- Advertisement -
Home Business What's the Correct Pricing Strategy for a Small Contractor Business?

What’s the Correct Pricing Strategy for a Small Contractor Business?

- Advertisement -

The pricing strategy for your small contractor business will set the standard for your service in the market. However, many businesses often make the mistake of setting their price strategy to match the lowest-priced provider in the market.

How do you determine if you can afford to sell your service at a lower price without sacrificing profit? Pay close attention to past trends in competition and demand. You can create a sustainable pricing strategy by having a sound understanding of the market.

RELATED POST: 7 REASONS TO SELL HIGH-PRICED PRODUCTS



ALSO READ: 6 KEY ELEMENTS OF A SUCCESSFUL USED CAR BUSINESS

Does your strategy need to focus on lower prices or premium service? Here are two approaches you can take:

Pricing for market penetration

It can be difficult to penetrate an already saturated contractor market. An effective way to get clients immediately is to offer your services at a lower price than your competitors.

A market penetration strategy requires a thorough understanding of the contractor market. You must know who your competitors are and how much they are pricing their services. You must also know if your competitors are offering similar products or services like yours. From this, you will get an idea of your advantages and disadvantages over them.

ALSO READ: TOP FOUR BUSINESS IDEAS FOR INTROVERTS

There is no standard rate for contracting services, as states, cities and counties charge differently. Generally, however, the service can cost from $25.00 to $85 an hour.

As a small contractor business owner, you must know the difference between markup and profit. Markup is not profit. Markup is the term that covers both the overhead expenses and the profit. Businesses charge for a markup to stay afloat in the market. For example, a contractor has a 1.50 markup price, while the estimated cost for a job is $10,000. This amount will be multiplied to 1.50 to arrive at a $15,000 sales price.

What's the Correct Pricing Strategy for a Small Contractor Business?

ALSO READ: THINGS TO CONSIDER IN FINDING THE RIGHT CRM FOR YOU

Overhead expenses are deducted from the contractors’ revenue. These include advertising, sales commissions, job supervision, licenses, taxes, and employee expenses. Overhead expenses could range from 25 to 54 percent of their revenue. This means a $15,000 job could have overhead expenses between $3,750 and $8,100. Remember that overhead expenses are separate from the raw materials needed, like concrete accessories, plastic spacers and slab bolsters.

Every business will have to make a profit, or else it might go down. You must set a price that will not only cover the cost of the service. You must cover overhead expenses as well to make a reasonable profit.

Pricing at a premium

With premium pricing, you can set your prices higher than your competitors because you have a service that nobody can match.

ALSO READ: CRUCIAL BUSINESS DEVELOPMENT STRATEGIES FOR STARTUP COMPANIES

This strategy will work only if you have a substantial competitive advantage, and if you know you can charge for a higher price without being undercut by a product with similar quality. Customers are always conscious of prices, so if you offer your service at a premium, you have to work hard to create a perception of value.

In a survey conducted at the Construction Owners Association of America (COAA) Leadership Conference in 2015, eighty-nine percent of owners and developers said they are willing to pay more money for quality. In the survey, it was found that:

  • 36 percent of owners are willing to pay 1 to 4 percent more than the original price
  • 36 percent of owners are willing to pay 5 percent more
  • 18 percent of owners are willing to pay 10 percent or more
  • Only 10 percent of owners will not pay more at all

ALSO READ: FOUR WAYS OF FUNDING YOUR BUSINESS IDEA

If you’re looking to sell your service at a premium, ensure reasonable care and skill. Make sure the service is done by experienced workers. Ensure also that the service is done within a reasonable time frame.

Remember that profit is important for a small contractor business to survive. Your brand’s strengths and weaknesses will determine what pricing strategy you’ll want to go with. You can use this guide on service pricing to help you more with how you should start your construction business.

- Advertisement -
- Advertisement -

Must Read

SIGNO: India’s first launched AI-Driven Blue Collar sourcing in 60 seconds

As termed as a developing market economy, India is trying its best to cover all the aspects it needs to have so as to...
- Advertisement -

How to Start an Online Store with No Money?

Online shopping is catching up faster over a decade because it allows customers to order a variety of products easily. It provides opportunities for...

What are the 7 steps of the strategic management process in HRM?

Human resource management, shortly known as HRM, involves a variety of tasks that enables a company to accomplish its goals. A strategic management process...

How to Stay Safe Online- Starting Today

There are so many scams, malware and hacks out there right now, and this can all make the internet seem like a very dangerous...

Related Category Posts

The Roles and Responsibilities of a Project Manager

Introduction A project manager is a person responsible for planning, executing, and monitoring a project. He/she is the key person who leads a project...

What is a Work Breakdown Structure (WBS) In Project Management?

Introduction Project management can be a challenging domain. Complex projects with numerous tasks and deadlines can put project teams in awe and overwhelm them....

What Are the Applications of Sodium Lignosulfonate?

Lignosulfonate, abbreviated as LS, is a water-reducing additive used in a concrete mixture. It is yellow-brown wood pulp obtained from the bamboo pulping process....

Characteristics of Successful Startup Founders and Entrepreneurs

Introduction Startups have emerged as businesses that provide low-cost and unique products to the customers. They are flexible and can provide innovative and cost-effective...

What Does An Auto Dialer Do And How Does It Help Your Business

Predictive dialer software has several types, and one of them is an auto dialer. Auto dialers have various forms, allowing them to perform different...
- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Select Language »