It isn;t subsidizing! It is getting every job to pay what it is worth. if your old clients are underpriced time to raise them, not let new clients pay for what old should be charged…your losing money!!
HA! I had the exact thing happen to me a few years ago! By myself the job took 4 hours windows in and out and gutters. The next year i had 2 guys helping me and it took 1.5hrs…she flipped out saying how she can’[t afford paying that much per hour etc…so i sent her a letter with a $25 gift card so she could afford some starbucks…never heard from her again and i didn[t care!!
Raising your customers 5 to 10 buck every 2years isn’t going to scare them away! It is when you wait 5 to 8years and you need to raise them 50 to 75 bucks is when they may drop you…They jsut call someone else who just started out cleaning windows for cheaper etc…
Case 1: I cleaned windows for a lady the job was 100bucks in 1998. She tipped 100 bucks…I thought i won the lottery…12 years later I still charged 100 and she tipped 100…Problem was inflation caught up with the tip and now I wasn’t getting a tip! My idiot self saw no point in raising her rate, now i know I should have. About year 8 she started offering more money for the job and I said no, and ended up losing her a few years later…lesson learned.
Case 2: House i did was 200 bucks under bid, so every year I raised it 50 to get it to where it needed to be. She never flinched…
Lesson client know good business when they see it, never be afraid or hungry for work or fear of losing work!
I’ve done incremental increases over the last 20 years. I remember when my hourly rate was $17/hr in 1996 and now it is anywhere from $65/hr to $100 or more for the same customers. In all those years I’ve only had one couple say they simply couldn’t afford it anymore, they both retired and were obviously trying to watch finances. Educated consumers know prices increases are inevitable; labor costs, insurance, supplies, fuel, etc.
she did you a HUGE favor!!!
my prices go up only on jobs that I feel that we don’t charge enough !
Some clients have same prices for 6 years they are happy we are and because we quoted right the first time no need to raise them
If you’re fine taking a 10% price cut, in the effort of keeping customers happy, that’s fine. Just know that that is what is actually happening.
What you could buy in 2010 with $300, will cost you over $330 today.
To put that in perspective, if you had a commercial window job that has been priced at $500/mth for the past 6 years, and your grocery bill in 2010 was $500, you could count on that account to cover the cost of your groceries every month.
Now in 2016, the same grocery list will cost you $550+. You now have to complete more jobs to maintain the same standard of living.
Obviously real life budgets are not so cut and dry. But if you were operating in 2010 with a healthy 20% profit margin (jobs were ‘priced right’), all things being equal, your profit margin today would drop to a dismal <10%.
You could ‘trim the fat’ from your budget, find ways to make your operations more efficient, raise prices for newer customers, etc, in order to make up for the lost profit. But at the end of the day, you still have to complete more work (on aging accounts) to make the same $$$ as you did years ago.
Personally, I’d prefer to do less work for the same amount of money, as my business matures. Not the other way around.
And to be clear, I only bump up prices every other year (usually 4%-5%). But the more I think and write about it, the more I’m leaning toward yearly increases.
This is a good topic.
We raise are price every year or two, just depends how much taller those thorn bushes become.
What is your take on price increases Chad @windowsrx do you raise your price yearly or every couple years or are they lock into a price for a certain duration of time ?
Monetary inflation is one of those topics that took a while for me to wrap my head around- and I still struggle with the concepts here and there.
I hear older folks, and sometimes even myself, gripe about how much we could get for a dollar back in 19**. But at the same time, it is such a gradual process, that we aren’t usually conscious of it year to year.
Instead of griping about it, it’s one of those things I just need to adapt to. If cost of living has gone up 3% in the last year (just an average), then I should be compensated 3% more for the same amount of time/effort than I was last year.
If I have become more seasoned, efficient, knowledgeable, invested in more effective equipment, or in some other way become more valuable to my customers, then my compensation should increase accordingly, in addition to the 3% adjustment. Some of that additional compensation obviously comes in the form of increased productivity. But increased productivity or value offered should not become the stop-gap for regular inflation adjustments.
