In setting up your marketing plan for 2016, having a price list is key! Now that you have determined what your product is that you’re selling, you need to know what money you need to make for selling that product/service.
Determine Your Man Hour Rating:
Your first step in making the perfect price is, of course, man-hour ratings! When you know what your man-hour rating was in 2015’s season, you can determine what you want to make next year. Check out our man-hour rating worksheet. Go over every one of your customers to see which ones made you money. Then, only raise the prices of your customers that don’t pay the man-hour rating you want.
It varies company to company, service to service, and location to location, but the average man-hour rating that a profitable company stays around is about $40. That means that every hour each of your employees work, they are making the company at least $40 a man-hour.
Firstly, you need to figure out your man-hour rating for the company. Then remember to add material and extra equipment costs to any jobs that include strange equipment rentals or materials to buy. You can find a helpful (and free) spreadsheet/instructions here that will help you find that number for your company.
Research Your Market:
When you make your price list, you should not try to be the cheapest in town. To some people, being the absolute cheapest in town looks like a huge advantage. In reality, it probably means you don’t have money to hire legal employees or pay for business insurance. That will bring problems of its own! Another problem with being the absolute cheapest in town is that you probably will get the absolute cheapest customers in town. They may fight you over every penny you are trying to earn from them.
You should set your company apart in a way besides the lowest prices. Some options are excellent work, or median price with low headaches, or lawn expertise. Just don’t only rely on having the lowest price. Having lower prices (that still make you money) is fine, as long as they are related to your super systems and tight routes – not skimping on legal employees or decent equipment.
We all know that the absolute cheapest in town can rarely afford business insurance or decent equipment. Nobody wants their headaches!
So do some research on your pricing compared to your competition. Find a range that works for your company (if you focus on lawn perfection, you might be on the higher side, if you focus on efficiency mow-blow-and-go, you may be on the lower side). Find the balance that makes you a good profit and set up your pricing for each job/service that you plan to offer in 2016.
Create A Price List:
Write down every job and service that you offer in 2016. Now look at the prices you charged for them last year and determine if they make the man-hour rating that you want next year. If they don’t, then raise them. If no one wanted to pay for them (because they were priced too high), and they are still worth charging less for – then maybe you can lower a few prices. Lay all your prices and services/jobs out and put down your perfect price for each of them. Then in 2016, you can start fresh with the perfect price for your market that keeps making you the profits you want!
Stay tuned to add “Place” to your Marketing Plan next week!