Pricing, Estimating, And Success

Originally Posted by MrHands

Although I believe if MOST potential customers compare apples to apples and the proposal is delivered with confidence and authority, the higher "value" will win the job.

That said, I do not think too many will disagree that some customers are plain and simple price shoppers. And you can talk and present and prove the difference between you and the other guy until you are blue in the face, and they will take the "second to the lowest" price.

Originally Posted by pcplumber

You are getting warmer!

When you use the system of calculating your 'cost plus' to arrive at a price, you create own psychological barriers. You are instilling, into your brain, that your price is the right price because this is what your numbers tell you. Numbers can't think and they don't talk. Numbers do not tell you what your customers will pay.

There is no right price. No sound contractor is going to work for less money than his traffic will bear. The quality of traffic, you bear, becomes limited by the price that you charge. This is another psychological problem. I use a contractor to hang doors. He charges me $750 to hang one door. I think this is outrageous, but the door hanger thinks he is the best door hanger in the world. When he quote his price, he speaks with conviction. You cannot charge higher prices until you think you are worth the higher price. Therefore, you limit yourself to only low-priced jobs. You cannot charge higher prices if you think your 'cost-plus' system is telling you what to charge.

Stop thinking like the other contractors. Think only about what 'your' traffic can bear. Block your mind about the economy and the fact that other contractors are slow. They probably deserve to be slow because they think like other contractor who are slow. Stop thinking that you will lose work if you don't charge what you call the 'right' price. No special price will get you every job. Worry more about not charging the highest price so you can maximize your profit, so, should you fall on hard times, you will have the wad of cash you need to back you up.

Don't you ever wonder why there are about ten million of contractors and only a few that shine? Why are there millions of pizza makers and only about 6 that shine?

I'll tell you why most contractors don't shine. It is because they are thinking just like the other 9,999,999 other contractors.

This is what I am doing with my business. My sales are 400% to 1,000% higher than similar companies that are my size. My net profit (take home) is about 600% to 1,200% higher that similar companies. Most companies in my area are starving. I am swamped with work all the time. This is not only a result of the ability to close sales. It is the result of thinking different than other contractors, being focused, having an attitude that nothing can stop me, an attitude that I can do whatever I can imagine is possible, and some very hard work.

Do you want to know why there are still contractors, in this economy, who are dancing to the bank. It is because they are not thinking like the contractors who think bad business is a result of wars and economics. This world is never without wars, political, and economic problems, and if you are waiting for the world to become ideal, for you, then you will be waiting for a few hundred years.

Do you understand why I can do? It is because I believe that I can and I will do everything I can to make it happen. This can happen only if I abandon your system of analyzing the way you do.

Don't forget what this thread is about. It is about how all services and businesses determine the best price. The best price is the one that gives you the highest return on your investments. You don't start with the lower price and work up. You start with the highest price, you think possible, and you can lower the price until you reach the balance where your volume of sales creates more net profit that the highest price.

I have been setting the prices for services and products, for over 40 years, and hundreds of times, I was wrong, and I lost $millions before I realized that my customers were willing to pay more. The numbers would not tell me. I had to test the markets to see. We kept raising our prices, without number crunching, and now we charge more than other contractors. Do you know why, yet. It is because you (the other contractors) don't realize that customers are willing to pay more than what your number won't tell you.

Jack