How Cheap Pricing Is Ruining the Gas Industry w/ Dean Jones

The whole industry needs to change, to be fair. I think any industry where people are trying to outdo each other on price, it just lowers the whole standards and the whole industry. If you're on that race to the bottom, as they call it, where you're doing things for this price, this price, someone will undercut you and you'll attract a certain type of customer. Don't lower your prices. And if you can lower your prices and you see people doing special offers and things like that, it's not something we've ever done. If you can all of a sudden just reduce your prices, it means that you're overcharging, in my opinion.

This is the Gas Engineer Podcast. I'm your host, Tulloch Priest, and today I'm joined once more by Dean James. Welcome to the show, Dean.

Hello.

Thanks for having me.

You're very welcome. One of the biggest challenges every sole trader faces is pricing. As an engineer, no doubt you would've felt the rising costs of everything from materials to fuel, but tradespeople still haven't adjusted their pricing. Today we're diving into that topic with Dean, who's been through the process of figuring out what to charge and learning how to quote with confidence. As always, if you enjoy these conversations, then please subscribe and follow us on whatever podcast platform you're tuned into to support the podcast. And a sentence or two, why should people care about this conversation?

I think pricing is a massive part of any business. You know, you've got to get the pricing absolutely spot on to attract and get the work to start with, but also to make your business profitable.

Would you say that pricing is kind of I don't know, in my view, I kind of view pricing as like about how you're choosing which customers to serve, what level of service that you're doing, and also about the confidence that you're kind of projecting about your service. Would you kind of, would you agree with that?

Yeah, definitely. So we price to do the best job possible. So we want to be doing things to the highest possible standards and everything's fitted correctly and to the manufacturer's instructions. So we're not interested in doing the cheapest jobs. We want to do the best. We want to try and raise the industry standards and just massively help out doing things like that. So your pricing has got to be pretty good. And if you price for the cheapest jobs, there's always someone out there who'll do it cheaper every time. So if you're on that race to the bottom, as they call it, where you're doing things for this price, this price, someone will undercut you and you'll attract a certain type of customer. That wants the cheapest, not the best. So we like customers who just want a good job doing, not the cheapest. They can see the value in perhaps paying a little bit extra to have things done right and have the peace of mind that they've got somebody to ring up who will come back, sort out any issues that the manufacturers aren't picking faults with, and just doing the right thing.

How would you say your pricing compares to your local competitors? Would you say it's sort of like 1.5 times when I quote her, how close roughly?

To be honest, in some of the quotes I've seen previously, we're not that far off the mark, actually. We've had a few where customers have said, oh, you weren't the most expensive or the cheapest. And then we've had others where they've said, well, you've quoted more than a big national company would. And I'm saying, yeah, but we're going to do a better job. I can almost guarantee you that it'll be to a much higher standard and done right. We're flushing systems out. Putting the inhibitors in, lagging the condensates, making sure everything's right, and I'm just trying to make sure it's brilliant. But pricing is always a tricky one. You know, even I see some prices and think, oh crikey, someone either didn't want the job or they're trying their luck here. And you know, some customers will get back to you, and we've had some wild conversations in the past where we had a huge full system that we quoted for, and they said that somebody could do it £4,500 cheaper. And I'm like, they can't. You know, the materials would cost me more than that to do the job right. So yeah, it's very hard. I try not to focus too much on what other people are charging, to be fair, because they could have different costs and overheads. Obviously, as my business has grown, things have got more expensive. I've got staff to pay, our business and running costs have gone up higher. So you could have somebody who's not VAT registered, only works a couple of days a week, and they can do things much cheaper than you can. Doesn't mean they're going to do a bad job. It just means their overheads aren't as much as yours. But you've got to factor all that in for the complete package.

How would you kind of think about, like, if you're just starting out or you don't have enough work, you know, there's a huge temptation to lower your prices.

Yeah, I'd always recommend people don't keep price for the standard of work that you're going to do. Don't lower your prices. And if you can lower your prices and you see people doing special offers and things like that, it's not something we've ever done because we're already priced as competitively as we can get away with. Going. So if you can all of a sudden just reduce your prices, it means that you're overcharging, in my opinion. So I think you've got to know your worth. You know, if you're doing a good job and you're doing all these extra things and you've got happy customers, people will pay for that. They want peace of mind and they want it doing right. If you're known as being the cheapest, you'll always be known for being the cheapest. You'll sort of get jobs from within them circles and from them recommendations when, oh, don't do him, he's well cheaper. 'You know, you can get this done cheap there.' Oh, he fitted me a new radiator for £50, and before you know it, like they say, you're a busy fool. You're running around doing loads of work, but you're not making any money. You know, you might look popular and you're doing this, that, and the other. And to be honest, when I first started, I set my prices too cheap. Then when I became VAT registered, the VAT was coming off them prices as well, which then made me even less money. So then I had to make quite a significant jump. And then you've got to keep an eye on these things and business costs because they rise all the time. You know, if you've added the price of fuel from a few years ago and you haven't done some calculations to see what it's costing your business, you know, you could be losing out hundreds of thousands of pounds a year, you know, on fuel costs and stuff like that. So yeah, it's important that you keep in touch with all your outgoings and stuff like that. There's a lot more involved in just pricing for a job, and that's— we don't price day rate or hourly or anything like that. We always quote for a job. So, you know, if we're doing that, and some people might say, oh, you're, you know, you're getting £750 for that, and it's like, I'm not getting £750 for that. Once you've took the tax and the VAT and the wages and all all the other running costs off, you know, you're left with very little. It's a real tricky thing to do, but unless you know your business's costs and your outgoings, there's no way you can work out your pricing. So you need to add all that together and add your profit on and stuff like that. Um, so to do proper pricing, you know, you can't just go, you know, I'm gonna charge £50 less than him because his costs are going to be completely different.

