Hey Contractors Here s How Determine What The Market Is Willing Pay For Your Services
Below is a MRR and PLR article in category Internet Business -> subcategory Web Hosting.
Hey Contractors, Here's How to Determine What the Market is Willing to Pay for Your Services
If you've read my report, "The 10 Biggest Mistakes Contractors Make," you'll recall that Mistake
9 is pricing your work too low.
Today, I'll guide you on how to systematically determine the price your prospects are willing to pay, based on your services, project characteristics, and the type of client you're targeting.
Many contractors are convinced they understand what their market will bear. However, when I review their data collection systems, I often find significant gaps. Without robust information, it's nearly impossible to know the optimal price for a prospect.
Why Raise Your Prices?
Low pricing is typically due to two main reasons:
1. Fear of losing the job.
2. Lack of data-driven pricing decisions.
Addressing the second issue usually alleviates the first. Reliable data on past performance, along with continuous monitoring, provides the confidence to set higher prices. So, let's start collecting that data.
Collecting Market Data
Your goal is to track what your market is willing to pay. More detailed tracking leads to more precise pricing guidelines, which in turn increases your profits.
Begin by documenting each proposal's estimated cost, job size, services offered, client type, client status, and lead source. For client type, specify if you're approaching a residential, commercial, building owner/operator, property manager, retail space, office building, general contractor, subcontractor, industrial, institutional, or other client. For client status, indicate if it's a new customer, existing customer, or referral.
Choose an appropriate project size indicator for your trade, like square feet or cubic yards. Use a spreadsheet to record this information, creating a column for each item.
Include columns for the proposal number, project or client name, proposal status (won, lost, open, budget), and proposal date. Enter each proposal on a separate line. Weekly data entry is typical, so consider having someone input this regularly.
Analyzing Your Data
Once you've gathered sufficient data, analyze it to adjust your pricing strategy.
Sort and filter your data by work type, client type, and job size to identify trends. Focus on win rates, such as 1 in 5 or 1 in 3. You need to determine the mark-up that correlates with a successful win rate.
For jobs, aim for a success rate between 25% and 40%. Smaller jobs usually require a higher success rate, while larger projects may sustain a lower rate due to increased competition.
Recognize that as job prices increase, customers become more price-sensitive. Validate this trend in your data.
Understanding Client Price Sensitivity
Price sensitivity can vary significantly depending on the client type. Residential clients are generally more price-sensitive, whereas industrial clients tend to be less so. Remember the "Other People's Money" syndrome?"clients spending others' money are typically less concerned about price.
Developing Pricing Guidelines
Utilize your data to draft pricing guidelines. For instance, "For this type of job, this size, and this client, the optimal price should win about one-third of the time."
Refine your strategy by assessing the prospect's priorities. If a client doesn't seem overly concerned with cost, consider a higher mark-up. Use sales questions to gauge their focus beyond pricing.
Conversely, if a client appears highly price-sensitive, offer a price below your guidelines if you still want the job. However, if your data suggests the client is underpaying, they might not be the right fit for your business.
Aim to win around 25% of larger jobs and not exceed 40% of smaller jobs. If you're winning more than 40% of your bids, especially in any category, you might be under-pricing. This often means you're leaving significant revenue on the table.
With these strategies, you can better understand and navigate pricing in the construction market, ensuring your services are accurately valued.
You can find the original non-AI version of this article here: Hey Contractors Here s How Determine What The Market Is Willing Pay For Your Services.
You can browse and read all the articles for free. If you want to use them and get PLR and MRR rights, you need to buy the pack. Learn more about this pack of over 100 000 MRR and PLR articles.