Episode•May 27, 2024•31 min

EP168: Debunking The Higher Price Myths

Value is important, so raise prices. When clients choose a contractor, the price isn't always the most important thing to them. People hire contractors because they want to know if they understand their needs, keep their promises, and do good work. As long as the value of the service is clearly expressed and shown, raising prices doesn't always mean losing customers. In this episode, Brad talks about: Common misconceptions about pricing in the contracting industry. Fear-based responses and scarcity mindset related to pricing. Personal experiences and realizations about underpricing jobs. Importance of confidence in pricing and sales techniques. Encourages listeners to seek help, practice sales skills, and believe in the possibility of raising prices. Impact of underpricing and explore the potential of raising prices for profitability. Links to Resources: Get the blueprint to create financial freedom & more free time before burnout or bankruptcy happens. A complete Done-With-You Program - Join the Profit Club Join the Free Facebook Group - The Contractor Profit Blueprint Get Paid for Estimates - Free Sales Guide Plan Your Profits - Profit Journal Help us get the word out to other contractors by leaving us a review or sharing our podcast! Hosted on Acast. See acast.com/privacy for more information.

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Transcript

0:09

Contractor's journey to self-mastery requires discipline, integrity, and respect. Welcome to Hammer and Grind. Hey, welcome back to the show. It's Brad here. Listen, today we're going to talk about myths around pricing, myths around high pricing. What we're going to break down for you here, or what I'm going to break down for you, is all of these myths about pricing yourself out of the market or being too expensive. Okay. So we're going to dive into that right now, all the time, every single day, every post I make about pricing, about charging more, I get a ton of comments and contractors all over all walks of life coming to me and saying, that's not possible, right? I can't do that. Whenever I charge more, I lose jobs. If you price yourself too high, you're going to price yourself out of the market. Right. You're going to not sell as many jobs and then you're going to sit at home and be broke. These are all fear based scarcity mindset responses. OK, if this is your first podcast episode you've ever listened to, we don't we don't rely on fear. We don't rely on scarcity mindset. OK. There's an abundance out there in the world. There's an abundance of money. There's so much money out there that everyone has access to, yet they choose consciously to not get it. Okay. And it's, it's masquerade under a lot of different things. It's masquerade under, I don't, I'm not trying to rip people off, Brad, you know, and I get that there's, there is a valuable, uh, you know. noble thing about a contractor who doesn't want to rip someone off. I totally get it. I was that person for many, many years because I remember distinctly doing a job early on in my business. I went and did a handrail, you know, install job. And the client told me, I can't remember if it was before or after, but the client told me like, yeah, I got another quote and it was $450 to do this really simple, like two-step handrail. And I think I did it for like, you know, $200. all in materials and everything. And I remember getting done and it took me, you know, a few hours and I remember getting done and like doing the math and be like, man, I made 20 bucks an hour. That's crazy. Can you believe this other contractor was charging, was going to charge him $450? What a ripoff. I said that early on in my business. I said that because I had no idea about what it actually takes to run a business. I had no idea about profitability. I didn't fully understand. all of the intricate things that go into having a successful and profitable business for long-term success. So I get it. I understand. We're not trying to rip people off. The problem that most contractors run into with this specific thing is that if you try to price something really expensive and you sell it to the person who is the least capable, of paying that, it appears from the outside that you're trying to take advantage of someone. If I need to do a job and it's going to take a day to do this job and I charge someone $2,500 for a day's work, if I go to a busy professional, you know, like a doctor. or a lawyer, or a business owner, or someone who's very busy and values their time. And I say, yes, customer, it's $2,500. We can get it done for you. They say, that's awesome. When can you start? I go to another person who's a, you know, a 20 something single mom who works at a retail store, makes minimum wage. And I go to her and I say, hey, it's $2,500. You think the whole world's coming to an end? How dare you try to rip off a single mother? you know, with three kids working a job, barely getting by. You must be a crook. You're the problem with the construction industry, right? The job didn't change. My price didn't change, but the person I'm trying to sell to did change. And so, yes, if your marketing, if your client base is in the lower spectrum of the wealth gap or the wealth, the wealth spectrum, if you're on the lower end, then yeah, you're going to have a hard time selling higher priced jobs to that people segment. That's just economics. Okay. And here's the thing too. Here's the second part that I always get pushed back on. My competitors are cheaper. I can't charge more or I'm going to lose jobs. Hear this all the time. It's not true. It's just blatantly not true. It is a blatant lie that everyone passes down. like folklore and generational, you know, stories about their great, great, great grandpa, who was a general in the civil war and how he did all these amazing things. That's, that's the same type of stories that get passed down to the next contractor starting. Well, you can't charge too much a young lad because if you do, you'll never get jobs. There's just too much competition out there. So you have to be cheap, right? Those are the soundtracks. that broke contractors tell the next generation of future broke contractors how to run their business. And here's the reality, like probably around 70% of contracting businesses in existence have no idea how to run a business. 