Rule 4: If your rates are the same as everyone’s, you’re not charging enough.
The ironic thing about adjusting rates to the perceived market (i.e., what everyone else is charging) is that they are probably doing the same thing. In other words, they have probably considered your rates when setting theirs.
Now typically, surveyors don’t publish their rates for everyone else to scrutinize. We do, however, convey our rate structure to our clients, who do compare and eventually pass that information along, in one form or another to other surveyors. Employees gossip, and in one way or another we are able to compare our rates to market rates in the area.
But setting your rates based on what other surveyors charge is not a rational way of pricing. Market rates are logically based on two things – cost and value. You as a surveyor know, or should know what the cost of surveying is, but the value is another matter. You don’t know the value of your service and the only way to determine that is to test the market.
Basing your rates on what your competitors are charging is not addressing either cost or value. It’s simply a reaction to the perceived market force of competition, and a completely illogical means of establishing rates, especially when you consider that they are probably basing their rates on yours.The effect of all this volleying is that rates tend to stagnate. I set my rates somewhere near yours, and you set your rates somewhere near mine, and both of us complain about the competition’s rates being too low.
Don’t set your rates based on what others are doing because they’re probably doing the same thing.
A Race to the Bottom
How did you set your rates and prices? Go on, think about it, I’ll wait.
Most likely you set your rates to be in line with your competition. It’s like this in nearly every profession and across every industry. Despite all the posturing, nobody really knows what they’re doing when it comes to business, especially those of us who started out as technicians. So we end up copying others, except they don’t know what they’re doing either.
When a lot of businesses do this, it sets a low bar that ultimately affects salaries and hurts the whole profession.
Raise the Bar
Everyone is afraid of losing business if they raise their rates, but everyone we’ve talked to that has actually done it has only seen business improve! If you don’t test the market, how will you know?
Even better, figure out why your services are worth more than the competition, and make sure everyone knows it. Maybe your turnaround time is better, maybe your customer service is more friendly and helpful. Think about your ideal client, figure out what’s important to them, and build your premium business around this.
More than just Rates
High rates are important, but that’s only part of the picture when it comes to profitability. Here are a few more things to think about:
- How do you create estimates that you know will make a good profit? Do you have a way to look up similar past jobs in a certain area to help with your estimates?
- Do you know what your most profitable type of clients and jobs are, so you can focus on them?
- Does everyone have access to job information and status so you can easily support your clients when they call?
If you think you could use some help improving your company’s profitability, have a look at Cyanic Job Book: