Adam (00:17):
Welcome to Masters of Home Service, the best podcast for home service pros like us. I’m your host, Adam Sylvester, and I want you to crush it in business. If you’re like a lot of home service business owners, then you’re probably just guessing at your pricing. Maybe you Googled your services to find out what you should charge, or maybe you found out what the competition in your local city charges, and you decide to set your price right below them or right above them. If that’s you, then that’s not a very good strategy. If you don’t actually know how much it costs to go run a job, then you’re just guessing, and you’re not going to be as profitable as you need to be. In fact, pricing is one of the most important things in all the business, and so it’s worth getting it right, and not just guessing. You don’t have to just guess. And so if you feel like that’s you, yeah, I’ve never really thought about pricing. I just kind of price what everybody else is charging. That’s not the best strategy. And my guest today is Wilson Betances, and he is really good at this. He figured out how to make sure that he priced his services the right way because there was one point that he wasn’t doing it right. And so we’re going to talk really specifics on overhead, expenses, profit, margins, all that goes into pricing. Wilson, thanks for being here. I appreciate it.

Wilson (01:30):
It’s good to be back.

Adam (01:30):
Wilson, tell our audience who you are, what you do, that kind of stuff.

Wilson (01:34):
So I’m an electrical contractor based out of Connecticut in the Northeast. We’re serving as an electrical contractor. We have a few contracts nationwide working in the renewable space.

Adam (01:44):
Bingo. Okay, cool. So you have a lot of experience with this. At one point, were you doing it that way? You were Googling and trying to match your competitor’s pricing? Is that what you’re doing at one point and you decide to do it your way one day?

Wilson (01:54):
Exactly. I feel like everybody goes through that. Once again, they’re going on Google or they’re asking their buddy how much they price. Or we look up a competitor. I think that’s the one, two, three of understanding your price.

Adam (02:06):
You get your mom to call the competitor and pretend to be a shopper and just to get their quote. And then you see what they’re charging. We’ve all done the tricks. 

Wilson (02:12):
Exactly. 

Adam (02:12):
But here’s the thing. Their business is different than ours. Shocker, right? Oh my gosh. Their business is not ours. They have different expenses. We have different expenses, and so we just need to look at it in a silo. We need to stop looking at it like what do they charge? What does AI, we need to say, what does it cost me to run this job?

Wilson (02:31):
Exactly. And I feel like that’s where the disconnect comes from because we talked previously about stigmas. There’s stigmas when it comes to pricing jobs now. People will say things like, Don’t lower your price, you’ll go out of business. Or, you have to charge for growth. So we see lows and highs, and then you understand there’s other individuals who are saying things like, Oh, you’re going below market value. Or, I’ve been doing this for 30 years, this is the price. But nobody can actually explain what that means.

Adam (03:02):
Because they just pull it out of thin air. But there’s formulas, there’s principles here we’re going to uncover. And so what is that formula? Let’s talk about it. Let’s flesh out some.

Wilson (03:10):
If you really want to understand these things, you got to go through your numbers. You got to go through your overhead. You got to talk to your CPAs, because then you’re going to actually be able to tweak these percentages that we’re about to give you. But as a foundation, you want to go with a 30-30-30-10 rule.

Adam (03:27):
Okay? What’s that?

Wilson (03:27):
We understand if you give a price in Connecticut, it’s completely different from California. Everybody has different ranges of prices. What can we control? And its costs. The cost that is going to affect us. For the most part, 30, 30, 30, 10. Those ranges apply to us all across the U.S. 30% taxes, 30% overhead, 30% profit margins, 10% contingency. So 30% profit, we all go for the 30%, 20 to 30% profit margins. The next goes down to overhead business expenditures. What is needed to keep that business operational? It’s roughly 15, 20, 30%. We’re going to round up to 30 just so you can get that range.

Adam (04:13):
Okay.

Wilson (04:14):
Next is 30% taxes. Either payroll, either IRS, either state, you’re roughly going to spend around 30%. 10% contingency. If something happens, inflation overnight, just like what we’ve seen this year, tariffs, that’s going to give you that wiggle room.

Adam (04:32):
Some margin, some cushion.

