location but not in the other. In addition I would advertise discounts for seniors and veterans.I don't want to end up being the low cost guy everyone wants because and end up with all the bargain shoppers as well as hagglers and nit pickers. I have considered fixed price services and I do that through Amazon Seller Services based on their list. I am a carpenter by trade and just decided to take up the handyman business due to the up and down cycle of construction. There are so many different task that I am asked to complete it seems like a daunting task to develop a price system for each and every one. I do many things well but pricing may not be one of them. I have not yet called around and spoke with the actual companies but have done some preliminary computer research that seems to show my prices are lower than the market may bare.


      • #4
        Originally posted by Derrick Barcroft View Post
        I do many things well but pricing may not be one of them.

        You, me and most everybody else in this business.

        I'm fairly involved with lots of sub contractors and I have a good feel for what others charge and pricing is pretty much all over the place for many reasons. But I'll tell you right now the guys who are charging more are charging more because they know they'll get it and they can afford not to get as many jobs. I have two roofers who are so far apart in pricing. Both do very good work but their prices are not even close for the same type of work.

        I've learned over the years never be afraid of making too much money from a customer because guys like yourself (I think you fall into this category) will always do right by the customer and never screw them. So there's more to your service then just repairing a damaged door jamb which any decent carpenter can do.

        The majority of my repeat customers will not price me because once I'm in the door I give them stellar service, service that I know most contractors are not willing to do and/or can do. That's where you need to set yourself apart. Houses need constant maintenance and once you find a few really good money clients you'll be in a good position.

        So don't worry about your price being too high, worry about it being too low for what you bring to the table.

        Remember this it's easier to lower your price but very difficult to raise it once your customers are conditioned to your lower price.


        • #5
          "... once I'm in the door I give them stellar service, service that I know most contractors are not willing to do and/or can do. That's where you need to set yourself apart. ..."

          Nicely said.


          • #6
            I definitely agree that it is harder to raise your prices than lower them. I try to build a personal relationship with most of customers and often do little things that I do not get compensated for. I am fine with that because generally it is a small favor. I have one customer that I had to take to the emergency room when she fell and fractured her shoulder while I was working in her home for the first time. A year later she called and asked if I could run her to the hospital because she did not want to pay for an ambulance charge. I had to return in a day to pick her up. This was a good 1+ hour trip each way. She however pays less than most as I made the mistake of charging her a lower rate thinking it was a one time deal. At the time my work was slow and I thought no biggie. Since then she has kept me busy with small stuff but now the list is growing and the projects more involved. My thought is to send a notification to all my current customers prior to the first of the year thanking them for their business and at the same time announcing a new pay schedule effective for the first of the year. I also have considered offering some promotional coupons for random home maintenance services that may soften the blow. My problem is trying to be a good guy in the business world. At the same time I do not want to be a broke good guy in the business world. - Thanks for the input!


            • #7
              Don't bother sending out a notice about your price increase. Do it when they call so you can put them on the spot. They are more prone to hire you when in person or on the phone. The next time they call for service explain to them there has been an increase in costs and that your price has increased due to those costs. Don't go into a long story because you owe nobody an explanation for making a living. Keep it short and present it tactfully. You'll keep more past clients by being upfront without hiding behind a letter.


              • #8
                I just raised my price 12%. I didn't have to tell my customers 'cause I almost always charge a fixed price whether its changing lightbulbs or a total bathroom. The work is still coming in just fine.

                A few years ago I read "Defensive Estimating" and stopped looking at what I make an hour and started paying attention to what I make a year. The big picture will tell you what you have to charge to make a decent living.

                I also like to take a look at what the median income is for my area. IMHO, anyone running a business should make at least that much or change their business plan.