Hi, Wayne Bettess here. I have been a heating engineer for over 15 years. I’ve witnessed the boom times and the bust times, this is why I feel us trade professionals are being left well behind when it comes to what we earn.
Over the past 15 years our industry prices have been very stagnant!
Back in 2002, when I started my career as an apprentice plumber, the company I worked for charged £65+VAT for a full boiler service, £600+VAT labour for a boiler swap and £400+VAT labour for a power flush.
Do these figures sound familiar? If so, read on…
Almost everyone I have approached about this subject has expressed that they are fearful of raising their prices. Common reasons are:
- “ I will lose a lot of customers”
- “ My customers will complain”
- “ They have been loyal customers so it’s not fair”
- “ I haven’t got the confidence to do it”
The above (and other) reasons are valid objections BUT (it’s a big but) at the end of the day, your business is there to serve its customers. If you are not running your business at a fair and healthy profit margin, there is not a fair exchange – and one of the first things to slip is the service your customer receives. To be blunt, you have to stop focusing on the negative reason as to why you shouldn’t raise your prices and start focusing on the positive reasons as to why you must.
Let’s get technical…
In the examples below, I am only going to use The Bank of England Inflation rate over the past 15 years. I’m not even factoring VAT rises and the higher taxes most are paying, which would compound this issue further.
In 2002, when I started my career, the price for a boiler service was circa £65+VAT. Based on The Bank of England Inflation figures you would need to get £95+VAT to be in the same financial position in 2018. Basically what you could buy with £65 in 2002 would in today’s values cost you £95! When we use bigger figures it really starts to hit home how far off a lot of small businesses are from reality, see some examples below:
- 2002 – Labour charge for a boiler swap – £600+VAT
- 2018 – Inflation based labour charge for a boiler swap – £950+VAT
- 2002 – Labour charge for a power flush – £400+VAT
- 2018 – Inflation based labour charge for a Power Flush – £620+VAT
- 2002 – Labour charge for a boiler service – £65+VAT
- 2018 – Inflation based labour charge for a boiler service – £95+VAT
Now let me increase this further so you can see the huge impact it has. The examples below assume 30 boiler swaps a year, 10 power flushes a year and 288 boiler services (six a week for 48 weeks):
- 2002 – Labour charge on 30 boiler swaps – £18,000+VAT
- 2018 – Inflation based labour charge on 30 boiler swaps – £28,500+VAT
- 2002 – Labour charge for 10 power flushes – £4,000+VAT
- 2018 – Inflation based labour charge for 10 power flushes – £6,200.00+VAT
- 2002 – Labour charge on 288 boiler services – £18,720+VAT
- 2018 – Inflation based labour charge on 288 boiler services – £27,360+VAT
Based on the assumptions above, if your charges have remained pretty much stagnant then you would be £21,340.00 worse off today compared with 2002!
(The cost of goods and services increased by 58.5% over this period. Source: Hargreaves Lansdown. Figures based on the Retail Price Index (RPI) as at August 2017. Source: Office for National Statistics. Above figures are estimated)
Have I got your attention yet?
It is unsustainable not to increase your prices
If you are not making a fair and healthy profit margin, you cannot serve your customer effectively, as there has to be a fair exchange in all transactions. Increasing your prices will also increase the service you can provide, you will be able to invest back into your business, improve systems, processes, training, innovation etc
Although you may not think it, our customers are human just like us. We only have to look at our own behaviour to get a gauge to how our customers will react when we increase our prices. In the majority of cases, if a product/service we buy goes up, we accept it as just the way it is and simply carry on as normal. We may have a moan and groan about it but in general, we just accept it… and so will your customers.
I really hope this has opened your eyes as to the need for you to raise your prices.
Keep an eye out for the second part of this article, coming soon.