Wilson (04:35):
Exactly. Some cushion. So 30, 30, 30, 10. Here’s the thing though, we’re blue collar. And I guarantee you, if I go to a lawn care company, if I go to a plumbing company, if I go to a HVAC company, if I go to a painting company, everybody’s probably around the 20 to 30, maybe $40 range an hour. Sure enough. 

Adam (04:54):
Wow. 

Wilson (04:55):
Now that’s your base number. That’s our cost when it comes to an employee. 30% profit on top of that, 30% overhead, 30% for taxes, times 10% for contingency. That’s going to give you the price for that one employee when it comes to labor only.

Adam (05:13):
So you’re talking about starting with a base, basically you’re suggesting that you start with however much you want to pay somebody, and then you add in all those percentages.

Wilson (05:22):
Correct.

Adam (05:22):
Is that what you’re saying?

Wilson (05:23):
Or position types. You know, you have your own pay scale, your range. But for position, you have to understand your cost. Your cost is what’s going to determine everything. If that one job you do, are you going to stay in business? So it has to revolve around your burden, your cost.

Adam (05:39):
Yeah. So you’ve got somebody, you’re a plumber, you pay your people, made $30 an hour. And so then what would you do? You add 30% for taxes, so now you’re up to $40 an hour, and then you add another 30%, so then you’re up to 50, $60. It keeps going up. So then, ultimately, you get to the point where you’re like, I need to charge a hundred dollars an hour.

Wilson (05:58):
On that one employee.

Adam (05:59):
On that one person, plus materials. 

Wilson (06:02):
Exactly. When you do materials, now you mark up the material. So this just puts into a perspective of what you’re going to be pricing. And when there’s a lot of individuals online, YouTube, you’ll take courses where everyone calls and groups everything as markup. And that’s true. You have to mark everything up, but you have to break it down into these categories so you understand where your money’s going. When you understand where your money’s going, business becomes fun. What happens if you budgeted a two-day job for 30% profit margins and you bid it, right? You won it, you completed it, but you guys took four days, you just cut,

Adam (06:42):
It’s a nightmare. 

Wilson (06:43):
You just cut 30% into 15. You just doubled the expense. Sure enough.

Adam (06:48):
Right.

Wilson (06:49):
Now, you know you’re at of 15% loss of profit. The cost stayed the same because your overhead, your taxes is still revolving around that employee. You can’t take away from that. That comes at a loss of you as a business owner. The first thing, when I had a financial advisor, she opened up six accounts and I’m like, what are these six accounts for? And she goes, boom, boom, boom, boom, boom, 30, 30, 30, 30, 10. The other two, something else going on. But what I’m trying to say is they broke it down into these scenarios because they said that’s where you have to send the money and forget about it because at least taxes are covered. Your business is going to grow. Your guys are covered and 30, 30, 30, 10, and then payroll, taxes, contingency, it’s all covered for you. You don’t have to worry about anything. Now that leads us to the next stigmas, and that formula directly contradicts all the stigmas that we see.

Adam (07:44):
Yeah. Well, a lot of people are going to say, Oh, but Wilson, I can’t charge that much. My clients won’t pay that much. There’s no way I can charge a hundred dollars an hour or whatever it is. So what do you do then?

Wilson (07:54):
That’s one of the variables. Market dictates your value. If you’re in a low, I’m going to be, I’m sorry, there’s specialty trades. There’s just regular blue collar labor trades. The range is going to vary. So you have to keep that in mind. You have to also understand if you’re in rural Colorado, rural Tennessee, your prices is going to change if you’re downtown Manhattan. So all of these variables come into play. So one, am I in the right market for this business and is it going to suit me? Is this what success looks like? That’s things you have to ask yourself.

Adam (08:34):
Yeah. I also think it matters. I think phase one is how much do I need to pay my people to keep good people? Do I need to pay people 20 bucks an hour, $30 an hour or more? Then you work backwards from there. And so if I want to keep people, I want to pay them proper wage, I want to give them PTO, I want to maybe give them nice uniforms and all these perks so to speak, then I’ve got to charge X, Y, and Z. If I want to have 20% net at the end of the year. Like, I think it really helps the listener to think, Okay, I’m going to start with my employee. Now there’s overhead. We’ll get into all that, but you got to start with your labor first and say, how much do I need to make at the end? How much do I need to charge in order to be able to pay that person what I want to pay them?

