“The moment you make a mistake in pricing, you’re eating into your reputation or your profits. —Katharine Paine, CEO
Katharine is spot on here. Determining the best locksmith pricing for your services is the most critical component of your success.
Price your service too low, and you’re eating into your profits. And while higher prices bring in more money, it pays to increase a little at a time. A study by Harvard studies found that just a one percent raise in pricing can result in 11% more profit.
So how can you get to that sweet spot where you are charging the right amount to grow your locksmith business and make a profit – without chasing anyone away? There are several factors to consider, but you have come to the right place!
Once you know the right steps to take, you’ll be able to get your locksmith pricing set in no time! Use this complete locksmith pricing guide to help you price your locksmith services based on:
- Profit goals
- Customer feedback
- Your break even point
- Insight from your target market
- Your financial advisor’s advice
By the end of this ultimate locksmith pricing guide, you’ll nail that sweet spot of pricing and be much more confident that you are properly pricing your services.
1. Know Your Local Target Market
In order to set your locksmith pricing, you need to gain insight from your local target market. As a result, you’ll be able to use that gained insight to beat your competition and sell more effectively to customers.
To get started, you need to identify your ideal customer. Think about your favorite customer (or a customer you’d like to win), and answer questions like:
- What’s their age range?
- Are they single or married?
- 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 spare time?
As you answer these questions, it’s important to be as detailed as possible. The more detailed you are, the easier it’ll be to get to know your ideal customer. Then, you can write ads faster and more effectively.
Next, discover what your customers want. The best way to do this is by sending out a survey to your most satisfied customers. Ask questions like:
- What about our locksmith business do you love the most?
- Why did you choose our locksmith business over our competitors?
- What do you care most about when choosing a locksmith?
Then, find out which of your services are the most common. Are there any packages or recurring maintenance services that customers may purchase, such as security plans?
In order to know when to promote your services, you need to discover local seasonality. The winter holiday season is the busiest time for locksmith businesses. Many locksmiths keep their 24-hour emergency services working, even on Christmas day. So you may want to plan for longer hours and surge pricing during the holidays.
Holiday Season is Great Time to Promote
Why is the holiday season the best time to promote your business? There are several reasons:
- Cold weather causes many locks to seize up or keys to snap and break off. Getting locked out of your house in cold weather is not a good situation.
- The party season results in many emergency calls to locksmiths. Some people may get locked out!
- Holiday time is prime time for burglaries. Homeowners are buying gifts, it gets dark out earlier, and people are just generally distracted by holiday schedules. Security calls are plentiful during the holidays, and this is your opportunity to sell security services to prevent burglaries in the first place.
Having a plan in place before the busy season hits is critical for getting the most out of the increase in business.
Focusing on your local target market will allow your business to take advantage of these newfound insights to help you improve your locksmith marketing strategies, and ultimately become more effective in increasing your conversions in your:
2. Find Your Break Even Point
Now that you know exactly who you are selling to and when peak season is, it’s time to calculate your break even point.
What’s your break even point? It’s defined as the point at which total cost and total revenue are equal, meaning there is no loss or gain for your business.
In essence, it determines the minimum amount you need to charge for locksmith jobs (just to break even).
Of course you don’t want to break even, you want to earn a healthy profit, but this break even point is a critical piece of the locksmith pricing strategy.
To begin, you need to add up all of your monthly overhead costs:
- Locksmith tools
- Vehicle payments
- Vehicle insurance
- Business insurance
- Property rental costs
- Office staff/leadership pay
- Vehicle/equipment maintenance/gas
Once you’ve added it all up, you’ll have your total monthly business overhead expenses.
Next, you’ll need to find your total estimated labor costs. You can find this by multiplying these numbers together:
- Number of locksmiths on the team (This is typically one, unless it’s a bigger commercial job)
- Average pay
- Hours worked
Then, you need to find your total monthly revenue required (your break even point) by adding both our calculations together:
Total Monthly Business Overhead Expenses + Total Estimated Labor Costs = Total Monthly Revenue Required
Also, don’t forget to share your estimated break even point with your accountant or financial advisor so they can weigh in.
Once you add up your costs, you’ve determined your break even point! Now, you know the minimum you need to charge in order to avoid losing money on locksmith services.
3. Calculate Project Costs
In order to determine how much you need to charge for specific projects, you’ll need to calculate your project costs.
Locksmith projects fall into three categories, and costs for each may vary:
- Vehicle services: Includes unlocking and rekeying a car (if you don’t have a spare). In the middle of the night, this fee usually doubles. There’s also many other locksmith services performed on vehicles, such as rekeying the ignition.
