Thursday, May 30, 2024
Business File

Increase rates and continue to increase work

By John Corban

How can I increase my rates and win the work I want?

What is the reason for wanting to increase fees?
If you look at your P&L statement and don’t like the profit you see you need to delve deeper to discover why this is happening. Often in a landscape construction business the problem can be underestimating components of a quote and/or having a dysfunctional project management process that is costing time and profit, and sometimes it can be due to costly mistakes. Don’t just increase fees to try and fix the problem – address the cause. However, with increased materials and labour costs as well as running the costs of a business, increasing rates is often part of the solution to increase profit.

I am worried I will lose my clients or potential work!
When it comes to increasing fees, some of my construction clients have been initially concerned that they will struggle to win work if they raise their fees. My response to them is that it’s a fair concern and totally understandable. However, there are a couple of reasons why you won’t lose the jobs you want.

  • An hourly rate increase will not increase your estimate amount by much.A small increase in labour rates (say $2.50 per hour per employee) will not make a huge difference to a $100,000 project.
    Look at the maths – a $100K project may have 600 man-hours estimated to build it, so 600 hrs x $2.50 will increase the quote by $1500 plus GST. That’s a small amount.
  • If you have established a good connection with a client, and totally understand their brief and are doing all you can to design, plan and quote a garden they will love within their budget amount, an extra $1500 or even $3000 will not stop them from signing the contract.

You provide a great result for clients, so you deserve to make good money
You have worked hard learning how to professionally design, and/or maintain great gardens. You have years of experience that all your clients have benefited from, and will continue to do so into the future, so it can help to tell them this. You are also guiding your clients by approaching the transformation of their garden with a professional, helpful, honest approach that will result in them having a garden they will be proud of for many years. Think about what you are providing your clients, then tell me why you shouldn’t increase your fees?

Rarely does a client disagree and the increase in fees or increased markup in material costs and/ or hourly rate doesn’t affect contractors winning the jobs they want.

What about increasing rates to maintenance clients?
Often, a P&L analysis for my client will reveal that wage costs are high compared to income. The hourly rate increase to their clients will become a solution. So, the client base will be dissected into target market and secondary market. Some clients may be culled as they no longer suit the clients’ company. Then a wage rate increase is decided and is emailed to clients with enough notice. If their clients have been receiving high quality service, the clients will not be fazed by a $5 per hour increase. But if the service provided has been suffering, I suggest they delay increasing fees until the clients are receiving a high standard of service. Also, keep in mind that prices for everything have been increasing significantly, especially over the past few years. Your clients know this and understand that increasing rates and prices will need to increase.

When doesn’t increasing fees work?
When you’re always competing on price to win work. If your target market or client base is only interested in getting the cheapest quote for the work you provide, then increasing fees or material markups will probably work against you. And if this is happening, you may want to reassess your business model. Also, when the service provided is substandard, don’t increase rates.

Most of you work hard to manage your business and provide a great service. I suggest staying aware of the elements I mentioned in this article, so a price increase when you feel the time is right is an easy and supportive decision.

John Corban
Business Coach for Landscapers,
Horticulturists and Nursery owners
M: 0433 27 1980

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