Wilson (09:16):
And you hit on head. That’s why that’s the base number, the employee cost. Everything else is added on top of it. And then what’s so beautiful about that formula and understanding where that money’s going and these margins, it’s because one, it tells you when something really bad happens. Like, well, we mentioned if the job is starting to get milked, trust me, that profit margin starts going down real quick. I always imagine it just like when you’re in New York City in a taxi cab, I’m at a red light, but the clicker still keeps going. I’m like, oh, no.

Adam (09:48):
Wait a second.

Wilson (09:49):
Yeah. As a contractor, you have that sixth sense. When your guys are just sitting on site, for some reason, the hair’s in the back of your head starts standing up. It automatically pinpoints where there’s a leak, and that’s why you have to understand this. But at the same time, just like you had said, if you want to incentivize your guys, if you want to focus on retention, that helps identify it too. Let’s say, this was a two-day job, and we finished in one. We just turned 30% profit margins with our same cost already getting covered, profit margins just turned to 60. How do you incentivize your guys revenue share? So the same thing that keeps you accountable is the same thing that’s going to allow you to give blessings to your guys, but we’re so focused on the negative, “if”. So, that’s why I love this structure is because it directly pinpoints where you get to give a blessing or it identifies a problem, something that needs attention on that job site.

Adam (10:41):
Sure, yeah, yeah, yeah. I think that a lot of times people will say, Oh my gosh, my lawyer doesn’t make that much money per hour. That’s too much. But here’s the thing, the lawyer isn’t a good comparison. Comparing a home service business to a doctor at a hospital is a way better comparison. The doctor has support staff, they have rent, they have a building, they have material costs, and they have all these things. A lawyer for the most part just is him. 

Wilson (11:04):
Correct. 

Adam (11:05):
But if we charge $500 an hour, we’re not making $500. So we have CSRs, we have trucks, and we have to have to send guys out and we have to do all these things, and we have a whole infrastructure like a hospital or a doctor’s office does. And so when we look at an hourly rate, for example, like, Oh my gosh, it’s so expensive. Well, yeah, but that’s just what it costs. 

Wilson (11:25):
Exactly. 

Adam (11:25):
You can’t get around it. It just is. And so I think our listeners would be really wise to say, Okay, I need to stop looking at my pricing based off the market or what the guy down the street’s charging or what my client wants to pay and just say, Okay, it’s on me to get my overhead and my fixed costs as low as possible. It’s on me to treat my employees really well and pay them as well as I can, but not too much to run a really tight business, and then I need to charge what I need to charge, and that might be more than what I’m charging now.

Wilson (11:56):
And you just hit it on the head. You broke one of those stigmas. That goes against everything the last 30 years that you’ve been trying to say. They say you don’t go to a steakhouse, but we seen the last 30 years of contractors and a lot of ’em aren’t charging. They’re charging for steak or defending steak, but they’re giving McDonald’s.

Adam (12:13):
Right. Wilson, I want to pause our conversation for a minute to talk about why we love Jobber so much and you’re a Jobber user, so am I. How has Jobber helped you dial in your pricing?

Wilson (12:21):
I love Jobber because it tells me where I have a leak. So whenever I have an employee assigned to tackle a job, I get to click his name, assign it to him. I also can use the cost estimator. I can input my overhead, I can input my costs, and it’ll actually tell me how profitable this one job was, but at the same time, if he starts milking the job, I get to see where the leak really was.

Adam (12:44):
Yeah, yeah, yeah. So it knows how much that person’s getting paid, and so it knows hourly rate and all that and bakes it in. One of my office people, he does a job cost report every week. He puts all the jobs in this Excel spreadsheet. All the data comes from Jobber. And so I’m a big fan of Jobber’s job costing system. If you’re not job costing your jobs, you don’t know how much you’re actually charging, your pricing’s all off, you need Jobber. Go to jobber.com/podcastdeal, get the exclusive discount, and start job costing and get your pricing dialed in with Jobber today.

