Editor’s Note: The following remarks were made regarding the “Will You Be Raising Your Prices in 2015?” article, by Herb Woerpel, published March 16 in The NEWS.
Better Economy Means Higher Prices
Yes, we redid our gross-profit-per-man-day calculations and decided our service labor rate was too low based on the average service hours we were billing. With the economy picking up, we have needed more employees, new vehicles, increased training for the new product offerings, and the cost of doing business has gone up.
While we actually just raised our service rate, we plan to do it again in 2016, as the economy keeps growing. We’ve also provided raises to our lead installers, and we’ve had to raise our installation labor rates to account for the higher wages in 2014 and 2015.
When considering price increases, we place a high priority on financing analysis. We take our average employee wage for a task and then add in our burden, which includes benefits and taxes. Then, we find our overhead per man hour and price ourselves accordingly.
In my market it costs me at least $71 per hour for a lead installer and even more for a service tech.
Sky Heating & Air Conditioning
Higher Prices, Higher Wages
In commercial service, we’ve raised our hourly rates so that we improve our compensation to technicians. The demand for techs is high, and the availability is low. This will continue to create higher wages for the techs in the market as the demand for services continues to rise.
We’ve seen a slight increase in commercial construction margins as the volume of work in our market has increased. Hopefully, the commercial construction and remodel markets will stay steady so that bidding confidence will continue to increase. As contractors feel more confident that there are plenty of jobs to bid, they will slowly raise their bid margins.
It’s our aim to grow our contracting margins by 2 percent and our service prices by 5 percent. In commercial service, the main driver for pricing is the cost of labor. We can’t hire enough technicians to meet the customer demand. We’ll continue to raise our price to curb demand and give us the ability to pay higher wages. Hopefully, the higher wages will keep us from losing technicians and give us a stronger tool for attracting new ones.
Publication date: 3/30/2015