This is obviously the ideal I’m speaking of. But I know there are some business owners who have accomplished this. I don’t want to make anyone feel self conscious, but there is one solo operator who (last I was aware of) increases all prices 4% every year. This exceeds the average rate of inflation. It provides a modest but deserved raise in income every year, and from what I understand, his customers are more than happy to “give him” this raise each year.
Also wanted to mention: inflation is something that most of our successful customers will likely understand better than we do. If their portfolios haven’t grown by at least the rate of inflation + maintenance costs, they’re in fact ‘losing’ money. They understand that everything goes up.
If you somehow are able to structure your business so that you can “grandfather in” prices for repeat customers, then that will be very appealing to the “thrifty” investors, as they’ll recognize that they’re really getting a price cut every year in perpetuity.
Personally, I haven’t had good experiences working for “thrifty” people. Especially not “thrifty investors”.
When I said new customers could pay 2x more than old ones that is in extreme cases. We make money on every job. Whether the margin is 25% or 40%, it is not going to break the bank.
What is the life expectancy of a regular customer? 5 years? 10 years?
Yeah, some will be around for decades. Then you can work on raising them.
Hey Steve. I raise my prices a little each year. New clients prices are locked in for 2 years. Then I go up every year after that. I find that clients understand the small increases each year.
For example: If you have a $300 job. Let’s say you go up 3% each year. Next year that house will be $309.
Now that same $300 house, let’s say you go up every 5 years. Your next price increase would be $45 bringing it up to $345. In my opinion, that is a big price increase at one time.
I think small increases are easier for clients to understand. Everything goes up and they understand that.
Hope that helps!
Thanks for sharing that Chad.
I totally agree with that.
that’s a great system.
@severn Thanks for sharing the pricing calculator. I was playing around with the calculator earlier and it is amazing how fast even a 2% increase each year can add up. Most people don’t notice it.
A $200 job in 2006 would be $239.44 in 2016. I think a 2% increase each year is reasonable.
So after twenty years you are still doing the work for some customers for the same price? that is very generous of you, but the dollar you are getting is not worth what it was worth twenty years ago, so you are screwing yourself. From every job at least one-third should go to overhead, one-third for direct costs, salaries and fuel, and one- third for profit, that is how the income statement is set up and that is how we need to setting price point for financial success,
I hope you are saving for retirement, I don’t increase every year for my seniors who live on a fixed income, but most everyone else gets a ten dollar or 4% increase to cover inflation that is what businesses do. It is usually just ten bucks,(There are exceptions, say the job turned out to be faster than I expected or a just a super easy job to do, then I might make a concession just to be fair and of course I really want to hang onto the job. I’m six hundred customers strong in a small city.
Being the cheapest is not a good strategy in a service type business. Time is a fixed variable, after your overhead and direct costs are paid every dollar that you earn is profit. Now unless you have several crews you are not making a ton of money in this business, not like what most other businesses earn. If you don’t believe that just look at your customer’s homes and then look at most of our homes! Now we shouldn’t envy them, (I know I don’t) because I am really not all about the money.
If all I cared about was money I would have stayed in the Pawnshop business (where I owned four shops over 8.5 years), and earned ten times as much as I do in the window cleaning business, (more than anyone can spend really) I do what I do now because I have a job that I actually enjoy. At the same time, we should be fair to ourselves and we must look ahead and put something away for the days coming where we can no longer do what we do today! The median income in the USA is fifty thousand dollars. (Talking net pay, not top dollar sales) that is an amount that most people can live and save. A bit more is even better.
$10 or 4% every year?
i got my $9 of food from taco bell in 5 min, that’s $108 an hour. rediculous!. and my $2 soda? only took me 10 seconds to fill. THAT’S $720 AN HOUR!! i’m never going there again!
Thanks for sharing that!
I raised my prices in '13 and '16. Just ran a few past jobs with that calculator and I was mostly close to what the calculator called for.
I will use that as some of the old jobs come back around.