As an HVAC contractor, managing your pricing has always been an important part of your business, but this past year had made it more critical than ever. Many contractors we have spoken to recently have described the perfect storm of challenges facing their businesses:
- Strong demand for services, but continued lack of skilled labor
- Equipment shortages creating delays and disruptions
- Inflationary pressures increasing the cost of doing business
If you don’t play close attention to your pricing strategy, these factors can damage your profits and growth prospects.
Dial in Your Pricing Strategy
When your costs increase, whether it’s equipment or labor, it’s critical to have a strategy for how you incorporate those costs into your business. HVAC businesses are not alone in dealing with this problem. We’ve scanned the web for some expert advice, and found a few that are worth your time.
Strategic Pricing Video
This video offers thoughtful advice on increasing your prices:
- Segmenting your pricing (and avoiding “one size fits all”) at timestamp 22:23
- Work with the psychology of your sales team at timestamp 33:09
6 Strategies to Combat Inflation
This brief article from the Harvard Business Review covers useful tips, such as “Differentiate between strategic and nonstrategic spending” and “Unpack the drivers of spending.”
One of our personal favorite tips is to “Automate” where it makes sense. Our partner platform OnCall Air handles pricing automation by pricing jobs with flexible formulas — and automatically applying cost updates to your quotes.
12 Pricing Strategies
When pricing becomes so central to your business, it’s a great time to review and perhaps rethink some of your assumptions about how you set your price. This article from the makers of Quickbooks walks you through 12 different strategies that can you gain a fresh perspective on price.
Stay Nimble with Your Costs
Staying on top of costs for thousands of equipment and accessories is daunting. Especially when your costs are changing more than once a year. Add to that the tracking of your labor costs, your truck rolls, rebates and financing, and the list seems to never end.
Let’s take a look at two ideas to help manage the large batches of equipment costs.
Option 1 – Put Formulas to Work to Manage Bulk Cost Updates in a Spreadsheet
Getting good at Excel (or Google Sheets) can make you much more nimble when dealing with a large batch of pricing updates from your supplier.
Here’s an Excel technique that can help you more easily track changes to your costs:
- Start with a listing of all your current equipment and accessory costs. Hopefully you already have this in a spreadsheet.
- Make sure you also have — in a spreadsheet format — an updated sheet with the new costs from your supplier.*PRO Tip: Login to your online account to download your current pricing from our website as a CSV file to have your pricing in a spreadsheet format.Once you have these two sheets, the goal will be to have Excel help you highlight cost changes.
- Organize the spreadsheets so that you have your model numbers and your costs in two columns (hide any columns that you don’t need).
- At this point, you can then paste in the NEW costs from the second spreadsheet.
- Using Excel’s powerful VLOOKUP formula (tutorial here), you can create a new set of columns next to your current cost. This formula will match the model number from your current list, and look it up in the new cost list.
- Once you have the current and new costs side by side, you can add two columns to show the before and after difference in cost, and the percentage change.
- With this information, you can now review your price books or your proposal formulas, and make the appropriate updates based on your most current costs.
Option 2 – Use OnCall Air to Automate Your Pricing
OnCall Air, a sales platform that integrates to East Coast Metal Distributors, automates this process. It establishes a connection behind the scenes and refreshes the cost of all your products automatically each day.
OnCall Air allows you to specify a profit margin target, so that any new proposals you write will automatically re-price to take into account your profit goal. With OnCall Air’s pricing engine, you can set up a target fixed dollar margin by job type. This means that you don’t absorb the increased cost of equipment and you will remain competitive with your price. On top of that, OnCall Air lets you tweak your margins dynamically, so that you can dial in your pricing with just a couple of settings.
As an admin, you’ll receive a daily update that shows you any changes to your underlying equipment or accessory costs.
Presenting Your Pricing Value
Ultimately, there’s no getting around that you will often need to increase your own prices to maintain your margins, so that you can continue to invest and grow your business. So here are some tips for you and your team on having the pricing conversation with your customers:
Lead with Financing
Many customers are interested in alternatives to paying for the entire job in cash, so why wait for them to ask? Present financing options up front so the customer can see affordable options for the system and any add-ons you are offering.
OnCall Air, for instance, recently added a feature that can automatically show a cash discount when you present financing. This gives you the best of both worlds, and makes your proposal more attractive to more customers.
Emphasize Your Brand and Services
When you present a quote for multiple thousands of dollars, it’s critical that you emphasize all of the service that you offer, and the reputation of the company that stands behind that service.
Many companies will simply present a PDF invoice with model numbers or even just leave a print out heavy on terms and conditions.
Selling platforms like OnCall Air, on the other hand, give you unique ways to position your company brand, unique team advantage, awards, testimonials, or even your virtual business card, right inside the proposal. You can read more specific tips about this in this article.
Now your price increase is secondary to all of the value you are delivering. You’d be surprised how much of your authentic business story matters to your customers!
