As I See It
Buy this book! Buy this book! Buy this book!

Buy this book! Buy this book! Buy this book!

Matt Michel, the president/CEO of the Service Roundtable, has written one of the best books on pricing that I've ever read. Every contractor should buy The Power of Positive Pricing (How much is your pricing costing you?). I love this book.

Matt Michel
Matt Michel

The book is worth it just for the appendices, like the service rate calculator, the overtime rate calculator, and maybe the most valuable, Service Roundtable Chairman Lee Rosenberg's detailed list of all the items that should be included in your overhead.

Michel begins with how to price your service calls and how to assign overhead. He explains how to price overtime service (the same as your regular rates) and why you'll make more money. The key is that all of your overhead is assigned to 40 regular hours a week. On overtime, therefore, you don't have to account for overhead so you'll make more money even paying time and a half in wages.

He gets into stuff like how to use your show-up or truck charge as a promotion and how to establish customer expectations. Customers walking into Wal-Mart and Nordstrom have different expectations and your customers need to know what to expect from you, especially if you're a premium contractor with top-notch people.

Michel gives a clear and understandable explanation of price elasticity. For example, the price is elastic for a commodity repair like a toilet rebuild that just about anybody can do. In that case, the low price wins. If, on the other hand, you're the local geothermal guru, people will buy from you regardless of your price, so the price is inelastic.

Michel takes that a step further and explains how to use flex pricing like the big box stores. The big boxes advertise cheap prices on the price-elastic commodities in order to get people into the store. Michel suggests flexing prices down for basic repairs and increasing your prices for complicated repairs. "If nothing else, it will drive your competitors nuts." he writes.

He also talks about how to price and sell service agreements, how to price installations, and how to use Dr. Harold Squire's dual overhead pricing method.

Michel advocates discounting by addition. Never cut your price on the equipment, he counsels. Instead, discount by throwing something in, like a humidifier.

Contractors have been complaining for decades that the competition doesn't know the cost of doing business. That's why every contractor should read and use this book. It's published by Service Nation Press, servicenationpress.com, with a cover price of $28.95.

TAGS: Geothermal