Why and How to Boost Your Bottom Line with a Custom Pricing Strategy

But don’t view that as a bad thing. Instead, look at the extra work as a worthwhile investment in your business! The long-term benefits in terms of profitability and control can far outweigh this upfront inconvenience.

Steps for Developing Custom Pricing

Creating your own price list may seem daunting. However, if you have a systematic approach, it's an achievable and gratifying process. Try following these steps:

Start by conducting a comprehensive analysis of your costs.

This includes direct expenses like labor and materials, as well as indirect costs such as overhead, insurance, and equipment depreciation. Be meticulous in this step, as accurate cost data forms the foundation of effective pricing.

Next, research your local market thoroughly.

This involves understanding the going rates for similar services, identifying any unique regional factors that affect costs, and assessing the competitive landscape. Tools such as industry surveys, local contractor networks, and even discreet inquiries with suppliers can provide valuable insights.

Consider This: If you are charging restoration prices that other companies frequently charge in your market for your level of service, you have a strong position that your prices are customary and the carrier should pay them.

Adopt technology that will make custom pricing easier.

Leveraging technology can significantly streamline the process of creating, maintaining and using custom price lists. For example, the magicplan app has a new Estimator module that offers the following solutions:

• Advanced Price List Customization: You can adapt the Estimator to your company’s specific time-and-material rates and requirements.

• Seamless Estimating Based on Your Custom Price Lists: Create and manage multiple project estimates on your desktop or mobile device.

• Time-Saving Templates: These help you estimate more efficiently by reusing common estimate setups. For example, you might create an estimate proposal template for jobs requiring a water mitigation estimate. This will make the process of writing an estimate so much easier.

• Simplified Scope Adjustments: magicplan allows for rapid updates to estimates when the project scope changes, ensuring that your company can document and justify any additional costs immediately.

Begin structuring your custom price list.

Categorize your services and materials, ensuring that each item is clearly defined. For labor costs, consider creating tiered rates that reflect different skill levels or job complexities. Don't forget to build in a profit margin that aligns with your business goals and market positioning.

As you develop your custom prices, it's crucial to document your methodologies and rationales.

This documentation will be invaluable when you are justifying your prices to clients or insurance adjusters — especially if some of your prices are higher than what’s shown in standardized pricing. For example, you could justify your material prices with links to local suppliers’ web pages that show what you are paying for materials. Also, explain other factors that influence your pricing, such as specialized training, equipment costs, and any unique value propositions your business offers. All of this documentation will prove that your pricing decisions are well-thought-out.

Finally, implement a system for regularly reviewing and updating your price list.

Remember that pricing is an evolving process. Market conditions, material costs and labor rates can change rapidly, so staying current is essential. Many successful contractors review their pricing quarterly or biannually to ensure it remains accurate and competitive.