EP279: How to add 100K in 12 months: Contractor Profitability Tips

The sale. So this. This particular job, this particular scenario is important because it's the same leads, the same work, the same crew, the same service, different price. That was it. All they did was change the price. They didn't change anything else in their business. It took them Approximately you know, two seconds to change the price on their estimate. Two second change gives them an extra 100k a year. That's mind blowing. All right, let's look at example number three, a remodeler. So remodeler, you know, you don't need, Typically if you're doing remodeling, you're not doing, you know, 100 jobs a year. You're probably not even doing 50 jobs a year unless you're a big, you know, a big company. You know, most remodelers, depending on what you're doing, are doing somewhere between like 15 to 30 jobs a year roughly. And you don't, you don't have to add more work. It's even easier with remodeling. Remodeling is probably the easiest trade or business to add more profit without doing anything. So if you're doing remodeling and you add $5,000 to your project price, that's only 20 projects a year to get to 100k. So if you're already doing 20k or 20 projects a year now, and you add 5k to each project, that's your extra 100k. If you're doing say 10 projects at $10,000 extra per project, that's your 100k right? Now if someone's doing a $50,000 project and you charge them $55,000, that's not enough of an increase to make them say, nope, you know, if it was 50, 51,000, we would hire you. But 55 is too much. That doesn't happen. You know, the ratio to the, to the amount doesn't happen. Now if it's a $5,000 job and then you charge them 10k, you're, you've doubled the price and you're going to get some pushback, right? But even then you can, you know, probably sell it at 10k. If it's a hundred thousand dollar project and you charge 110, it's not going to cost you the job. $10,000 on 100k, it's 10%. It's not going to cost you. A 10% increase is not going to cost you the job. So, you know, the, the ratio does matter, but again, it's not hard to do. It's just math, right? So if you're doing kitchens, bathrooms, basements, additions, you know, you can leak $100,000 a year easily without even realizing it. And then when the projects go south and you have to eat into your profits because you have overages, overruns and overages and all this stuff Then you're, you can easily burn up an extra 150, 200k year in your production problems. So one of the reasons why I always tell people to charge more is because one, you're probably not estimating correctly anyways in terms of how long it's going to take. And then two, you're not charging enough because you don't have the right margins. So, you know, we shoot for a 50% gross profit because a lot of times we land at a 45% or in that one, you know, nightmare job, we land at a 38%. Well, at 38%, you're doing okay. But if you sell that job at a 30% margin and then you lose 12%, you're screwed. You, you're probably paying them to do their job. So this is why it's important because we're not, we're not even talking about like, you know, production errors, production issues. We're just talking about pricing, just pure pricing. It's super easy to just add that money. So 10 projects underpriced, that's 100 grand. You know, 20 projects underpriced by five, that's 100 grand. That's all it takes. The bigger the job, the easier it is to hide the cost because everyone is focused on total contract amount instead of the profit. Right? If it's a $300,000 job, you could add an extra 20, 30,000. They're not going to, they're not going to know right now. I'm not telling you to price gouge people. I'm not telling you to just overcharge everyone and get the maximum amount of money that you can possibly get. And screw. That's not what we're talking about here. We're talking about you need profit to run your business correctly. The overwhelming majority of contractors do not charge enough. And so when you have like, you know, 80 plus percent of the marketplace is undercharging, then the consumer side of the marketplace thinks that's the norm. It's normal for, you know, contractor A to only charge me $10,000 for a remodel, and you're trying to charge $18,000 for a remodel. And you're the one that seems like you're screwing people because you're $8,000 more. In reality, the other contractor who's charging $10,000 is, is losing five or six thousand dollars of what he needs to run his business, and that's why he goes out of business. So collectively, across the board, if you guys all raise your prices, which you should we basically adjust the market, right? We can adjust the market pricing. Too many of you are too scared. You're just scared to death to raise your price. And that's what we're going to get into next. When you look at this information from a mathematical perspective and take the emotion out of it, it's. It's clear as day. It's super easy, right? So the handyman needs a price per hour correction. The electrician needs a price per service correction, and the remodeler needs a price per project correction. But the problem is all the same, and that is that they're all undercharging. All right? So the math is not the hard part. The math is super easy. I just. I just gave you the math. It's super easy to make more money. The hard part is actually saying that new number because you're scared to death. Brett. I'm not scared. Yes, you are. Let's call a spade a spade. If you're afraid of rejection, that's fear. If you're afraid of being told no, that's fear. Right? If you're afraid of conflict, that's fear. Those are all examples of being scared. Let's just own it. We're scared to raise our prices. So number one objection. Going to say, Brad, that's great. I wish I. I want to raise my prices. I wish I could, but my customers just won't pay that much. That's fine. You don't. You don't need every customer. Like I said in the opening, your job is not to find a price that your customers are willing to pay. Your job is to find customers who are willing to pay your price, period. There's lots of people out there waiting for you to call them so. So they can pay you a premium price to get a premium experience. The customer who says yes to your underpriced job does not mean that your pricing is right. It's not proof that you're charging the right amount, because it could just simply be proof you're too cheap. And that was me. I would win a bunch of jobs because I delivered phenomenal experience, phenomenal quality work, phenomenal everything. And I was too cheap. Just didn't realize it. I was winning everything. Who doesn't want someone who doesn't know their own value and over delivers the quality? Everyone would want that on everything. I don't care what it is. Everyone wants to underpay for premium quality work. So just because you're cheap and you win jobs does not mean that that proves that your price is the right Price, it just means you probably haven't even tried raising your prices.

