This is not a new method
By Rob Blackstien
Mike revived the Straightforward Pricing discussion last week, and this opened the door to a very detailed explanation of the history of this method by Joe Gerolami:
New idea? This method has been used since the early ’90s, however in the U.S. Canadian contractors are always a bit behind on some of the methods that are being used. Pretty much any contractor that is part of a Best Practices Group uses this method of pricing their customer as it shows complete transparency as to what the job will be before starting any work. While there are those few who get accused of price gouging, rest assured that the majority of companies using this method are held to a high standard and operate very successful businesses.
The problem is really not in the pricing methods, it is the way that many companies operate. Most of them do not have any type of operational systems or proper processes and no fault to them, they just simply have never been shown. We all pretty much started the same way, tradesman in a truck and now we are “Businessmen.” No formal education as to what it takes to run a successful company, no understanding of accounting methods or financials, but boy can we build or service stuff.
Lots of those newbies fly by the seat of their pants thinking they are making money when in fact they are praying for profit at the end of the year when they hand over their shoebox accounting to their guy and cross their fingers. Straightforward pricing has all of the costs associated with what it takes to run your particular organization without guesswork. It is based on knowing what your break even numbers are as it applies to the business operations, how many billable hours are required and at what rate.
Calculating what is your overhead cost per Billable Hours. No one ever thinks of these items. It is relevant even if you’re a solo individual, we all have overheads. Once you learn that, it is actually shocking to see what must be calculated as your billable rate. If anyone wants a calculator to figuring that out please feel free to reach out and I’ll send what we use here in our company. I always recommend two books to read – The first is E-Myth by Michael Gerber — currently there are 17 different business Verticals in his library, and the second book is The Power of Positive Pricing by Matt Michel.
I encourage you to obtain these books as it will help people understand what is required to have a opportunity to succeed. While there are those who have done well, there are far too many failures and that is not cool especially when you are trying to support yourself and family and not fair as well to the employees you hire if you go out of business. SMS me at (250) 258-8889 if you want any info.
Thank you for allowing me an opportunity to share. I am a contractor/provider just like all of you.
Thanks for fleshing that out, Joe, and we appreciate that you’re willing to offer more info offline. Contractor Nation, now that we have revitalized this discussion, any newbies have an opinion about Straightforward Pricing? Pros and cons?