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Tired of paperwork?
If you’re working in the field service industry, then you probably have been asked for a price breakdown (or will be asked in the future). While this can be a little alarming at first, it’s important to understand that it is the customer’s right to ask for it. It doesn’t always mean that you have to break down the price for them, of course - but they can ask if they want to.
So what do you do in this case? You don’t want to risk losing a potential customer because they think that the price is too high or that you’re profiting off of them. But you also don’t want to give away all of your information because the customer might be fishing for all of your details so they can DIY it themselves.
It is a legitimate concern that those who work in field service face. And there really is no right or wrong answer. It all boils down to what you want to do and what you feel is right for your business. You may want to break down every single cost for your customers in an attempt to build trust, or you can be content with the possibility of losing them because they don’t trust you enough.
Either way, to help with your decision we’ve compiled a few pros and cons to breaking down prices, as well as some insight into what to say to customers before you make a decision.
Pros and cons of breaking down your prices
There are always two sides to a coin. And in life and business decisions, there is always a list of advantages and disadvantages. There may be a positive and a negative outcome. Let’s explore, shall we?
1. The customer trusts you more: if you are prepared to expand on everything you take into account when you offer your clients a price, there is a chance that they will trust you more. The catch here is that you need to be honest. If you’ve increased your price of materials to make up for a low hourly wage, then the customer could be able to tell. So if you’re transparent with your calculations, it proves that you’re there to do business, a great job, and not to profit off of anyone unfairly.
2. More options for your customers: if you’re a contractor and a client asks you to build something for them, they most likely have made some calculations about the cost themselves. If you’re willing to break down your costs, you give your clients the options to choose if they want to take out a few things or increase their budget.
3. Smaller projects but loyal customers: sometimes the cost of material and tools may be completely removed from the equation if the customer wants to cover it themselves. You might have smaller projects on your hands where you will be paid only for your labor, but that doesn’t mean that it’s a one-time thing. You might end up having loyal customers who trust your work and call you back for more jobs. They most probably will recommend you to their friends and colleagues, so the small projects could lead to more clients.
1. The customer is only fishing for information: in many cases, potential customers aren’t really interested in hiring you, but in learning secrets of the trade. If they know how much you pay for your material, then they will most likely attempt to purchase them and do the job themselves. While this doesn’t necessarily have to hurt your business, the dishonesty of these “customers” isn’t a great feeling.
2. They want to get it done for cheap: cheap doesn’t always mean that it’s bad, but you set your prices for a reason. It is normal for consumers to want to pay less for a product or service, but if you fully break down your prices you risk running into more problems with your customer during the job. They might think that a specific part of the package is not useful and that they want to remove it from the project - even if you think it should be included. In this case, if the project falls apart your business will still suffer the bad experience and bad reviews, because no matter what the customer said you will still be blamed.
3.You gain a problematic customer: not all customers who ask for a price breakdown are problematic, but if you do risk running into more problems with them when working on their project or job. They can try to micromanage the project’s funding or they can create more demands because a particular service or product is “cheap”- even if it isn’t available or doable. In these cases, you would rather think if losing a potential customer is better for the business because you would much rather spare yourself and your team the stress of dealing with them.
What to say when customers ask for a price break-down
Now that we’ve mapped out a few possible pros and cons to breaking down prices for your customers, what do you actually tell your customers when they ask for it?
In many cases, potential clients have very different assumptions than you do when it comes to the project details, labor costs, and material costs. So even if you don’t assume anything initially and just focus on building trust, then these clients most likely won’t ask for a breakdown. The slower you take your explaining and negotiations, the more time you have to focus on your client’s emotions, questions, and irrational fears. If you can identify what the client is afraid, embarrassed, or flustered with, then you can work on alleviating these feelings and work on building trust. They might just forget about the price breakdown altogether.
Ask What They Want To See
Sometimes the client has no idea what they’re expecting. They just want to see a full breakdown of prices. But before you prepare a proposal, ask your potential clients what exactly it is they want to see. What information do they need to make a decision?
Think about why they need to see this breakdown of costs. If they’re interested in labor costs more than material costs, then all you would have to do is provide some insight on what you charge for labor. This can also be extremely easy if you have time-tracking software integrated into your business’s day-to-day. You can just pull out your device and generate some information based on your historic data of labor activity. It would be extremely easy to prepare information on how much you charge hourly and how long it takes to complete a particular project. If you know exactly what your potential clients need to see in order to make a decision, work on that. Don’t risk overwhelming them with too many costs.
Make Your Expectations Clear
No matter which sector you work in within the field service industry, you probably have a few pricing plans that are what you expect customers to pay. Each service has a specific cost that is connected to it. As part of your potential client’s decision-making process, you have to set clear expectations on what you expect to do with their project. They would have to know why you charge the price that you do and make them feel that working with you is the best decision they ever made.
Whether you decide to show your clients a complete breakdown of prices or not, don’t forget that you set your prices based on your experience, workforce, materials, and market. There is a reason why the price is the way it is. If your clients understand that, then you are able to negotiate a deal with them and potentially make them long-term customers. When your clients ask for a cost breakdown, ask why they need one. You will find out exactly what you need to do.