for people who are never going to

Objection. My market won't support that. I live in a small town, Brad. I used to say this forever. You know, no one's going to pay for consultations. No one's going to pay for estimates. You know, I live in a smaller town. No one's going to pay that. It's all buddy, buddy. It's all network, it's all who you know, no one's going to pay for estimates. And I thought that for years until I actually started trying it and people didn't really walk back. And then I just implemented it and it wasn't even an issue. So for those, you know, two or three years where I knew that I could charge for estimates, my mindset was I can't because people will not support that. That was a limiting belief because it was wrong. That's the point I'm trying to make here, right? Most contractors will say they can't, the market won't support it. And they've never tried it. They've never tried to raise their price, they've never tried to improve their sales process. They've never positioned the value that they add any better. They've never changed the customer experience, they've never tried to improve the experience. They've never, they're doing all of this decision making without trying anything. And they're just coming to their own, you know, decision in their head that people won't do it. And the fear that's Inside of you is you're trying to avoid heartache. You're trying to avoid the rejection. Your brain is saying, man, wouldn't it be awesome if we could charge for. Charge more? We could charge more money or even charge for estimates. Wouldn't that be awesome? And you're like, yeah, that would be awesome. But, man, it's just not going to happen. You know, I talked to John the other day, and he. He went out and he tried to. He had a lead come in, and he said he was going to charge him a hundred bucks to come out and do the estimate. And the client said, no, we're not doing that. So that's it. That's all the proof I need. John tried it one time. How many of you use the same ratio of testing? Whenever you were dating, you just went up to one girl and asked her out, and she said no. And then you just decided you weren't going to date anymore. It's funny, because your. Your inherent need and desire to find somebody to be with is more important. It's. It's more powerful than the rejection that could potentially happen, right? So, like, naturally, you will get over that rejection, the first one, or two or five or ten or whatever. Because honestly, even in dating, it's a numbers game. If you ask enough people, somebody will eventually say yes. You just got to get over that fear. Number three objection is I don't want to gouge people. Now, I hear this a lot, and I used to think this a lot. I'm not trying to get rich off everyone. I'm not trying to screw people. The reality of it is you're the one getting screwed. You're choosing in your mind. This is what your mind is saying. I don't want to screw, you know, sweet Alice, who's 80 years old. So let me screw myself by not charging enough to. By not charging the appropriate amount that I need to have enough profit so that I can pay for advertising or pay my insurance or pay for gas or whatever it is and still be able to have a decent lifestyle. You know, I don't want to rip her off, so let me rip off myself, my team, my employees, and my family instead. And then I'll hide that under the guise of I'm a good person, you know? Well, Brad, I'm a Christian, and I don't want to rip people off. Guys, that. That is just your brain, your mindset that's limiting you. That's not. That's not true. Those are not true facts. Just because you charge more doesn't make you less of a Christian. Just because you charge more doesn't make you less of a human being. Doesn't mean you have less morals, doesn't mean you have less values. It's because that's what you need to run a business. If you're. If your accountant came to you and said, listen, you know, you're charging 75 bucks an hour, and this year, let's say it's the end of the year, this year we're looking at your taxes. You lost $20,000. You're like, how is that possible? Well, because you're overhead. You're like, I can't lower it anymore. Like, literally, I've stripped out everything. I cannot lower it anymore. You know, I. How did I lose 20,000? Because that's what it took you to run a business, stay in business. Yeah, but I didn't pay myself hardly anything. I only paid myself 40,000. Yeah, I understand. But you lost $20,000. If your accountant came to you and told you that you would have no choice but to raise your prices. You would have to, or you will go out of business. The problem is, one, you don't even track your finances, so you have no idea how much money you're losing. But two, even if you are doing it, it has. It's not enough. You're like, well, you know, maybe if I work on the weekends and If I work 60 or 70 hours a week, that will give me the extra money. All of this. All of this thought process, all of this decision making is simply to avoid you getting rejected. It all lives in fear. 100% of it is fear. I don't like Grant Cardone very much. He's got some. Some of his stuff's pretty good, but I don't. I don't really like him very much, but I will give him this. That guy will keep going until you basically slam the door in his face. He does not give up on the first. No, he's not scared to try and push and push and push. Now, I'm not saying you got to be him. But what I am saying is that people who are not afraid of being rejected are the ones who have the greater success. You cannot be scared to raise your prices. If you are, you're in the wrong business. Go back to being an employee. So price gouging is not taking advantage of people. You're not putting a gun to their head. You're