Consider Your Options When Setting Prices

Looking to sidestep the challenges of pricing services? Check out this breakdown of strategies.

Consider Your Options When Setting Prices
Amanda Clark

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One of the biggest challenges contractors face is correctly pricing services. Naturally, you want to price competitively so you don’t lose all your business to other companies operating in your space. At the same time, you don’t want to price so low that you fail to make any profits or simply become “the cheapest option.”

There are a number of pricing models for contractors to consider. It’s worth taking a look at some of them as you consider how you might price strategically, keeping your costs and overhead under control.

Fixed Prices

One of the simplest options is to offer a fixed price. 

Consumers typically like this approach, as they know up front exactly what they’re going to pay. For the contractor, it can be a gamble. If you need more time or more supplies than what you first estimate, you could lose money. Then again, if you end up completing the project more easily than anticipated, you could increase your profits.

In this scenario, the contractor assumes all risks and all benefits — so if you pursue fixed pricing, it’s vital to run the calculations and to factor in possible surprises or overages. Make sure you’ll come out on top even if things don’t quite go according to plan.

Not-to-Exceed

A variant on fixed pricing is the not-to-exceed model. For example, the consumer pays no more than $1,000. If the project comes in at under $1,000, that’s great news for the consumer, who saves a few bucks! If the project comes in at over $1,000, that’s still great news for the consumer, who doesn’t have to pay any extra. 

Again, the contractor bears the risk, so the same advice applies: Your pricing must encompass any plausible surprises or hindrances.

Time and Materials

In this pricing model, the consumer agrees to pay you a flat hourly rate for your labor, plus the cost of any materials that you are required to purchase to finish the job. 

This shifts the risk to the consumer, which is why some contractors hesitate to choose this approach. If you do select a time and materials pricing method, make sure you check in regularly with the customer to keep them apprised of the amount of the invoice.  

You Don’t Have to Pick Just One

These basic pricing methods all have their pros and cons, but for many contractors, the best approach may be to combine them. 

For example, there’s no reason why you can’t give yourself an allowance for fixtures, a not-to-exceed limit on labor, and a straight time-and-materials approach to any raw supplies you need to complete the project. An integrative structure can help you offer the consumer some peace of mind while also putting some cost controls in place for you and your team — the best of both worlds.

However you choose to price each job, it’s important to factor in some flexibility; you never really know what you’ll find once you’re on the job site, and even the best estimators may overlook some potential issues. Make sure you pick a pricing model that will allow you to walk away from each project with some profits in hand.


About the Author 

 Amanda E. Clark is the president and editor-in-chief of Grammar Chic, a full-service professional writing company. She is a published ghostwriter and editor, and she is currently under contract with literary agencies in Malibu, California, and Dublin. Since founding Grammar Chic in 2008, Clark, along with her team of skilled professional writers, has offered expertise to clients in the creative, business and academic fields. The company accepts a wide range of projects; often engages in content and social media marketing; and drafts resumes, press releases, web content, marketing materials and ghostwritten creative pieces. Contact Clark at www.grammarchic.net.



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