(13:15)
I think it’s important to remind our listeners too, that homeowners or even commercial clients, they’re not just buying price, and I’ll beat that drum ’til the day I die. They’re buying the experience. They’re buying the fact that you answered the phone the first time they called. I told my technicians this last Monday, I said, Guys, we lost a job to my neighbor down the street because they got a really, an obscure contractor to do their gutters. And I said, I can tell you what, those guys showed up in an old truck, they showed up with, I didn’t see any iPads. I didn’t see any nice uniforms. Their truck definitely wasn’t wrapped. I’m guessing they don’t get PTO, I’m guessing, and I just went down this long. There was nobody to answer the phone. The owner is on the roof, and he answers the phone, I’ll call you back later, I’m busy. But we don’t do that. Our guys are professional. We have people who are literally waiting by the phone to answer it, the first ring to solve their problem. And so when you say, Oh, well, our clients care way more than just the price. They care about the experience, they care about quickness, promptness, professionalism, all those things. And so if our listeners like, I can’t charge that much, Adam. You guys are talking. Oh, you guys, it’s way more than that.

Wilson (14:23):
And we have a script, a sales script for exactly that type. When customers want that experience, there’s times where you can explain everything. There’s times, and then there’s also times they’re just shopping around. So you don’t want to entertain those type of conversations as well because then they’re going to start draining more time. But you hit it on the head.

Adam (14:42):
Yeah. The way I look at how to price it on a broad scale, I love your 30-30-30-10 rule. My rule is more or less, it’s the same thing, only looked at different view. And so I look at it at 50, 30, 20. And so 50% gross profit. So if you make a hundred dollars, let’s say just keep it easy for the year, then $50 of that was materials cost, paying all your people in the field, maybe subcontractors, maybe sales commission, some people argue about that. So that’s 50%, that should be 50%, so that’s $50. And then you have about $30, 30% there of overhead, your rent, fuel, insurance, all that kind of stuff. And then hopefully leftover is about 20% net profit. Now remember, as the owner, you’re baked into that 30% overhead, so your salary’s in there already. So the 20% is just literally everyone’s paid, and 20% is still left over, 20 bucks, because the business needs to make money and be put away for rainy days, maybe 15%, 20% is pretty healthy. If you raise your price 5%. So now instead of making a hundred dollars and making $105, your net profit just went up 25%. ‘Cause it went from $20 to $25.

Wilson (15:55):
Exactly.

Adam (15:56):
That’s massive.

Wilson (15:57):
Oh yeah.

Adam (15:58):
5% is nothing. 5%, no one notices. Your client’s not going to be like, Did you raise your price? They’re not thinking 5% is nothing, but we have this fear that if we raise our price, we’re going to run a business. No one’s going to say yes. Oh, my prices are always already too high. No, they’re not. The vast majority of our listeners, their prices are not too high. They’re too low. 

(16:17):
Let me ask you this, Wilson, what do you think are some indicators that our listeners’ prices are too low?

Wilson (16:22):
You’re getting every job.

Adam (16:23):
Yes. Everybody says yes.

Wilson (16:26):
I was told if you’re getting 10 out 10, eight out of 10 even, you’re too low. You should be in that healthy four to six range.

Adam (16:33):
I agree. Yeah.

Wilson (16:35):
And that’s a good indicator because if you’re just staying busy with low-paying jobs, you can lose half of them and double your rate. So that’s a good indicator, I believe.

Adam (16:43):
Yeah. I also think an indicator is, something I first mentioned earlier, are your people paid well? Do they get bonuses if you do well that week? Do they have PTO? Do they have 401(k) matching so you can invest in their future? I think how new are your vehicles? Do they have an iPad? Do they actually show you what the client, the quote on an iPad instead of paper or a tiny phone screen? These are all things that are indicators. And so if you’re looking at your business thinking, Yeah, my people are always asking me for a raise, and I always say no. And if it rains, they don’t make any money, and the Christmas party is kind of lame. I don’t really give them anything special. Those are indicators that your prices are too low. 

Wilson (17:21):
Exactly. 

Adam (17:21):
Really. You might think your prices are too high or they’re just right, but all the evidence leads me to believe that your prices are too low because your people are underpaid and you don’t have anything new and all that kind of stuff. Do you agree with that?