not making them make that decision. And by the way, price gouging, by definition, is not. When you raise your price, price gouging is whenever you have a situation where you have leverage over people and you can charge more. That is Covid. During COVID people were selling, you know, face masks for like $10 apiece. A 10 cent face mask was being charged for $10 a piece. And that is the definition of price gouging. Because people didn't have any options. That was, the only option was to go and get this, you know, $10 face mask or not have a face mask. That's taking advantage of a situation. That's what price gouging is. Charging more money than the next guy is not price gouging. That's just difference in price. Because people have an option, they could hire you, you know, for $50,000 or they can hire the other guy for $40,000. That's their option. That's not price gouging. You got to get that out of your head. That's not price gouging. Very rarely does price gouging actually happen. Now can you take advantage of people? Yes. If you have that 80 year old lady who doesn't know any better, and you tell her she needs to replace, you know, her air conditioner and furnace and everything because it's all broken, and you're lying to her and you sell her a $30,000, you know, unit, then, yeah, you're taking advantage of someone. But if you're giving, if you're telling them, hey, it's $30,000 to fix all of this stuff, and that's the same price that you would tell someone who's rich, hey, it's $30,000 to fix all this stuff. You didn't price gouge the old lady. You just, it was a client who didn't have the means to pay your dollar amount. It's the same dollar amount. One has millions of dollars, one has no money. It's the same dollar amount for the same work. That's not price gouging. You have to get that crap out of your head. Objection number four. I don't want to lose jobs. Yeah, you will lose some jobs, but again, if you do the math, the math will prevail. So even if you lose, you know, 10, 15% of your work, if you're charging the appropriate amount, that extra money that you're charging, actually you'll make more money doing less work. So instead of doing, you know, 25 jobs a year, you maybe you only do 20 jobs a year, but you actually make an extra a hundred thousand dollars because you're charging more per job. So, yeah, you can't afford to Lose some work. And if your goal is to win every job, you have a problem. If your goal, if you think you have to win every job that calls you, you have a mental problem. I'm not, I'm not being funny. I'm serious. Like you have some kind of mental disease where you think you have to win every single client. Most people are not going to be your clients, period. Most. Most of my clients that I have, their average closing ratio is between 20 and 40%. Somewhere around there, roughly around 30%. That means seven out of 10 people they talk to, they don't close. Meanwhile, you're trying to close 90, 100% of all your jobs. That's unrealistic. And if you are doing that, that is the number one reason, or the number one proof rather, that you're not charging enough. Because if you're consistently closing 90% of your work, you're not charging enough. There's room in the marketplace to charge more. You should not be closing that many unless there's some weird situation where you're the only person that does that work and we're not. That's an exception. That's not the norm. So, yes, you will lose some jobs, but you'll still make more money in the end. Plus, it actually gets easier. I don't know about you. I would rather make, let's say, $800,000. I'd rather do $800,000 a year doing 20 jobs than make $800,000 a year doing 30 jobs. Same revenue, 10 less jobs. Why? Because 20 jobs is easier to manage than 30. I'm actually working less. So, yeah, the math. The math is math in here. You guys can do the math. I'm not making this stuff up. The last objection which does happen is I'm not worth that much. And again, this is a mental blockage. You are worth that much because it's not. It's not tied to your worth. It's tied to the value that your client believes it's worth. Now, if you have a low self worth, it will be challenging to try and sell more because you will sabotage that sales call, by the way you talk. Because you won't be confident. You will. You will sabotage that call if you don't think you're worth that much money. So, yeah, you got some work there to do on yourself. Your self image, your self talk, your self worth. It has to be up there. You are worth it. I promise you. There are people that make lots of money that aren't worth it. I mean, you know, there's Lots of people out there, gurus and stuff that promise you the world, and they don't deliver anything. They're not worth it. They're just really good marketers. So, yeah, there's lots of people that aren't worth it. But I promise you, you are worth it. You are worth it. If you have a legitimate business, you are worth it, period. All right, listen, everything that's pricing related in your business is math. It's not emotion. You have to remove the emotion out of it. Once you remove the emotion and you look at it mathematically, right? Let's say you were advising one of your friends who has a company, and he brings you his math, brings you all this stuff, and you're looking at it and you're like, man, you're only charging 65 bucks an hour. Why don't you charge, you know, if you were to just charge 120 bucks an hour, you would make extra. Whatever, 70 bucks. 