How to Double Profits Using Surge Pricing in Your Home Service Business!

Hey everyone, it's Mike Yandes, founder of Augusta Lawn Care and Copilot CRM. Today I'm going to be talking about surge pricing and how you can use it in your home service business to make a lot more profit when you're extremely busy, especially during the spring rush or periods of the year where you might get booked out four, five, six weeks or beyond. And so I actually want to use an example, and that is Uber, which most of us are familiar, is a ride sharing app that you can use to basically get around town and have other people drive you. And I want to go through their, what they consider surge pricing and really just show how this can actually be used in home services very similarly. So let's go through this. What's surge pricing look like? So how search pricing works. Learn how it works. Connect person who needs a ride with a driver to help them get to their destinations. All right, so here's how surge pricing works. Demand where the ride increases. Here, let me zoom in a bit.

All right, how it works. Demand for ride increases. There are times when so many people are requesting rides, there aren't enough cars on the road to help them all. Bad weather, rush hour and special events, for instance, may cause you unusually large numbers of people to want to ride to request a ride with Uber all at the same time. Okay, so let's just look at home services and break this down. They there are times when our demand also is going to spike and there's going to be times when it is goes from the slow season where you might have no work on the schedule to all of a sudden being booked out months, weeks, if not months into the future. Demand is very high. Lots of leads are pouring in. So the same way that Uber has demand times where demand goes way higher and there's way more people that need rides than there are people, people to be able to provide the rides. In other words, the demand outstrips the supply. When that happens, you should raise prices. It's natural demand. Supply curves. When demand is higher than the supply, then you should raise prices. Okay? That's what happens in a natural open market. And so when it comes to your, your home service business, it's a matter of when there's so much work on the schedule and leads are pouring in. Don't turn off your estimates. Don't say, hey, we're not going to not, we're not going to get take any more customers. And I see people do this all the time. They get really far booked out. Is they, they just like stop taking New customers, why not have surge pricing? And that is when you're so busy and so many leads are coming in. When you booked out your schedule so far, start raising your prices. For example, I'm just going to give this an example. You could have it where after three weeks, your hourly rate goes up 5 or $10 per hour, or your material markup goes up, or your estimate fees go up, somehow you raise your prices. And then at four weeks, five weeks, six weeks, you start to raise the prices. That as you get expand and you're trying to take all these new jobs coming in, you're actually making more profit because there's a demand surge, all right? And everyone you know would say, oh, that's not fair. For example, Wendy's recently tried to do a version of this and they did. We're going to say, hey, we're going to have these digital menu boards and we're going to increase prices when it gets really busy throughout the day. And someone will point at that and all the outrage they got for that, like, that's so bad. Well, this is the difference. You might wait in the drive through an extra couple minutes during surge peak time of the day. The difference between getting served today and six weeks for your home service is a big deal. And you can absolutely charge a premium price for customers to be able to do that service during the peak time of the season, during spring rush, for example, if they want it to. If they're like, hey, price is really important to me, great, I will book your job six months from now when we're really slow, and I'm willing to give you a cheaper price. So if someone's really, really price sensitive, I can accommodate them. They're just going to be booked out way off into the future. Now, if someone wants to get on the schedule more now, and it's the busy season, charge a premium price. There's nothing wrong with changing your pricing based upon the time of the year. All right, let's look a little bit deeper into this and look at what Uber does. So prices go up. In these cases of very high demand, prices may increase to help ensure that those who need a ride can get one. This system is called surge pricing, and it lets the Uber app continue to be a reliable choice. So again, you're like, well, it's not fair to charge people more when it's the, when in the middle of spring rush. Well, the person who wants it the most, needs that service the most, is willing to pay a premium price to be able to be put at the Front of the line. And so why not when it gets. Starts to get really, really busy, have a tiered system. And that is when it gets really busy and it's, we're backlogged a certain amount, we're way behind. We're going to increase prices so that when we actually get