Push past one of the top challenges businesses face – electrical pricing. Use this complete manual to eliminate guesswork, maximize profits and get your prices right today!
Remember, pricing your services doesn’t have to be complex. Take advantage of the strategies in this electrical pricing guide to increase profits with:
- Profit goals
- CPA advice
- Break-even profit
- Customer feedback
- Target market insight
- The right pricing model for your business
Use this manual to simplify the pricing process by diving into these easy-to-implement electrical pricing strategies.
1. Gather Local Target Market Insight
In order to sell more effectively to ideal customers, it’s important to gain some insight into your local target market. For example, if you’re looking to gain additional residential accounts, then you could identify top residential prospects by answering question like:
- What’s their age range?
- Are they married or single?
- What’s their education level?
- What’s their household income?
- Do they have kids? If so, how many?
- What are some of their challenges or pain points?
- What do they do for a living? Do they have any spare time?
Remember, the more detailed you are in identifying the ideal customer, the more effectively you’ll be able to sell to them.
Next, define what ideal customers want by sending out a survey to your top customers, and ask questions such as:
- What about our electrical business do you love the most?
- Why did you choose our electrical business over competing businesses?
- What do you care most about when choosing an electrical service provider?
Use the answers to the questions above to identify trends, common themes and popular services. For instance, which packages or recurring maintenance services are your top sellers?
In addition, what are your busy and slow seasons? Local seasonality will tell you which electrical services sell during specific seasons. Use these insights to beat the competition and increase conversions.
Use the insight you’ve gathered about your local target market to improve marketing strategies and improve sales with:
- Social media
- Facebook ads
- Business cards
2. Establish the Break-Even Point
When you establish the break even point, you’ll determine the minimum you need to charge in order to service a property. To calculate this, first add up ALL of your monthly overhead costs:
- Vehicle payments
- Vehicle insurance
- Business insurance
- Property rental costs
- Office staff/leadership pay
- Vehicle/equipment maintenance
Once you’ve added up all monthly overhead costs associated with jobs, you’ll have calculated the Total Monthly Business Overhead Expenses. Next, multiply these numbers together to find the Total Estimated Labor Costs:
- Number of electricians on the team
- Average wage
- Hours worked
Then, incorporate the previous calculations into the formula below to find the Total Monthly Revenue Required (i.e. the break-even point):
Total Monthly Business Overhead Expenses + Total Estimated Labor Costs = Total Monthly Revenue Required
Now that you know your break-even point, you can use it to stop losing money on projects and determine which ones are or aren’t worth pursuing.
As always, meet with a trusted CPA (i.e. Certified Public Accountant) to verify the break-even point you’ve calculated.
Did you know the #1 electrician software has the ability to track ALL of these costs AND MORE? Discover how FieldEdge has the power to transform your business, and book a demo for free today!
3. Decide on an Electrical Pricing Model
After determining the break-even point, you’ll choose which electrical pricing model to adopt – time and materials or flat rate pricing. Although, remember the factors like profit goals and cost calculations might be affected by the pricing model you select.
Time and Materials Pricing
Essentially, time and materials pricing is when you bill customers for an electrician’s time, and then add all additional costs incurred after the project is completed. Particularly with first-timers, this pricing model may be harder to sell to customers.
Time and materials pricing helps to ensure jobs are profitable. As a result, some electrical businesses choose to bill customers using this method.
Pros of Time and Materials Pricing
- Provides more control over each project’s profit margin.
- You don’t need to know the exact average time and materials beforehand because costs can be calculated after the job completion.
Cons of Time and Materials Pricing
- It can be harder to sell to some customers because the cost isn’t known upfront.
- More time is spent in calculating the electrician’s time and materials for each individual project.
Flat Rate Pricing
In short, flat rate pricing is when businesses combine the electrician’s average wage by the hour with the part costs needed (service calls and/or trip fees are typically factored in at an additional flat rate price). Due to the fact that flat rate pricing is presented on-site, many residential customers prefer flat rate pricing.
Alternatively, time and materials pricing is often used for billing projects with unpredictable costs. Time and materials pricing can better take into account any unforeseen costs within a complex job, while flat rate pricing isn’t as flexible.
Although average times and costs of materials are needed to determine set flat rate prices, the best electrician software tracks this data automatically.
Pros of Flat Rate Pricing
- It can be easier to sell to customers since the cost is known upfront.
- There’s no need to spend countless hours creating new parts-based estimates for each individual project. Simply refer to your flat rate pricing database tool or book.
Cons of Flat Rate Pricing
- You’ll need an accurate flat rate tool or book because EXACT project costs must be known.
- Instead of billing customers for the electrician’s time, the electrician will have a set amount of allotted time for each project.
How to Use Flat Rate Pricing
Keep in mind, flat rate pricing should be standardized. Which means, with set tools and equipment, ideally all electricians should be able to complete their jobs within the allotted timeframes. In turn, flat rate pricing varies from service to service – not electrician to electrician. As a result, you won’t make an hourly charge afterwards.