Wilson (17:32):
A hundred percent. And that’s why I like how you broke it down. You have a system. You have down a formula that works for you, and that’s perfect. What I love about having these formulas is either way, it still brings it back to the principle. It tells you where that leak is. If you’re too low or it tells you if you’re doing just right. And the reason why as a whole, why we need to have a formula. Do you know based off the Department of Labor, what’s the annual profit margins of a blue collar business? Six to 8%.

Adam (18:04):
It’s kind of low.

Wilson (18:05):
Well, what are you bidding for? What am I bidding for? Where’s that leak? Now we have homework to do. 

Adam (18:10):
Yeah. 

Wilson (18:10):
You understand? Just like you said, Hey, if I raise prices 5%, now I have 25%. I’m bidding for 30, but the national average is six to 8% based off the Department of Labor. Do we have fact check here? I’m sorry. 

Adam (18:26):
I believe you. I believe you. We’ll take your word for it. 

Wilson (18:29):
So that directly tells you there’s a problem. And guess what? It’s not an overhead issue. It’s not a tax issue. It’s operation and profit issue. Profits directly lead to operations of the work or just troubles within the company. So that tells us, once again, it’s back to like you said, that profit margin is for the business. We’re already covered in overhead. That’s telling us we have a problem that we need to fix. It’s our responsibility.

Adam (18:55):
Yeah. I think a really good way of going about it, just very simply is to say, look, I’m going to take what I pay myself. Let’s assume someone’s just a solo operator. It’s just them. They’re cutting grass. I’m going to pay myself and then just multiply that by four.

Wilson (19:09):
Awesome.

Adam (19:11):
And that will make you at 25% of the revenue, and that’s a pretty good starting point. You can tweak it as you learn, you’ll dial it in. That’s a general mindset. Okay, so I’m going to pay myself, I’m going to charge about a hundred dollars an hour, so I make 25. Now, as the owner, you might want to charge 50. So it’s 200. It’s hard to make money in home service if your labor is above 30%. It really is. It’s hard. 25 is better, 20 is really fantastic, but if you’re like 35, 40%, you’re not making any money. Trust me, I’ve been there. I know it. I just know. And so I think if our listeners go back and say, if they look at any data, hopefully they’re using Jobber. They could see some of these things in Jobber and they realize, Wow, I pay John every day to go out and cut grass for me or to paint. And he’s like, I pay him half my revenue. That’s too much. Now don’t pay him less. Go charge more.

Wilson (20:04):
I love that. And I do like the Jobber function. There’s actually a cost estimator and it tells you your profitability after that. And at the end of the day, remember the experience we give. We’re communicating that experience in value to the homeowner. So a lot of this stuff you have to put yourself in the homeowner’s position. So I imagine a homeowner, he or she is getting two estimates, one’s from a new guy first year in business, like you mentioned, somebody who’s been established in 20 years, multiple trucks, multiple crews. The one guy, like you said, he’s on the roof, he’s doing the work himself, and they both give me an estimate and they both have the same price. Who are you going to choose?

Adam (20:41):
I’m going to choose a reputable company, but I don’t think it’s wrong if the client chooses. I think some people take their car to a shady mechanic. I think some people take their car to a dealership, so I think we need both.

Wilson (20:52):
Correct. That’s not negating that. I’m just saying. Everyone has freedom of choice, so that’s open. That’s why you have union. That’s why you have non-union. That’s why you have Whole Foods, and that’s why you have.

Adam (21:03):
Exactly right. Some people buy a cheap watch. Some people buy an Apple watch, some people buy a Rolex.

Wilson (21:07):
Exactly.

Adam (21:08):
And all three of those are legitimate buyers. What we have to decide on, who are we going after?

Wilson (21:13):
Exactly, and who’s your target? What’s the intent? What type of contractor do you want to be? What type do you want to present yourself? At the same time the customer, what type of customer do you want?

Adam (21:24):
Totally. That’s a good segue because you have a pretty unique look into this because of the kind of business that you do, and a lot of people will think bigger the job, more profit. Bigger the job, I want bigger jobs. And they don’t realize a lot. I got some bigger jobs, I didn’t make any money. And so that’s a fallacy. It can be true. 