to be doing that work, we're making a higher profit margin. And as you begin to know what your demand curve looks like over the course of several years in business, you'll actually be able to do your estimating prior to actually being booked out that far, because you'll know exactly what that demand curve looks like. You'll know how busy you get. Like, oh man, I know next month we're going to be so busy, we'll start raising your prices now. So that way, when you're in the middle of it, in the middle of the rush, and then it's crazy, you're actually performing the work that you put on the schedule four weeks ago at, at a higher price. Okay, So I just. The reason I'm making this video is like, open up the thought process of potentially raising prices during the busy season to be able to capitalize on extremely high demand as well as it ultimately is going to pare down the people who actually need the service the most and they're going to get served. Riders pay more or wait. Whenever rates are raised due to surge pricing, the Uber app lets note riders know some riders will choose to pay, while others will choose to wait a few minutes to see if the rates will go back down. So again, if customer, if a customer is price sensitive and they really want a discount, they don't want to pay premium prices. I can schedule your job during the winter months, I can schedule your job during the slow season. But if you want to be served during peak season during the surge of demand, I'm going to have a different price and I'm going to make sure that I capitalize and get as much profit from that time as possible. Because if I don't, this is what happened. Everyone's like, that's not fair. You're being a capitalist and you're overcharging people. If I don't do that, I will book out myself. So far, I can't serve the people that need the service done. And so determine for yourself how far out you want to be booked until you do raise prices. And what will happen if you don't have this. You're going to start losing customers simply because you can't get them on schedule. If you're booked out eight, 10 weeks. They're like, look, I need this job done this month at least. I can't wait three months. And so now you're actually going to lose customers that are willing to pay more, but you can't even serve them because you put work on the schedule for people that are paying a lower price, and you can't even fit them in on the schedule. And so instead of saying no to work, instead of losing customers because you're booked out so far, just have surge pricing that is going to increase the prices during the time of the year when demand is extremely high. I recommend knowing what your demand curve looks like so that you can actually anticipate when that's going to be right. Raise prices accordingly. For example, let's say you're at $70 per hour the majority of the year, the slow season. But during, let's just call it April, May and June, if you know it gets super busy, April, you might go up to $80 an hour. May make up to $90 an hour. June, you might go up to $100 an hour. And then, hey, after that, we know it's going to be slower. I'm not going to have two months backlog. And all the work that I actually complete during those three months now I'm able to make an extra premium, and I could even pay my employees more during that time to ensure a more consistent workforce and make sure they get a piece of all the money. All the money. If you're paying on performance and you increase your hourly rate to the customer, they're already getting a piece of that pie. But even if you wanted to, you could, you could give them more money. Because when you surge pricing the same way that Uber, they give a cut of the money to the driver. And the driver, like, it's busier, the traffic's heavier, it's harder to find. Like, if you're at an event and it's a big stadium and all these people, it's not fun to be a driver. But hey, if I can get twice as much profit, I get twice as much to do the drive and make this ride complete. Fantastic. Same things with employees. If it's the middle of spring rush, it's wet and cold, and no one's going to be working and the grass is growing really fast. If you're in the lawn care industry or whatever industry, and it might be, like, super crazy busy during that time, they don't really want to work, but they will if they're able to get a bigger piece of the pie, they're able to make more money. And so if you have surge pricing, you can actually incentivize your team to also make more money during the busy season, to ensure they show up on time, they're not calling out, they're they're not late. These are the type of things you need during the spring rush, during the time when you need to have surge pricing. So this is not necessarily a directive, but something to think about. And that is, can you change your prices to ensure that you maximize profit? Are able to incentivize your team more during the spring rush, when demand is surging, as well as be able to ensure that you don't have to turn off your leads, but rather maximize your profit. Keep the backlog contained so you're able to keep putting jobs on the schedule, regardless of what time of the year it is, and regardless how busy it gets during the spring rush.