My, my how time flies! Like many across the country our home fell victim to bad weather. Several years ago a hail storm hit our home in Owensboro, KY and low and behold we were hit again a few weeks ago. The last hailstorm required a new roof. Another hailstorm and another roof! This time we contacted the same contractor that replaced the roof last time. My wife and I discussed how long it had been since the last major hailstorm. We conservatively guessed five or six years, at the top end perhaps seven. When the contractor arrived to inspect the roof, we asked him when he had last replaced the roof. After checking his records, he said it was replaced in 2017. Wow, that was 8 years ago!!! So, what’s the point? The point is simple: Time passes quickly without our being aware of it. The problem is what has or has not transpired during that time period.
The Gold Standard for updating a company’s hourly rates is once a year, coupled with the suggestion that it be done every six months. How long has it been since your company updated its hourly rates? My guess is that most people reading this article have not updated their rates for several years.
Have any of the following items increased over the past year, much less the past couple of years?
• What about the salaries of the owner and/or staff? Have they increased?
• Have any of the techs received a raise over the past year or two?
• Did the company add office positions or hire additional techs recently?
• How about health insurance, vehicle insurance or workman’s compensation, have they gone up?
• Vehicles have gotten older; have annual maintenance costs increased?
• What about gas? Has the price per gallon gone up? Have sales increased therefore, more jobs and more driving?
• Did the rent increase on the building?
The about items have assuredly increased over the past year or two. With just a little thought I am confident you could easily add a number of additional items to the list.
There is a basic business principle that literally applies to every business. Every dollar increase in the cost of doing business will create a need to adjust the company’s hourly rate. When costs go up, the owner has two choices:
1. Increase the hourly rates in order to pass the increase onto the customer, or…
2. Adsorb the cost, which will result in decreasing profits
If your company utilizes a flat rate pricing system, the increase becomes even more magnified. Flat rate pricing books are based on two very important foundation stones. First, the hourly rate. If the hourly rate increases, the books need to be reprinted. That’s obvious. The less obvious area deals with parts pricing. If the price of parts is not updated, the current flat rate books will be seriously outdated and, therefore, underpriced.
Does time fly by? Yes! Do you know that labor pricing needs to be updated at least once a year? Most do. Should flat rate pricing manuals be updated at least once a year? Sure, they should, but how many of us do that? We get busy putting out fires, and before we know it, it’s been 2, 3, or more years since we updated labor rates and/or reprinted our flat rate books. Ouch!
Most companies that go out of business do so because of improper pricing. Stated another way, they fail to update pricing regularly. Don’t fall into that trap, it can be fatal!
Grandy & Associates has produced a brand-new book called Profitable Labor Pricing for the Trades Contractors. It’s full of tips on how to become more profitable in addition to a full section on how to set profitable hourly rates. All ten (10) worksheets are included. The book is only $19.95 and it includes shipping. Order today! Like all Grandy items, this product provides a 100% satisfaction guarantee, or your money will be fully refunded. No fussing!