Flat rate pricing doesn’t have to be intimidating. Verify every job is profitable by knowing your numbers and having set systems for equipment and task pricing. This allows you to spend less time on estimating.
Also, when setting up your flat rate pricing tool or book, be sure to consider the wide variance in tools and equipment costs. After all, the precise flat rate pricing makes it significantly easier to reach profit goals.
Service Calls and Trip Fees
Some electrical businesses charge a minimum two-hour service call fee. Though, if the job pushes past this two hour time limit, you might revert to flat rate pricing.
In this instance, you’d bill the customer for task labor on the job. Based on the scenario, you could either offer a discount or waive the two-hour service call fee if the job takes more time and you revert to task labor.
On the other hand, a trip fee typically is a set price. Although, it’s important to factor in local traffic.
For example, a customer in a low traffic area might have a lower trip fee and vice versa. However, don’t discount rural areas with no traffic. After all, there is more drive time to be taken into account.
In order to attract more first-time customers, we suggest lowering your service call fee and raising labor rates in flat rate pricing. This way, you can attract first-time customers while still meeting profit goals using flat rate pricing.
The best electrician software has the power to automatically and accurately track time and materials. Book a demo for free today and experience how FieldEdge can revolutionize your business!
After choosing an electrical pricing model, it’s time to calculate project costs to determine average prices for specific projects. This allows you to determine how much to charge for set projects based on typical on-site costs.
First, add these numbers together to find the Total Project Material Expenses:
- Total cost of parts/equipment per job (FieldEdge can help with this)
- Disposal costs
Don’t forget to double check to ensure you’ve included ALL costs specific to the project. Next, incorporate the previous calculations into the formula below to find the Total Project Material Cost:
Total Project Material Expenses + (Total Project Material Expenses x Profit Margin) = Total Project Material Cost
Then find the Total Project Labor Cost by multiplying these two numbers:
- Hourly rate
- Estimated number of hours
Finally, input the previous calculation into the following formula to find the Total Project Cost:
Total Project Material Cost + Total Project Labor Cost = Total Project Cost
5. Set Achievable Profit Goals
Now that you’ve calculated the project costs, you’ll need to set an achievable profit goal per project to include in your electrical pricing.
Step 1: Calculate Net Income
First, use the following formula to calculate the Net Income to set the right profit goals:
Net Income = Total Revenue – Material Costs – Labor Costs – Overhead Costs
Next, find the Profit Margin by including the previous calculation:
Profit Margin = Net Income / Total Revenue
Step 2: Incorporate Profit Margin Goals into the Total Price
In order to discover what’s best for your electrical business, you’ll need to test out various profit margin goals. Though, keep in mind, sales goals increase with profit margin goals. In addition, it’s important to set ambitious, yet realistic, goals.
Step 3: Analyze the Competition’s Electrical Pricing
In order to ensure you’re within a reasonable price range, it’s essential to compare electrical pricing to the competition.
Though, keep in mind, while competition price comparisons are great, you can’t copy their prices. After all, the competition has different underlying goals and costs than your electrical business.
However, before comparing your electrical pricing to the competition, don’t forget to factor in profitability goals into each job’s pricing.
Adjust your prices in a few minutes using this FREE electrical pricing calculator to increase profits now!
6. Verify Adjusted Electrical Pricing With a Trusted CPA
Remember, it’s critical to meet with a trusted CPA (Certified Public Accountant) before finalizing electrical pricing. After all, a great CPA will be able to catch any errors or oversights. Since your finances will make or break your electrical business, this step is essential.
7. Use an Electrical Flat Rate Book
By choosing the flat rate pricing model, you can give prospects detailed service and price explanations using an electrician price book.
In order to explain costs to customers, prevent repeated frequently asked questions and more, a book or digital tool is necessary. Items like these should be included any solid flat rate book or tool:
- Business name and contact information included in all quotes
- Disclaimer that ALL estimates are subject to change
- Breakdown of costs for each task and piece of equipment
FieldEdge assists you with in-the-field pricebook and invoicing. Rather than using a physical pricebook, FieldEdge Flat Rate Mobile allows you to go COMPLETELY PAPERLESS. Book a demo of FieldEdge for free today!
8. Use Customer Feedback to Improve the Electrical Pricing Process
In order to improve the electrical pricing process, it’s essential to gather customer feedback by taking actions such as:
- Encourage reviews from happy customers (though, we advise against incentivizing)
- Calling or asking for in-person feedback (after a positive experience)
- Text surveys and follow-up texts and emails
It’s important to use unprofitable customers to improve the price increase process for more profitable ones. For this reason, you’ll want to increase prices on your least profitable accounts first. Then, send a survey to find out how they feel about your electrical business after service. Use this feedback to improve the process for subsequent more profitable customers.
Increase Profits With This Complete Manual to Electrical Pricing
Today, you have the power to maximize profits, minimize stress, and achieve your goals using this complete electrical pricing manual.
Use these easy-to-follow strategies to take all factors into account and properly implement your newly adjusted prices.
Experience true, long-term success and level-up your business by incorporating these top electrical pricing strategies now!