Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
7 Aug 2025 · 2 min
0:00
In this episode of Double Your Profit, the host advocates a profit‑first pricing approach. He sets a concrete goal of 25% net profit and breaks down the cost structure needed to achieve it: 20% for materials, 20% for field labor, maintaining a 60% gross margin, and allowing 35% overhead. The rationale is that many costs are immutable, so controlling the selling price is the lever you can manage. He condemns discounting as "lazy selling" and illustrates the downside with an anecdote where a competitor priced 30‑40% higher, sold on premium value, warranties, and a stronger value narrative, and won the job. The host stresses that to hit the 25% net target you must know your margins "freaking cold," which requires timely and accurate financial data. He ends with a call to action for listeners to share their own premium‑value wins, like, subscribe, and share the episode.
Chapters
Welcome back to Double Your Profit. Today we're talking about profit-first pricing. Instead of starting with a cost-first mentality on pricing or budgeting, we're going to start with a profit-first mentality on pricing. So what that means is I want to drive 25% to my bottom line, and in order to do that, I need my materials to be 20%. I need my field labor to be 20%. I need to maintain that 60% gross margin, and my overhead will be 35%, giving me that 25% net. The reason that matters instead of cost-first is because some costs are sort of immutable. So when you have static costs after negotiating, after working hard, we're gonna talk about that in a later video. But if you have static costs that you just can't control much, what you can control is the price that you sell at. There are a few behaviors that we tend to use that sort of take that control away from us. The first and easiest is discounting. Discounting is basically lazy selling. Any asshole in the world can sell something for less than what it costs. That's not complicated. You are giving away for less than it costs to perform that job. There's a company about 15 minutes north of me, and they're funny because they price about 30 to 40% higher than I do. We just interviewed one of their salespeople the other day. He had just the previous day bid against us on a job. We bid $11,000 for that job, and I even think we gave a little bit of a discount, tried to sweeten the deal. This gentleman came in, he charged $3,000 more, and he closed it on the spot. What he did was he sold premium He sold on value, and he sold on the package that he was bringing to the table. And he did not sell on price and discount like my team member was attempting to do. We were the cheap guy, and we got beat by the premium guy. Not every sale is about price. He came in with a better offering. He probably had better warranties. He explained the value of what he was doing better than my team did, and he won. And you can do that every single day. So stop competing on price because that is just a loser's game. But winners are going to drive for premium and explain the value of what it is that they're trying to sell. My final comment here is you need to know your margins freaking cold. If I want that 25% net, I can't know that I'm going to price and get there if I don't know the cost of my materials and if I don't know the cost of my labor. So you do need to know your margins cold, and that takes timely and accurate financials. What I'd love to hear in the comments below is a time that you beat out the low seller by presenting premium and value. Make sure you like and sub. Share with a friend that you know competes on price.
