How to Deal With Rising Operating Costs
Published on August 20, 2021 by Nate Bortz
Over this past year, you’ve undoubtedly been dealing with skyrocketing material and equipment prices that are affecting your business. That’s why we’ve adapted this article by industry expert Anja Smith.
She gives some great advice about thinking of your business in terms of the popular Serenity Prayer: “Grant me the serenity to accept the things I cannot change, courage to change the things I can, and wisdom to know the difference.”
In this blog, we’ll cover things you can change versus things that you just need to accept.
Courage to Change: Your Prices
If you use time and materials pricing, make sure you create an updated price list of common materials and get it in front of your employees.
If you use a flat rate pricing system, monitor your parts allowances carefully. You can either implement across-the-board markups to account for overall fluctuations, or review the applicable categories as often as necessary. These suggestions can be a lot of work, but it’s critical that your prices reflect the market cost of material.
Smith also suggests that employers should maintain an open conversation with staff about what is going on with prices and “help them understand that your small business is not the place for those margins to get squeezed. If you need permission to maintain your profit margin and pass that cost along to your customer, this is it.”
Wisdom to Accept: The Deals Other Businesses Get
Unfortunately, right now the more purchasing power a business has, the better it is going to do. It’s not fair, but you can’t change this reality. Other people might get parts you can’t get, water heaters you can’t find, and prices you can’t touch.
For your own sanity, let it go.
What you can do is put more effort into the services and offerings that don’t rely on expensive parts. If you can’t get water heaters, don’t advertise those services right now. Instead, talk about sewer line replacements, drain cleaning, leak inspections, or whatever else you offer. Challenge your staff to sell jobs that maximize investments you’ve already made. “Get that hydro jet out five days a week,” Smith says.
Courage to Change: The Conversation with Customers
Right now, customers may balk at your pricing, with good reason! That’s why Smith suggests changing how you approach pricing conversations with customers. It’s okay to let them know that you’re not happy with current prices either. Hear them out, empathize, but be firm. Do not give away your labor.
“Another change you might make to normal policy is to offer repair options you normally would not recommend,” Smith suggests. The price differential may have improved to a point where the customer deserves the option. As long as you provide excellent documentation about warranties and expectations, there is nothing wrong with a repair — assuming you can get the parts.
Wisdom to Accept: Adjusting Expectations
Right now might not be the time to “reach for the stars” by setting unrealistic business goals. The market is super volatile and we don’t know what tomorrow will bring. You and your staff will get burnt out if you fail to meet goal after goal. Failure isn’t fun, so give yourself and your team some easy wins. “It’s been a tough couple years and we all need a little achieving to celebrate,” Smith says.
What are some ways you’ve adjusted your business practices during these crazy times? Let us know on social media!