Jun 13 , 2014
Underbidding jobs sucks. Whenever I do it, I feel defeated and unmotivated. It makes me feel like I’ve lost power and freedom.
Here’s the worst part. When I do underbid jobs I can typically sense it happening as I’m doing it, yet I still underbid the job. Why is this?
It’s like I’m watching myself do something that I know is not good for me and have no control over it happening. There’s some hidden power at work that I can’t see or touch that is controlling me from sacking up and charging what I should.
Kinda like when I start eating ice-cream and I can’t stop eating it.
During the first couple years of running my handyman business, I lost a lot of money by underbidding jobs. Now, I’ve been doing this long enough to where I almost never do it. I’ve figured out a few strategies that help me to only take on work that is worth my time.
Getting better at estimating and pricing jobs has had a significant impact on my income and enjoyment as a handyman. Learning to quote with confidence is empowering.
That’s why in this article I’d like to share some tips to help you stop underbidding your jobs and start making the money you deserve. If you implement them, you will immediately experience a feeling of empowerment and excitement about your business.
Tip #1: Understand Your Business From a Financial Perspective
How much do you need to make per hour to hit your income target? How many billable hours do you need to work to hit your income target? How much does it cost you to do a free quote? What is the minimum amount you must charge to make money on small jobs?
Most new business owners can’t answer these questions despite the fact that they are fundamental to actually running a profitable establishment. If you don’t know the answers to these questions, that’s cool. Your next step is to figure them out.
When you understand how much money you need to make each hour, each day, and each week, you’ll find yourself changing the way that you look at your pricing. Giving customers deals is suddenly seen as a direct impact to your livelihood and you’re motivated to stop doing it.
By understanding how much you need to charge for each hour of your time, you’ll have a solid foundation for formulating your pricing instead of just guessing. Guessing leads to being unsure and giving discounts for no apparent reason. Knowing your shit leads to charging what you should.
Tip #2: Be Prepared
Many customers will put you on the spot with pricing. They’ll want you to give them an estimate over the phone or will rush you to give them a price while you’re still looking over a job. They may even ask for a discount.
If you’re not prepared for these types of situations, you might end up giving an answer you regret later. I know I’ve done this many times myself.
To avoid being caught off guard, be prepared to answer customers when they put you on the spot. Come up with company policies for certain questions such as:
- Can you give me a ball park estimate right now?
- What is the best price you can give me?
- Do you offer a cash discount?
- Do you mark up materials?
- What if I buy the materials?
Being prepared when you answer these questions also makes you look more confident to the customer. Confidence is huge when talking money with customers.
Tip #3: Have a Minimum Service Charge
As a handyman you will come across a lot of very small jobs. Jobs that may only take you 15 minutes to complete.
You could charge your customers very little for these projects and then make the money back on large projects. However, that is only if your bread a butter is large projects.
If your business is anything like mine, you make all your money on those 2-4 hours jobs. That means that you need to be making good money on small projects and can’t afford to cut those same deals. A minimum service charge will help keep you profitable.
There are many ways to come up with a minimum service charge. One way is to simply add one hour of labor to a trip charge and make that your minimum. Or, you could have a two hour minimum. Regardless of what it is, make sure it’s worth your time and you stick with it.
Tip #4: Don’t give pricing on the spot.
This goes along with tip #2 above, but it’s very important so I wanted to emphasis it.
If you aren’t familiar with a job or need to think it over, don’t give the price on the spot! Instead, let your customer know that you will get back to them with a quote within a couple of days. Or, go out to your vehicle and compose a quote without the customer hovering over you. This will allow you to collect your thoughts and formulate a quote that makes sense.
Once you’ve got a price that is going to be worth your time, you can present it to the customer with confidence.
Please note that this only applies to jobs that you are actually submitting a quote on. In many cases, especially for small jobs and jobs where you are charging hourly, it’s critical to communicate price as soon as possible as described here.
Tip #5: Let Some Jobs Go
I’ve heard from several sources that you should only be getting 1 out of every 3 jobs you bid on, otherwise you’re prices are too low. Personally, I think that number may apply to contractors doing large projects, but not to handyman services. As a handyman you should expect a higher success rate because most homeowners aren’t going to get 3 quotes to fix a faucet. (if they do, you don’t want them as customers anyway.)
However, you still need to be able to let some jobs go and accept that some people can’t afford your services. Or, not everybody is willing to pay for your services.
As you are writing your quote you may have the tendency to think “how much would this customer be willing to pay?” Get that thought out of your mind because it will force you to underbid!
Instead, quote jobs based on what it will take to get the job done right. Or, how much is it worth it for you to do. Maybe that ends up being too expensive for the customer. So, what? The customer doesn’t hire you? Move on to the next job. At least you didn’t underbid the job and aren’t working for beans.
Tip #6: Do Some Marketing!
The most common reason handymen underbid is because of fear. Fear that they won’t have any business if they lose this next job. Fear that they’ll lose their precious few customers. Fear of disappointing people. This fear may cause you to re-evaluate and lower your bid before you submit it.
I can totally relate to this because it’s something that I’ve struggled with from day one.
If this is the case for you, you have two options. Sit there in fear and wait and hope for customers to call you, or put some effort into getting more customers!
Good marketing is the key to getting rid of that fear because it allows you to have enough leads to test different prices and book your schedule out a few weeks.
Don’t know much about marketing? Do some research. Take some courses. Marketing isn’t something that just magically happens, it’s a skill you develop through trial and error and learning from others.
Want to learn my best marketing methods broken down step by step? Be sure to check out the Handyman Marketing Machine on the products page.
Tip #7: When In Doubt, Add More To Your Bid
Ok, so you’re sitting there writing up your quote. You’ve estimated how long it’s going to take you. You’ve figured out how much materials are going to cost you. You’ve applied your markup to materials.
Then, you add it all up and when you see the total you think to yourself “that’s too expensive. I can’t charge that much.”
So, you go back to the time you estimated and you think “maybe I can get it done a little faster. I’ve probably overestimated the time for this or that.” And you end up lowering your bid.
Now, what I’m going to say is going to sound counterintuitive, but if you actually do this you’ll find the results are incredible.
Whenever you find yourself second guessing your bid and being tempted to lower it, add more to it instead! Get out of your comfort zone. Tack on an additional $50 or $100 just in case it takes longer than you expected.
Again, the worst thing that will happen is that you won’t get the job. But, at least you’re living with the possibility of charging what you’re worth.
You may think this is bad advice, but how has your current method been working for you so far?
Let’s Sum it Up
As I’ve said before, quoting jobs and pricing your services is one of the most challenging parts of this business. It’s not something that is ever clearly defined because there are so many variables to consider.
There’s a science to it, but it’s also an art. There is no “right price.” What one customer thinks is too expensive, another customer will think is a deal.
If you find yourself constantly underbidding jobs, just remember these 7 tips and hopefully they will empower you to start charging what you’re worth!
Did you find this helpful? If so, you’ll love the handyman pricing guide I put together. Check it out here and gain the confidence you need to stop leaving money on the table.