95% of contractors go out of business in 10 years. Most of them have no idea. And the ones that definitely don't know. And they're never going to learn how to are the ones that are always giving me hate comments in my videos and TikToks and stuff because they're the ones that their ego will not allow them to look in the mirror and say, you know what? Maybe, just maybe, someone gave me incorrect information. Maybe my uncle, who owned a construction company for 20 years, and he was giving me advice, was wrong. He's the one that said you can't charge more than everyone else. Don't be the highest. Don't be the cheapest. Be the one in the middle. You ever heard that before? Right. My uncle said, always try to be in the middle. That's the fair and right thing to do. And so we latch on to that soundtrack and it now becomes our anthem for pricing and anything over that, a penny over the middle, a penny over trying to make profit. And you're a crook and you're trying to rip people off. So you guys, as an industry, we are plagued. I mean, worse than cancer. It is basically the cancer of construction. And that is misinformation. And it's misinformation. And the president of the board of misinformation, his name is Pride. And the vice president's name is Ego. And the other board members' names are Fear and Scarcity. Right? That's who's leading this industry is all of this ego and pride and fear and scarcity mindset and wrong information, incorrect information. Regardless, I mean, there's at least eight different contracting coaches, you know, whether they're individuals or organizations. Like I think of at least eight off the top of my head that are all basically saying the same thing. and helping their clients, yet the industry knows better. I mean, the industry as a whole just knows better that that's not true. You're just a guru trying to sell us a course or a program, Brad, right? I get that crap all the time too. Guys, you have to realize that in construction, predominantly construction, in the blue-collar trades, for the most part, it's been the blind leading the blind. for decades. And a small handful, probably that 5% that make it past 10 years, have cracked the code. Whether they do it on their own through trial and error or they get help through coaching, they have transcended past this idea of if you charge too much, you're a crook and you're ripping people off. And so what we're talking about on this podcast are these myths because that's what they are. It's not true. But let me give you an example of exactly what happens. Somebody says, you know, somebody sees a video I make, or it doesn't have to be me, it can be anybody. Let's just say somebody sees a video I make, and I say, you need to be getting a 50% gross profit. Immediately, first reaction, Brad, if I do that, I'll lose all my clients. That's fear. That's scarcity-based response, okay? That's a fear-based response. I'll lose all my clients if I do that. Okay, I hear you. I hear you, contractor, with fear. What proof do you have that that's true? Well, I talked to a guy one time, and he said that he tried to raise his prices, and he didn't get any jobs, so he had to go back down to his regular prices. Okay, so let me get this straight. You've never actually tried to raise your prices. No, I mean, that's just what people say. Who says that? Just people, people on the Internet, people I run into. You know, they always say you can't raise prices. Nobody wants to pay. Okay. That's your evidence. You've never actually tried it yourself, but you know with 100% certainty that it's not possible. Yes. Now, if you heard someone else say that, you would say that is absolutely ridiculous, right? But this is literally what the conversations I have on a daily basis. It's this won't work for me. I get it. You got clients who have major success who are. increasing their profits by two to three times in one year and five times their revenue in 12 months. Yes, I see you doing that. I see your case studies. I see your testimonials. I see all this evidence that you produce, Brad, but my situation is unique. You just don't understand. I live in a small town. You just don't understand. It doesn't work in my trade. That might work in remodeling, but it doesn't work in electrical. It might work in general contracting, but it doesn't work in landscaping. So you don't understand, like in my town, it's all the buddy-buddy system. And if I charge, if I try to start charging more and heaven, you know, God forbid I try to charge for an estimate, everybody will find out. And within one week, I'll be out of business. That's the stuff I hear on a regular basis. Okay. And let me, let me just drop a bomb on you here. I was that guy. I literally said every one of those things. Do you see the irony in this? I was the guy that I'm talking to in every one of my podcasts because really what I'm doing on these podcasts is I'm like some, some, in some way trying to speak into my old self. And like, maybe I think that that if I speak into my old self, my current self is gonna be better off because I robbed my family out of years and years of success. Because I believed all of this stuff. Because I had a limited mindset. Because I had a scarcity mindset. Because I was too scared to try something. And you know what I think I was the most scared of? I was the most scared to try something and then realize I had been wrong. And let me tell you something, guys. I remember this distinctively. The day that it clicked in my brain that I was not charging enough. And what I really should have been charging all this time. I did some rough calculations. Now there's no way to like 100% prove this, but there's a high probability based on some simple assumptions that over the nine years that I had been in business to that point, I had screwed myself and my family out of over $1 million in profit and revenue. Maybe not profit, but revenue, right? And so obviously that would translate into the profit. Even if it's half of that, it would still be profit. So I screwed myself out of, you know, probably somewhere around eight, nine, one million or more in revenue. And when I when that realization hit me, I was depressed for two weeks because in that moment I realized it was me who had been doing it wrong, who had the wrong information, who was, you know, not seeking outside counsel. to rectify this. And it was all on me. It was all on my shoulders. I couldn't blame the customers. I couldn't blame the economy. I couldn't blame anyone. The evidence was overwhelming. The jury of 12 came back with the verdict and said, you are guilty. And I was. That was a fundamental change in my mindset around running a business. And I want you guys to hear me loud and clear. Raising your prices. is probably the easiest thing that you will do in your business. Hey, just a quick timeout from the show. If you're a frustrated contractor