70. $70,000 an hour or a year, whatever that is, right? And you're like, yeah, that would be. You would have no objective. You would be objective. Let me talk about this. You would be completely objective because you have no, no skin in the game. It's not your business. It's someone else. Right? You're not biased at all. But if it's your business, then the emotions kick in. Oh, I can't do that. I hear what you're saying, Brad, but I can't do that. You guys got to get over that. Just got to get over it, period. Otherwise, you're just going to keep having the same results, doing the same thing gets the same result. That is the true definition of insanity is doing the same thing over and over and expecting a different result, right? So just to kind of recap here on the math handyman, all you do is do an hourly or block pricing correction, right? The electrician just had to do an extra two grand on a single service. And we, you know, there's other services, too. That's just one. One service line generators. There could be. There's lots of other service lines. So really, in reality, they could be making even, you know, 20, $30,000 extra a month. The remodeler, it's just a five or $10,000, you know, price correction per project, which is easy to do. Super easy to do. So here's what I want you to do. Here's how we're going in the podcast. I want you, for the next 10 estimates, I want you to raise your price not by 1%, not some weak little number that you need to make you feel safe, which I've done this in the past. I've told you to, you know, raise it a thousand bucks so you can prove yourself. We're going to skip past that. I want you to raise your prices enough so that you're either at a 50% gross profit, you know, maybe you're at a 45 or something. If you're at currently at like 20%, 25% gross profit, then go to 40. I want you to make a significant jump so much that it scares the crap out of you guys. Here's the. Here's the trick. This is. This is the most powerful thing I can tell you. If your price that you're going to give them doesn't scare the shit out of you, it's not enough. If you're super comfortable with the price you give them, you're not charging enough. That's the easiest litmus test that you can do. You have to say, there's no way these people are going to pay this much money. There's absolutely no way. But I'm going to send it anyways because Brad told me to. That's a good position to be in. And send it. And then when they sign it, and not only do they sign it, they. They don't even complain, they just say, sounds good, Sign me up. Or you just get an email that says, john approved your estimate. You're going to crap your pants. Like, you're going to shit your pants. Because you're going to be like, I cannot believe it. I just, you know, I was going to charge them 30,000, and I just charge them 40,000 and they approved it. That's an extra $10,000. You will shit your pants when that happens. And then you keep. And then you can message me and say, thank you, and I'll be like, cool, you're welcome. Next 10 jobs, raise your prices. Track what happens. I mean, truly track it. Track how many say yes, how many say no, how many pushback on price, and then track how much extra profit you made. I want you to do this for the next 10 estimates, and then I want you to send me the results. This is. This is the. This is your part. I'm giving you the information. You have to do your part. You have to send me the results. You got to tell me, okay? Because until you test all of this information, you don't know your market, Right? All you know is fear. That's all you know is fear. So that's gonna be the end of the episode. But I want to share something with you. I'm excited. I have a new, a new website dedicated to the podcast. It's just hammeringrindpodcast.com all one word, you know, My main website is Hammer and grind. This is hammerandgrindpodcast.com There's a couple cool features on there. Other than having all the episodes right there readily available. There's even some tags. We're still putting information in there, but it is live. But you can go in there, search by tags, by category, like if you want to see everything, it's sales related, you click on the sales tag, it pulls up all those episodes. But that's going to take us a minute to get all those episodes tagged. But there's one cool feature in there I want to bring you to. It's called Voicemail. And if you go to the website, go to the nav at the top and you click on Voicemail, you'll be able to actually just record a 60 second audio and I'll get it. So like you can just leave me a message. So if there's topics you want me to talk about, if you don't like what I say, if you want to tell me I'm ugly, whatever, I don't care. If you just want to give me some feedback, that's the easiest way is you just go to the website, click on voicemail and you'll be able to leave me a 60 second voicemail. So that's a good way for you guys to give me feedback. There's some other things in there too. Our guest information are on there and some other stuff there if you want to take a look. We'll have the link in the show notes so you can just click on it and go there. But yeah, hammering grindpodcast.com is the new podcast website. Guys, thanks for hanging out with me. I truly appreciate it. You know, if you haven't grabbed my book yet, you can grab the book that's actually on the website as well. You can go there and grab that. If you're looking for help in your business, we have several different options available at different price points depending on, you know, where you're at. So we can definitely help you. If you're a contractor, we got something that can help you. So just reach out if you want to learn more about that. Otherwise appreciate you hanging out with us. You know the, the drill. You can go find me on the Hammer Grind podcast anywhere and you can or go to the show notes and find it there. Remember, until next time though, guys, this is the most important part. Profit is not a dirty word.