Whether you are someone who has been in the home renovations business for several decades, are just starting out, or fall somewhere in between, one of the most critical factors in your success is establishing a pricing system that fits your objectives. While it can be tempting to go with intuition and your ?gut feeling,? especially when you?ve been doing this a while, but that can yield you lower profit margins than you might expect and potentially cost you work if you aimed too high. Here are some ways of the ways you can price your home renovations services:
- Match Profit Margins to Risk?? Sit down and think about the various home renovations you offer and rate them based on complexity, potential for injuries or material loss, and other risk factors. Set your profit margins a bit higher than you typically would for those that pose the greatest risk should something not go as planned.
- Have a Set Gross Margin?? Gross margin is the gross profit expressed as a percentage. Using this method, you would set the same amount of profit percentage to every project you do, regardless of the risk involved. You would calculate out your costs and then add the appropriate gross margin to come up with the amount to quote your customer. This pricing system can work well for simplicity?s sake and when you have a higher percentage of low-risk home renovations than you do high-risk ones.
- Factoring in Other Considerations?? Regardless of which pricing system you use, be sure to take into account that you will need to adjust it based on the economy. Traditionally, recessions result in the need to lower your gross margin to remain competitive, while a progressive economy could give you the freedom to bump it up a bit so you can set some aside for less favorable economic times. Keeping a close eye on what?s going on around you is key to avoiding pricing yourself outside the market conditions or leaving money on the table.
It can also prove helpful to be a member of a home builders association so you can have the support network you need. Lake Norman Home Builders Association is a valuable resource for both home builders and those involved in home renovations. We are a not-for-profit professional association that represents and protects the interests of the building industry in and around the Lake Norman, North Carolina area. We are a full-time advocate protecting your business and the business relationships you can forge as a member can prove invaluable. Reach out today to learn more.