The price that a plumber sets is very relevant to clients, simply because the cheapest price isn’t always the best. Unfortunately, choosing the cheapest alternative can lead to undesired consequences down the road. For instance, if a plumber doesn’t understand how to correctly set their prices in order to stay in business, would that do any justice to the client? Setting prices is critically important for any business to understand. These are the four areas that I look at when I set my prices.
First, I look at the industry average for the amount of time that it will take to get the job done. Of course, some people are faster and some people are slower at performing a given task. That’s why I look at the average. The cost of labor is also greatly affected by the fact that fewer and fewer people are becoming skilled tradespeople. Over the last decade, there haven’t been many people getting into skilled trades like plumbing. As a result, it’s caused the labor pool to become extremely small. As demand for labor increases, the price will go up simply because there aren’t enough people to meet the demand.
When it comes to materials, I’m not just looking for the best value—I’m also looking for the best quality. In the grand scheme of the overall price, materials aren’t a very big piece. It just makes most sense to spend an extra 10-20% on material costs, since they only constitute about 15-20% of the overall price. Using superior quality material is a good idea because you wouldn’t want to pay more in terms of labor just to do the same job again prematurely.
Overhead in the Plumbing Industry
Most people have a misunderstanding of overhead where they think that it’s just everything that a company chooses to spend. In my opinion, the money that a company spends on overhead needs to benefit the client in some way. For instance, marketing is an overhead item. However, there are slow times and busy times in any business. If there isn’t any work, then there may be layoffs or the company might even go out of business. Marketing benefits the customer by sustaining the workload so that the company is there to serve them in the future.
Vehicles are another part of overhead that directly benefits the client. If they aren’t maintained and they have a breakdown, or if they aren’t well-stocked, it’s going to waste the customer’s time. If someone had an appointment and the company’s vehicle broke down that day, they would have to call and reschedule. It would simply have a negative impact on the client.
Employee benefits are another item that benefits the client. Even though it might not be immediately obvious, it does have a clear impact. The worst thing for a client would be to have an unhappy and underpaid employee visit their home. It will reflect in the work that they do and they attitude that they have when they serve clients. Properly supporting employees, which in turn allows them to support their families, is very important to the overall job that you get as a client.
Administrative costs like having people to answer the phone and fill out paperwork also directly affect the client’s experience. Answering the phone is somewhat obvious. You would definitely want to be able to get a hold of someone whenever you call. But how does paperwork have an impact on the experience? If a company doesn’t keep good records, then what would happen if a client had a question about their past work? If the company didn’t have clear records showing the history for that person’s account, they won’t get the full value of what they paid for (e.g., warranties). If we didn’t know what work we did for someone in the past or when we did it, what would happen if the client had an issue in the future?
Warranties make up a very small percentage of overhead, but there is a cost involved when a company stands behind their work. Everyone wants a warranty on the work that they paid for. If something were to happen, clients wouldn’t want to have to pay twice for something that should have lasted much longer.
Proper Pricing Allows Us to Help You Down the Road
All of these components are factored into our pricing. It’s important that we make sure we’re priced correctly so that we can be here to serve our clients in the future.
As long as I’ve been in this business, even I’m sometimes surprised by what the overall price comes to. When I compare it to the price from 20 years ago, I would have never dreamed that it would have increased this much. If you have any questions about how we set our pricing, contact us online or at 540-483-9382.