13:53

who's dealing with low profit margins, stuck working on the tools every day, or doing free estimates for people who are never going to hire you in the first place, I invite you to my private contractor community, The Profit Club, where contractors just like you are adding two to three times more profit each year without producing any more jobs and finally getting completely off the tools. to never do another free estimate again. So if you're ready to increase your profits, stop doing free estimates and get off the tools, then all you have to do is click the link in the show notes to learn more about the Profit Club and see how it can easily two to three times the cash in your pocket, give you a proven sales process that will convert more jobs with ease and get you off the tools once and for all. And the best part is you can do all of this without having to produce more jobs than you currently are. Click the link to learn more. Now let's get back to the show.

14:44

Let me say that again. Raising your prices is probably one of the easiest things that you will do in your business. Yet you believe it's the unicorn that can happen. I can give you email and text and Facebook messages and Facebook posts. And I mean, just one after another to the tune of hundreds of messages that I've received from both my clients. And it's people that randomly follow me on the Internet who've tried this, who said, I just raised my prices on this job, this next job I sold to see if it would work. And I raised it, you know, by 10 percent or I added an extra thousand dollars or I added an extra ten thousand dollars. And they did not even blink an eye at the price. They just said, sounds good. When can we get started? I have hundreds of these messages. Most of you are just scared shitless to try anything new because the thought of failure is paralyzing you. It's not so much the change. It's the failure that paralyzes you. And so you refuse to make changes. And then we allow ourselves to come to the belief. We convince ourselves. We lie to ourselves. That the real reason we can't raise our prices is because of pick any of these things. The economy. My town's too small. My trade doesn't work. Blah, blah, blah, blah, blah, blah. You know, play me a violin. Where's the cheese for that wine? It's all limited belief system. 100%. Now, let me ask you this. If I said, you know, let me change this. Let's just say you go, okay, Brad, fine. I'm going to try it. I'm listening to this podcast right now. I'm going to try it on the very next job I do. I'm going to add 10% to the price because right now I'm only getting, you know, I'm only doing a 20% markup on materials and labor. I'm going to try and mark it up 30%, which by the way, that's still not a good enough, but baby steps here. Okay. So just baby steps. You're going to add 10% markup over what you're currently charging. Okay. If you go to sell that job and you're talking to the customer, And they go, how much is this job? And you go, well, you know, it's a lot. You know, it's going to be $10,000. Now, how confident do I sound when I say it like that? I'm not very confident. So here's the second piece of this puzzle here. You can't just raise your prices and then subconsciously sabotage yourself in the sales process. You have to actually believe. with all of your might, that they're going to pay this much money. If you're uncomfortable doing that, it will come through in your demeanor, in your tone, in your facial expressions. If you're in person, all of that will come through your body as a negative energy because you're uncomfortable doing that. Do you think it's going to affect your ability to sell a job? Let me help you. A hundred percent. Yes. Because 90% of selling is emotion. It's not the product. It's emotion. If you don't learn how to sell the emotions, you will never sell a high ticket job. Unless, you know, extenuating circumstances, you're the only contractor who can get there tomorrow and you can charge whatever you want because they're absolutely desperate. Throw those situations out. Normal contractor, normal competition, normal customer. You're not going to sell it. If you don't have confidence in your ability to sell it, if you don't have confidence in the ability, they're going to pay that much. You will not sell it. So this is what happens to Brad. I tried it. I tried on five jobs to raise, you know, to do a hundred percent markup and get a 50% gross profit. And all five people said, no, you're too expensive. It just won't work here. I wish I could do it. I really do. I wish I could charge that much. It just doesn't work here. I tried it five times. Okay. You're in the group of, I did try it. It didn't work. Props to you. You went out and you took a chance. You tried it. Okay, that's something to be said for that. But is it possible? I'm not saying you did this. Is it possible that you just didn't do it correctly? Is it possible that the one time you tried to do something new that you haven't done before, that you did incorrectly or didn't do a very good job at it? Let me ask this in a different way. Is it possible if you wanted to go learn a new sport like skiing. Okay. I was thinking about this this