· gospel according to dan · 3 min read

Surveyors should ignore market rates

It's poor practice to try and mirror the market. There is probably no reason to believe that surveyors in your area are making money.
💡The following is an excerpt from Dan Beardslee’s “The Management Handbook for Land Surveyors”.

Rule 5: If your rates are the same as everyone’s, you’re making a big mistake.

Since rates are based on cost and value, it’s poor practice to try and mirror the market. There is probably no reason to believe that surveyors in your area are making money and you should take a business approach that will make you some money. So completely ignore what other are doing in terms of pricing.

That sounds like a terrible strategy on the surface, because this is a free market with free market forces, but more than likely, as you will find out as you read on, clients perceive surveyors’ pricing structures completely different than we do.

For the last twenty years, I have been told again and again that setting rates at the levels I proposed would ruin my business and I would have no work. Guess what? Those high rates have had nothing but a positive effect on my business and the businesses of those I have advised to do the same.

The simple fact is that surveyors seldom even begin to test the market. There are exceptions, but for the most part, we price our services well below what the market would readily accept.

Test the market - it might surprise you.

Okay, okay, I get it

You know, this is pretty much the same as Beardslee’s Rule 4: If your rates are the same as everyone’s, you’re not charging enough. I think he’s trying to drive home the most important point here, to ignore what everyone else is doing and test the market yourself.

What does it mean to test the market?

The easiest way to think about this is to raise your rates (beyond just keeping up with inflation) and see what happens.

You probably have a good feel for what is ‘normal’ in your company - your work backlog, the sales process, customer interaction, etc. Start with raising your rates 10% and see if you can detect any change at all. If things seem stable, go ahead and raise another 10% until you get a sense for how far you can push things. Nothing is written in stone and you can move things back and forth until you land on a set of rates you are happy with. Unless you try, you’ll never know.

Avoiding hourly rates altogether

There are good reasons to move away from hourly rates, in favor of something like lump-sum or value-based fees:

  1. Hourly rates don’t reflect the value of the service you are providing.
  2. Hourly rates can incentivize employees to be inefficient.
  3. Hourly rates don’t reward exceptional service or the expertise of the surveyor.
  4. Hourly rates make it more difficult to benefit from new equipment and technology - you may actually decrease revenue due to higher productivity.
  5. Hourly rates only allow your business to scale by doing more hourly work.

In fact, lump-sum fees are probably the only way for a surveyor to make a large profit, and you can test the market by raising those fees as well. We’ll cover lump-sum fees in a future post.

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