How do you know when it is time to raise prices for your construction services? This is an important question that many contractors need to ask themselves at one point or another. It is also a difficult one. As Entrepreneur puts it,
“One of the hardest things you will ever do in business is raise your prices. Even big companies are reluctant to do it. Once a customer gets used to paying a certain price for something, it’s tough to convince them they should pay more for it because of things beyond their control-an increase in the rate of inflation, an increase in your cost of doing business, or an increase in the rates your competitors charge. Many customers will be upset, especially business customers, because they probably aren’t free to raise their rates as freely as you are. Also, many customers will want to know, ‘What am I getting extra for the additional fee?'”
This can be a difficult decision to make but with the right information, it can be significantly easier. With this in mind, let’s take a look at how you can know when it is time to raise prices at you company. We hope this helps and provides your business with the resources it needs.
Too Much Work
One time when you will know that it is time to raise prices is when you have too much work or too many bids. If you cannot handle your current workload, you may want to consider an increase in fees. It may be possible that you are underselling yourself and thus having more work than you can handle. At any rate, raising your prices will slow down the the amount of incoming work and allow you to be more selective about which jobs you do. From the Balance,
“Having a waiting list, being over scheduled, or managing a back-log of orders are all signs that you may be able to charge more for your products and services. If the demand is there, the market will likely respond positively to a rate increase.
If your workload continues to build, you can raise your rates and then outsource some of the work in order to more efficiently meet the demand while still making a profit. And if your business continues to grow, a price increase can support hiring staff or expanding your team.”
Time to be Selective
Every business goes through a stage earlier on when it pretty much just needs to take any client it can get. However, once you have put in your time and have established yourself in your industry, you can start to be more selective about new contracts and who you take on at your company. One significant benefit in this is that it helps you fine-tune your company and become known for a specific specialty. Consider this excerpt from bidsketch.com,
“By specializing and turning people away, you become more selective, viewed as a specialist, and begin to establish yourself as the ‘go-to’ person in a single subset of [your industry… a subset with customers who are willing to pay.”
If you are able to carefully choose the time to raise your prices, you will have the opportunity to be know for a particular service which can improve your recognition, more easily manage your contracts and ultimately increase profitability.
If you are a business owner and you are wondering if it’s time to raise prices, we hope this article has provided you with some helpful information. If you have any questions about pricing, please be sure to let us know. We hope to hear from you soon!