Running a successful contracting business encompasses more than just delivering quality services — it’s about strategically understanding and managing your finances to ensure growth and stability. One of the most empowering steps you as a contractor, small business owner, or finance professional can take is to deeply understand the numbers behind your operation.
Why Pricing Your Services Appropriately Matters
When it comes to determining what to charge for your services, making informed decisions based on your business numbers isn’t just critical—it’s game-changing. Far too often, companies undervalue their services, resulting in unnecessary stress and potentially harming the sustainability of the business.
But why do businesses fall into the trap of undervaluing themselves?
In the pursuit of competitive edge, contractors might cut prices. The fear of losing potential clients to competitors can lead to undervalued service charges. However, this is a short-sighted approach that doesn’t consider the long-term financial health of your business.
Price your services to reflect the quality, the expertise you bring, and the cost of operation. Remember that your prices should cover not just your direct costs but also the overheads, and, importantly, the profit that will enable reinvestment in your business.
Educate to Empower
Educating others on understanding their numbers is pivotal. When contractors know how to calculate the true cost of their time and resources, and understand the market they are operating in, they position themselves to make better business decisions. Here’s how:
- Cost of Services: Break down the costs involved in completing a job — materials, labor, overhead. Keep in mind that overhead includes not only direct costs, such as office supplies or equipment but also indirect costs like insurance and marketing.
- Value of Expertise: Your skills and experience have significant value. When you educate on the importance of factoring in expertise, contractors learn to see their services as more than just a price tag—it’s a valuable, unique offer to their clients.
- Market Rates: Encourage research into what the going rates are in your industry and area. Underpricing might get you more jobs short-term, but it can devalue the service and harm the industry as a whole.
- Transparency with Clients: Clients appreciate transparency in pricing. Constructive conversations about how rates are determined can lead to better trust and long-term client relationships.
- Future Planning: Understand that what you charge today impacts your business’s future. Proper pricing today means having the resources tomorrow to grow and adapt.
Bottom Line
If you’re looking to grow your business, start with the numbers. A clear understanding of your business finances and an approach that communicates the value and rationale behind your pricing can lead to more sustainable business practices and a better bottom line. It’s not just about charging more — it’s about charging right. Your business is worth it, and so are your customers.
Educating others about this topic isn’t just an act of support; it’s an investment in the health of the industry and your business. When we all understand and respect our value, the entire sector stands stronger.
Take the time today to review your numbers. Ensure you’re in a position to maintain the quality of your work, sustain your business’s growth, and continue providing exceptional services to your valued customers. If that feels like a tall order, know that there are resources and professionals ready to guide you through the process. Your success is integral to the community, and understanding your numbers is the first step towards ensuring that success.
If your a contractor like myself and would like to have more information on how to calculate your numbers please feel free to reach out, I would like the opportunity to help you get on the correct path and not make the mistakes so many others before us made including myself.
James Suttle
Suttle Air