morning for whatever reason. I don't know why. Maybe it was, um, for telling this podcast. I I've done a lot of, I've done a lot of, uh, snowboarding. I'm a snowboarder. I don't, I haven't done it many, many years, but when I did, I snowboarded. I've never gone skiing. I've never done any type of snow skiing. I would imagine that the first time, if I go try and snow ski, I'm probably going to suck at it. I may pick it up quicker than others because I know how to snowboard and I know kind of how snow reacts to things. And I can, I can use some of that information to allow me to learn at a much faster rate compared to someone who's never done either. But I can almost guarantee you with a hundred percent certainty. I guess I am guaranteeing you. I can guarantee you with a hundred percent certainty. The first time, if I ever go snow skiing, I'm going to suck at it. Therefore, can I go enter a, you know, solemn skiing race competition the very first time that I ever learned how to ski? If I did that, I would be the last one. I'd be in last place and everybody would laugh at me because I don't belong there. This is exactly why we practice sales techniques and sales training and role plays in the profit club. You have to practice it. You have to. There's no way around it. No, you're not a natural salesman. No, you're not really good at people. No, you don't just need to get in front of them and they're going to buy from you. That's bull crap. I thought I was a really good salesman too. And so I actually got sales training and realized, holy crap, I don't know how to sell. What I know how to do is get in front of people and connect with them. And then, oh, I'm the cheapest contractor. So I get the job. And guess what? I'm really good at sales because I sell nine out of 10 jobs that I look at. No dummy. You're just the cheapest one. You won all those jobs for all those years because you were the cheapest one. You happen to be a really good craftsman and a really good person who did not understand their own value and therefore so jobs way undervalued. I was the one getting screwed and not the customer. The customers were laughing all the way to the bank because they save a ton of money by hiring me, the dummy who didn't know how to price a job correctly. We don't talk about that. We don't talk about all the contractors that go broke, right? We don't talk about the contractors that lose money on jobs because they misbid it and they're afraid to simply go to the customer and say, hey, I screwed up. You know, I actually, I missed, I didn't get enough materials. I'm going to lose money. So we just eat it. Because we don't want the embarrassment. One time after I got coaching and I understood how to run a business, I had a buddy of mine, high school buddy of mine. I mean, we're not like best friends or anything, but he's a high school friend. He wanted me to build. He had a big deck. He wanted me to install the underpinning on a deck to make it waterproof for his patio below. I'd never done it before. Brand new product. brand new type of trade service, never done it. I was confident in my ability to figure it out and do it, but I had never had any experience to know how long it takes. And so when I bid this job, and I don't remember the exact numbers, but let's just say it was somewhere around like $8,000. In retrospect, it probably should have been like $18,000, okay, based on the information. But I was willing to try it out. I was willing to even like break even on it because I wanted to get into this type of service. So this was an opportunity. Okay. And by the way, I don't have a problem with you like discounting services and stuff. If you're getting, trying to break into a new market and you need experience or you need testimonials, I don't have a problem in that scenario. I just have a problem if you do it every time. Okay. And so in this situation, I was doing it kind of doing it cheap, but I way underbid it. I way underbid it. And when the job was done, Again, I don't remember the exact numbers, but let's just say $8,000 is what I bid it for. My cost on the job was $9,000. Not with profit, my cost, as in labor and materials, my cost was $9,000. I mean, butchered it, way underbid it. But I'm not a chicken. I went to my buddy. Yes, he was a buddy, but I still would have done this with anybody. I went to my buddy and I said, look, man, Here's the deal. You know, I, I, I trying to help to do this job for you. You asked me to do it. I wanted to do it. You know, he was happy. Like everything turned out great. Loved it. Extremely excited and happy for the work. That wasn't an issue. And I went to him. I said, look, here's the deal. I weigh underbid this. I'm not going to make any money. I quoted you $8,000. I will 100% honor that. And you can pay me $8,000 and everything is good. There won't be any problems. You know, We're, we're, it's cool. That's what I quoted. However, this job actually cost me $9,000. And again, I don't remember the specific numbers, but it was something like a thousand, $1,500 more. You know, if, you know, anything that you feel like would be fair above the 8,000, I would really appreciate it, but I don't expect it. And he paid me the 9,000 