Wilson (21:43):
Correct. 

Adam (21:44):
Talk to us about that mentality of how do you make sure that you price a bigger job, maybe a bigger client, commercial client, maybe even a government contract. How do you make sure that those are priced right?

Wilson (21:54):
I love this conversation because once again, it goes back and breaks every stigma. Everybody wants to swing for the fence, every single job, and to me, that never made sense. For example, I don’t know how much you spend on ads or if you do ads, but the rule of thumb is 5%. People throw money in ads just to keep the wheels going. When it comes to our Google Ads, we do 10%. I pay 10% to look for an ad, to pay for ads, to look for work, for leads coming in. I use that 10%, If I have contract work and they give me a national contract, I use that 10% and I remove it from my price.

Adam (22:36):
Oh, I love this.

Wilson (22:39):
This goes back to what the 30-30-30-10 rule applies to. Once you understand these figures, you understand what cost goes into each bracket. Now you get to play with those numbers either as a profit, as profit sharing, contingency. Let’s say nothing goes wrong. Now that’s extra goes to the price. You can start playing, and everything’s a game now. Now it’s like, I don’t need to now look for ads. You’re going to keep my guys busy for the next year? Sounds good. I’ll remove this. I’ll be competitive. And then my systems, my SOP is kicking into place that 30% profit margin instead of a two-day job. So one day you can move people. This becomes fun. When you understand where every dollar goes and your margins, business is fun. Like, Oh, if I do this, this, this… Hey guys, if we finish this job in three days, guess what I’m going to throw to you guys? You throw 10% at them, but you’re getting another 20 because now they,

Adam (23:35):
Sure, the difference. Yeah.

Wilson (23:36):
So when it comes to government contract work, of course there’s specialty type of work that it’s just higher. For example, if you’re doing special smart home integration, custom homes, that’s always going to be a higher margin than just a residential new construction. There’s just things that are just more expensive and you’re in that ballpark. But when you come down to cost, when you come down to those figures, you get to start moving those numbers. If someone’s going to guarantee me work for the year, I’m taking 10% off. But that goes against with the stigma of don’t lower your prices because you’ll go out of business.

Adam (24:10):
It’s really fun when your team starts to realize this stuff, and they start making sure they charge properly as salespeople because they realize how important it is as well. Wilson, this is a great conversation. Thanks for being here. I think there’s three things that listeners can do right now to go improve their pricing. Number one is increase your price by 5%. Just do it. See what happens. You’re not going to notice a change in approval rates, and you will make more money right away. Number two is if you are winning most of your quotes, most of your quotes getting approved, then your price is too low. You want to be somewhere in the 50 to 60% conversion rate I’d say, maybe 40, maybe 60, 70. But if you’re 80 and above, it’s just too high. Your pricing is too low. You need to raise your price, bring your conversion rate down a little bit, and you’ll do less work and make more money. And number three is decide how much you want to pay your employee doing the work, and multiply it by four, and that’s how much you just charge per hour. That’s a really good baseline. You’ll tweak it. You’ll massage it a little bit, but that’s a really good starting point for right now. Wilson, that was great. How do people find out more about you?

Wilson (25:15):
If you want to know more about what we’re trying to do when it comes to the construction industry and breaking those stigmas, you can follow us on Energize Us EDU.

Adam (25:23):
You’re making a big splash in the marketplace. I want you to keep going.

Wilson (25:25):
Thanks. 

Adam (25:26):
Thanks for all that you do. On the next episode, we’re talking about how one young entrepreneur built a million-dollar junk removal business without fancy equipment or a business degree. You’ll learn why this simple overlooked industry is a gold mine and how consistency, smart pricing and great customer service can turn a side hustle into serious profit. Follow or subscribe today so you don’t miss out. Thank you for listening. I hope that you heard something today that will make your business more profitable by making your pricing right. I’m your host, Adam Sylvester. You can find me at adamsylvester.com and you can interact with me there. I’d really love to hear about suggestions for the next episodes. Your team and your clients, and your family deserve your very best. So go give it to ’em.