One of the most important tasks for a service business is establishing and maintaining fair prices for your area. Shopping around for the best prices is somewhat of a standard practice among customers. Choosing fair prices that ensure you can earn a living while also providing a good value to your clients is critical to running and growing a successful service business. Unfortunately, this can oftentimes involve a bit of guesswork that can put you at risk of under-charging and losing income, or over-charging your customers without knowing it. We were talking recently with a small service provider who is re-entering the plumbing and electrical business after having spent several years doing other work. He let us in on a little secret he learned from his dad many years ago:
The best way to learn how much you should be charging for your services is to call your competition.
Calling your competition
The idea is pretty simple. You want to make sure the prices you're quoting are both fair to customers and fair to you. There's no better way to get that information than to poll your competitors for their prices on the same services you provide. The plan is pretty simple.
1. Make a list of the services you provide
This is the easiest step. You know what services you provide. Just write all of the services you'd like to price-check in a little list.
2. Make a list of competitors in your area
Every good business person knows who their competitors are. You should be no different. Whether it's looking in the Yellow Pages, searching on Google, hunting down Facebook pages, or something else, you should pull together a list of other businesses in your area that offer the services you added to your list in Step 1. We think it makes a lot of sense to shoot for somewhere around 10-12 competitors, if there are that many—and for most small and micro service businesses, there probably are, unless you're in a really rural area. Make sure to find a phone number for each of the competitors.
3. Think of stories for the services you're calling about
You're going to play the part of a potential customer with a problem. To make the call easier, try to think up a little example story or problem for each service. This will help when you make the call, wanting to know how much a given service will cost. Think up a brief description of a problem you might hear from a customer that matches each of your services. If you're a plumber, that could mean a leaky garden spigot or clogged drains. If you're an HVAC technician, your stories might be air & heating systems that seem to be running all day without reaching the temperature on your thermostat. A story is a better way of getting your competitors talking.
4. Call your competition
Choose one of the services and stories, and simply make the call. Explain your story, and ask the competitor how much they charge to come out and take care of the problem. When the call is done, jot down the competitor's prices for the problem.
If you have a number of services you're trying to get prices for, you might not be able to ask about other services from a single competitor. You could have your significant other, a friend, or a family member make calls asking about other services from the same competitor. This way, you'll find out just how many of your services are offered by your competitors, and how much they charge for them. And to your competitor, each call is a different voice from a different phone number asking about a different problem, and they're more likely to engage each conversation.
5. Collect all the results and use them to establish your prices
You should have a pretty solid set of information on how your competition prices the services you each provide. Now you can take this information and establish fair prices that you can be sure won't leave you open to accidentally over- or under-charging your customers for the work.
Pricing you can depend on
When you know what your competition is charging for the same services, it takes all the guesswork out of deciding what to charge as a service business owner. From here, you can look at the information you've gathered and decide if you want to match prices, undercut the competition on some services with lower prices, or charge more for things you consider to be premium services. Whatever path you choose, you can rest easy knowing that your prices are fairly matched to your local area. You'll even be able to make comparisons to your competitors when you're talking to potential customers, and help save them time making their own calls for the best prices.