or whatever it was. And I think he even paid me a couple. He might've even paid me like an extra $500 above that. Now this, this gentleman, my buddy was very wealthy. He didn't need that money. And that could have obsolete, you know, that could have definitely contributed to it. But my point is I still asked him because I wasn't scared. And then I ended up getting a little bit money so that I wasn't actually losing money on that job. But the pricing wasn't an issue all along. He just needed somebody to do it. He didn't know what it was going to cost. Right. We put too much pressure on this pricing situation. We put way too much pressure on pricing. Pricing statistically, across all measurements of data, suggests that pricing is number third on most people's list of considerations for hiring someone or anything for that matter. Buying a new vehicle. Pricing is number three. Number one usually is Does this person fully understand what I want done? And I'm, and am I going to get exactly what I want when the project's over? Or am I going to, is he going to sell me one thing? And then when the project's over, I'm going to get something else. Is he going to tell me that he's going to be there every day? And then once they start the project, they don't show up every day. That's what most people care about. It's not price. The problem is most of you guys are order takers. And all you know how to do is take orders and give a price. And when you take orders and give a price, you lose most of the time. The reason why pricing high doesn't work is a myth is because there's evidence of this all over the place. If something is possible for one person, it's possible for anyone. Roger Bannister ran the four-minute mile. Prior to him running the four-minute mile, it was not possible. athlete in the world said it was impossible to run a four minute mile. And then Roger Bannister ran it. And I don't remember how many, but like in the next 12 months, four or five other people ran the, ran a four minute mile, sub four minute mile decades, decades. It was not possible. Roger ran it in sub four minutes. The next following 12 months, four or five or however many people. beat it in four minutes. All it took was him to prove to the world that it was possible. And now everyone else was willing to try it and believe. The problem here, guys, is that you don't believe it's possible because you haven't surrounded yourself with the right information or the right team or community to support you through this. You're just out there winging it with no idea how to freaking price a job correctly. And then at the end of the month, when you have no money in the bank account and you're working 70 hours a week and your wife's complaining that you're never spending time with your kids or her, you think that's just how everyone else does it. That's just quote business. Honey, that's just how contracting business is. You just got to work hard to barely make any money. It's a bunch of bull crap, guys. You just choose. You're choosing to believe that. Because it's easier for you to live in misery than to look in the mirror and say, I'm the problem. It's easier to screw your family than look in the mirror and say, it's your fault. That's the truth. That's the hard reality you need to understand here. And the day that I learned that was probably the most freeing day I've ever had in my life. Even though I went into a depression for two weeks. It freed up so much possibility in my head that I was actually excited after that. The depression was realizing how much I cost myself and my family. But that interaction, that experience opened up a whole new world of possibilities. And I hope that for you too in your business. But if you think you're just going to go out there and raise your prices and that's all you got to do, more than likely you will fail to some degree. And then you will say, this Brad guy doesn't know what he's talking about. And the only thing that why that's true is because you haven't tried to get help. You haven't actually tried to get the correct instructions. It's not your fault that you were given the incorrect instructions by your predecessors. It's not your fault that the industry, that the board of the industry is trying to keep you stuck where you're at. That's not your fault. That's just the industry as a whole. The industry as a whole is lost. It's confused. It's misguided. It was given the wrong information. What is your fault is choosing to see the possibility and then not taking action on it. It is your fault to not raise your prices. It is your fault to not learn how to sell correctly. It is your fault if you don't do anything because if nothing changes, guess what? Nothing changes. Guys, you know where to find me on the socials? Just search for the Hammer and Grind podcast. I hope this podcast helps you to just bust some of these myths because they're simply not true. I can give you all of the evidence that you want to disprove it. You just have to make the conscious decision to want to change in your business. And if you want help with that, reach out to me. I'll show you how to do that. Until next time, remember, this is why I say this, profit is not a dirty word.