Your business is up and running, you have your branding in place, and you are ready to hit the market with the services you offer as a contractor. You’ve found your differentiating factor and crafted a niche so that you already have a handful of clients in mind and a series of networking events to attend. The only issue – and it’s common for many businesses – is that you don’t really know what to charge. This problem plagues businesses as they get off the ground and there are many different ways to try to decide what to charge customers and how to ensure you are making enough money to survive while not pricing yourself out of the market.
The first issue when it comes to pricing yourself is not pricing yourself too low. As a contractor, you’ll need to factor in certain things to come up with the ideal rate. You’ll need to include the cost of materials you may use and equipment that will have wear and tear. These are simple to ascertain and should form the basis of your price. Next is the manpower needed to complete the job. Factor in your cost per hour and work out how you can be recompensated – even if at minimum wage – for your time on the job. Then, you’ll need to work out the cost of any other overheads. Do you have a business vehicle you use, which will incur costs? Have you subscribed to the necessary HVAC insurance against any issues that arise, including injuries to third parties and property damage? Once you have an estimate of how to split the cost of overheads against probable jobs per month, you will have a figure that covers all outgoings. This will ensure you break even. But a business needs profits to grow and invest. So, how do you ensure you bring in profit?
Crafting a rate for profit is simple, just figure out how much of the job you want to put aside based on the figure of necessary payment, and then add a percentage to it. Some businesses accept a 20% profit on their services and just add 20% to the figure of their necessary costs. This will mean that for every $100 of work, you keep $20 to invest in the future of the business. Some say that businesses starting out need to develop a reputation before charging too much. While this may be true – nobody is going to pay for something they can’t guarantee will work for them – there is also the school of thought that “you get what you pay for.” So, anything too cheap is likely – especially as a contractor – to be shoddy. The 20% figure adds a healthy amount onto your bill and gives the impression that you know what you’re doing.
As your business and expenses grow, you’ll need to adjust your prices. Some suggest every year; you should make yourself more expensive to counteract inflation and to reflect the experience you are gaining as a contractor.