Hey Steve,

This is Nathan. How are you? I have a quick pricing question for you. What I am wondering doesn’t have to do with estimates, but customers that I’ve cleaned for awhile. After completing a job, I divide the amount I made by my time to figure my hourly average. While not a fine science I usually figure that with the expenses of owning a business and advertising, I need to average 35-40 an hour.

With jobs that are less than that due to various factors, it seems the price should be raised. Obviously I want to balance that with not losing customers, but in my area I don’t think I will lose my customers. I’m more referring to once a year customers than those that are more often.

Anyway, is it necessary to advise them of a price increase or simply present them with a bill that differs from last year’s? I’ve even had customers ask if prices have gone up before paying me, almost expecting that they would have gone up from last year.

I ask because if a repair man comes to repair an appliance, he simply presents a bill. As opposed to them, we present an estimate before doing the work, so then it would seem that we should advise ahead of time of the price if different? What would be your suggestion on the best way to handle those situations? Thanks for your thoughts.

Nathan

My Response:

Hi Nathan,

Good morning. How are you doing today?

Raising prices is always a risky proposition, but it does need to be done if you’ve done a customer a few times and you feel that you’re not making the profits you need to make from that customer.

The only thing I would caution you on is to watch the calculation you do. You mentioned that you divide the amount you make by your time in order to determine your hourly pay. This is ok if you’ve been in the biz for awhile (which means your overall job speed is good) and it’s ok if you’ve done the customer job at least twice.

If you make this calculation too early in your business (in the first 6 months), the calculation will probably be incorrect because as the months go on, you’ll become more adept at the entire window cleaning process from unloading your equipment to packing everything up along with all the tasks needing to be done in between.

And if you make this calculation the first time you do a customer job, it’ll be incorrect because more often then not the first time you do a customer job, there is a bunch of stuff on the windows/in the tracks that’ll add time to the job.

So what I did when I increased my pricing was make sure to wait until I got a good feel for the job and I completed it a couple of times. If I was at $30 or less per hour, I re-estimated the job right then and there. I made a note of this new pricing and when telling the customer about it (when trying to secure my 3rd repeat service with them), I preferred writing to them. Sending an appt. reminder letter is a good way to announce a price increase. This allows you to let them know you’ll be calling them in a few days to secure a follow up visit and it also allows you to mention that there will be a small price increase.

So when you call them on the phone when following up, you don’t need to mention the higher pricing since it was mentioned in the letter.

Whatever you do I wouldn’t recommend trying to put the higher job pricing in play on the sly thinking the customer won’t notice. I did that once and I learned never to do that again. A customer did notice and it made me look real bad. After the job was completed, I presented him with an invoice for $239 and he said “i thought last time it was $212″. So I was stumbling around grasping for an explanation on the fly. It wasn’t pretty. :)

I realized that I underestimated after the first time I did his job and I thought I’d raise his pricing for the 2nd time doing the job. My first mistake was making my hourly calculation after only doing his job one time and my second mistake was thinking the customer wouldn’t notice.

Some final notes:

–I would try to limit this price increase thing as much as possible. Sometimes it needs to be done for sure. I mean if you are at a consistent $30 or less per hour for a customer job which isn’t profitable to your business, your only options are to walk away and not do the customer anymore or raise your pricing. Obviously I’m sure you’d prefer to raise the job price and keep the customer vs just walking away.

–If you have estimated the job correctly and your hourly income is fine, I still think a normal price increase at some point is expected. But I generally didn’t do it until 3 years has gone by. So I did a customer job 3 to 6 times before I raised their pricing. At that point you can just say (in your appt. reminder letter) “my supply and labor costs have gone up across the board. We are absorbing most of the costs for our customers, but I do need to increase your pricing slightly, so we’ve added $12 to your job pricing. This allows us to continue to provide the exceptional window cleaning service that you’ve come to expect from us. blah blah blah”.

–A repairman situation is different because there are many different types of repairs that can be done for a single appliance. They can bury their price increases in their invoice and no one will really know. But window cleaning is different. Unless the customer asks you to perform an add-on service along with your window cleaning service or they’ve added an outbuilding or they built an extension of some kind onto their house, your window cleaning service is the same year after year after year for each job. There’s nowhere to hide a price increase. So it’s best to get it out right up front before you do the job as I’ve suggested above (mention it in your appt. reminder letter).

Hope the above helps. Take care and have a great day.

Regards,

Steve

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