- Home Services The basic locked-out of-the-house service as well as rekeying, changing or upgrading locks.
- Commercial Services: These can include security, changing locks for all doors, installing digital locks, and safe installation and unlocking.
Make sure you’ve included all of your specific project costs to this list – tools, new locks and keys, etc. Next, you need to determine your total project materials cost by incorporating our previous calculation into this formula:
Total Cost of Parts/Locks/Keys + (Total Project Material Expenses x Materials/Parts Mark-up) = Total Project Material Cost
Now, it’s time to calculate your total labor costs. First, calculate your initial labor costs by multiplying these numbers together:
- Hourly rate
- Estimated number of hours
Next, it’s time to calculate your total project labor costs. Find this by incorporating the previous calculation into this formula:
Labor Costs + Service Call / Travel Fees= Total Project Labor Costs
4. Set Achievable Profit Goals
Now, you’re ready to set achievable profit goals that you can incorporate into your pricing for each locksmith service.
Step 1: Calculate Your Locksmith Business’ Net Income
In order to set achievable profit goals, you need to know your locksmith business’ net income. You can calculate your locksmith business’ net income by using this formula:
Net Income = Total Revenue – Project Costs- Labor Costs – Overhead Costs
Next, you need to know your profit margin. For this step, simply use the net income you just calculated to help you solve for this formula:
Profit Margin = Net Income / Total Revenue
Step 2: Incorporate Your Profit Margin Goals into the Total Price of the Locksmith Service
Now, you need to test out a few different profit margin goals to discover what works best for you. Keep in mind, your sales and job goal will simultaneously increase with your increased profit margin goals. The main priority here is to keep your profit goals ambitious, yet achievable.
Step 3: Analyze Your Competitors’ Locksmith Pricing to Stay Realistic
Your locksmith pricing is tied to your company’s reputation. Price your services too high and you may come off as arrogant (and you may lose business). Price your service too low and you may come off as the bargain basement business,calling your quality into question.
If you’re pricing your services considerably lower or higher compared to the majority of your competition, then you might need to consider adjusting your locksmith pricing.
Since your competitors’ costs and goals are different, you can’t copy your competitors’ locksmith pricing. However, it will give you a general idea of whether you’re in the right vicinity.
Once you’ve incorporated your profit goals into your pricing model, you can compare these prices to your competitors to see where you stand.
5. Verify Your New locksmith Pricing With a Trusted Financial Advisor or Accountant
As with ANY major financial decision in your business, it’s absolutely essential that you verify your new locksmith pricing with a trusted financial advisor or accountant prior to testing or finalizing it.
Your financial advisor can tell you how much you need to charge as well as any other factors you might’ve forgotten to consider. Since your finances are vital to the success of your locksmith business, this step is critical.
6. Improve Your Locksmith Pricing Process Using Customer Feedback
When deciding on a price increase, experimentation and feedback are key. Start with your unprofitable customers and see how a price increase is received. Is there pushback from your customers? Be cautious and roll out pricing increases to just a few people at a time.
You may not have many repeat customers. If you typically deal with one-time jobs, then choose to implement your pricing increase on smaller jobs, then scale up from there.
As you test your locksmith pricing increase, you’ll need to listen to customer feedback. Take a look at a few different ways you can gather customer input on pricing:
- Call or ask for feedback in-person (after a positive customer experience)
- Text surveys and follow-up texts (easily automate texts using FieldEdge)
- Encourage reviews from happy customer (keep in mind, you should not incentivize reviews)
- Email surveys and follow-up emails
After you raise your locksmith pricing to a handful of customers, it’s a good time to send out your survey and ask them a few questions to see if they’re still satisfied with your locksmith business.
Once you receive feedback from your customers, adjust your locksmith pricing for future customers who are more profitable. Once a widespread pricing increase has been put into place, repeat the above steps to gauge the feelings of your larger audience!
Unlock Your Locksmith Pricing Potential and Maximize Your Profits!
You now have all the tools you need to to maximize your profits and conquer your goals!
With the Ultimate Locksmith Pricing Guide, you know which factors you need to consider as well as how you’ll implement new locksmith pricing using:
- Identifying your local target market
- Finding your break even point
- Calculating project costs
- Setting achievable profit goals
- Verifying your new locksmith pricing with a trusted financial advisor or accountant
- Improving your locksmith pricing process using customer feedback
Use these expert strategies to help you build a long-lasting locksmith business that’s successful for many years to come!