Too high? Too low? HELP!

Hi Steve,

I’m having kind of a weird problem.  As a new start-up business (less than a year) I have focused on commercial work.  I’m already “making a living” (actually better than I did before in my sales job which got “down-sized”) but obviously I’d like to do better.  However, it seems like pricing in this business is all over the board.  Some of my customers (not too many) say my prices are low (a few say “too low”) while other sales prospects say I am too high.  So what should I charge per square foot for commercial work?

Perplexed in Salt Lake City

Dear Perplexed,

Above all else, you need to know what YOU need to charge to cover your true cost of doing business PLUS make a profit- which is your “just reward” for having to agonize about questions like the one we are puzzling about right now!  (Chuck Violand spends ½ day on Pricing for Profit in our SFS seminar.)

The second thing I would do is survey your competition. (Not to base your prices on theirs but instead to see what you are up against.)  So come up with a sample job and call your competition and see what they are charging to do the work.  (Don’t worry, your competitors are shopping you too!)  I would get my wife to do this from home, using call block (which I believe is *67).

It can be valuable information in commercial to find out what your competitors are charging… if you don’t know that, you are literally throwing darts at a dart board. And by doing this first, you can get a feel if your customers that are complaining about your prices being too high are “working” you or not. And believe me, everybody is working to get a lower price in this economy.

Also, don’t necessarily assume that you have to match the lowest price of your competition. I guarantee you that some of them are pricing so low, that they will be gone in a year or two or three!  But in large commercial bidding you may have to be in the range, or ballpark.  However, it is always easier to “come down” than go up!  Here is a slam-dunk way to find out if you are over the customer’s budget and then possibly trim your job specs/price accordingly.  After presenting your proposal and the customer hems and haws or says they need to check with their partner/ boss/ wife/ etc. just say,  “That’s fine.  But let me ask you- while I am here does the way I have this proposal written meet your projected budget?”  This way you draw the customer out plus by saying “the way I have this proposal written” indicates that you are willing to “re-write” it.  Much of business is negotiation but someone has to start the ball rolling with good communication.  It might as well be you!

Please don’t forget that especially with commercial it shouldn’t just be about charging a lot per square foot.  It is all about how much you make per hour so you should also focus on efficiency and speed in set-up, job routing and production.  (You should seriously check out high speed encapsulation methods such as the Cimex)  Remember, Perplexed, that other than giving you bragging rights on the industry discussion forums price per square foot is meaningless!

Steve

P.S.  Don’t forget to call your prospects back.  We always called back folks we had quoted if we didn’t hear from them in 7 to 10 days. (Or I would go visit them.)  We would just tell them we were planning our work flow over the next week or so and were asking them had they made any decision. Usually they would say they hadn’t, or just get evasive so we would ask them right out, “did they get the job done anywhere else?” The key thing is we wanted to find out was the account still in play?  If they went with another provider I was always very gracious and asked what would have swung them over to my side just for my next proposal.  If you are careful not to put any guilt on the customer you will pick up some valuable information this way.

By the way, you’ll find lots of other information on this site on how to sell and price commercial work.  For example, check out this Special Report Selling Commercial Cleaning and easy to use Commercial paperwork.  In addition see these Commercial Cleaning posts …