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So when you're pricing a job, how do you actually, um, Price a job.

So I regularly work out all the costs the business incurs over a year. So I'll add all them up, and there's loads of them. It's not something— it could take you hours to do this, by the way. So you need to— insurances, fuel, vans, tools, wages, training, pensions, everything you can think of, that every outgoing that comes out, you got to add that up, then divide that by the number of days you work a year, and then add your business profit on.. And then you know how much you've got to make a day then to earn some money. So then for instance, if you're servicing, you've got to work. We don't generally do more than 5 or 6 services a day because of the standards that we do it to. So most services take us about an hour and then we're travelling in between lunch and what have you. So you need to have, you need to then divide that cost and think, right, how much does each service need to be? And then you know that you're making money at that. And then same with the, so the bigger jobs, you've got to add all, you've got, you've got them daily running costs already there. Then you add the materials on. So all the materials that you're, you're supplying and sourcing. Markup on materials is something that every business should be charging because you're going to pick them up, you're sourcing them, they might be discounted already because of your trade discount, and when they go wrong, you're the one who's going back and picking it up and getting a new one and sorting it out. So it's not a fact that you're making a markup just to make money, it's to cover all them sort of costs—returning, coming back with new products, setting things back up—and then you just sort of add how much labor and stuff you can profit you want on the day and just build it all into the quote.

So you have quite a social media presence and your reviews are, you know, outstanding on Trustpilot, Facebook, and Google. How much impact does that have on your pricing? Like when you have like a discussion from a customer about you are more expensive than somebody else, the reviews help back that up massively.

So you can literally say, you know, don't take my word for it, have a look at what our customers say. I think if you're too expensive, that'll come through on reviews. People will say they did a good job, but you were too expensive. If you're priced about right, people are happy, aren't they? They feel like they've had value from what you've done. They can see the value in what you've done. So, you know, you can say, you know, there's hundreds of reviews there that people can look at and see happy customers. You know, it really backs up what you're trying to say to a customer and gives them a bit of trust.

Well, I hope it does. It's quite a tricky balance though, isn't it? You need to charge enough to do, as you say, the best service. Yeah, you know, without sort of going overboard. And then also, you know, all the things that you do when you're there, communicate, protect the property, etc. Did you kind of find this balance out by trial and error, or how did you, or is it just exactly the way that you did it? These are the costs, this is the profit, and this is what we need to charge.

Well, to be honest, like most things, I learned the hard way, so I learned by doing it wrong. So when I first started out, my prices weren't high enough, and I was rushing around doing all sorts of stuff, working long hours, and I just wasn't making the money. And then when I started to— because the problem is when you first start, you don't know what your business costs are going to be for the first year because you've not been in business. But you soon learn when you're not making any money that you need to put the prices up and get things right. So we can always justify our pricing. And the other thing is some customers might not want that. They might want the cheapest job. They might not be bothered about the quality and stuff like that. They might just want— you know, they might be renting a property and they're looking at it purely as a business. And they go, you know what, I don't want to pay for that. I'm just going to get someone to just go and do it cheaply. And, but that's fine. You know, they're not the sort of customers we want. And that's the beauty of a quote or a price. You give it to a customer, you can only give them as much information as you can. They can source all that information from the reviews and looking at your socials and seeing the standards of your work. And then it's up to them whether they want to use you or not. You don't have to beg or convince anyone. They either think, you know what, I can see the value in that. And I want the job doing correct. Or they go, you know what, I just want it doing cheap. I'm going to get someone else to do it.

So this is the service you're offering. I'm offering quality and you either you like it or get it if that's what you want. It's available. If not, another provider.

Yeah, it's a whole picture as well. It's not just the quality, it's the we answer the phone, we turn up when we say we're going to, we back up all our work and We've got manufacturers backing up the warranties. We always say to customers, even though you've got a 10-year manufacturer's warranty with this, if anything goes wrong, ring us up first because I'd rather go and have a look, make sure everything's all right myself, and then I'll contact the manufacturer and get it booked in. Because we find that us dealing with the manufacturer directly saves any issues the customer might have with poor customer service and stuff like that. They're just dealing with us, and it's a whole package. You know, when we protect their house, we remove all the rubbish, we clean up afterwards, you know, we hoover and wipe everything down. You know, it's a whole thing. It's not just, you know, real nice pipework or we've done this right. They're paying for the whole thing, the experience, the training, and just the backup and support.

How did you kind of like, in the beginning you were saying that you were charging, you weren't charging enough. At which point did you kind of work out you were charging enough and how? Because it must have been a point where you raised the prices, like for example when you got VAT registered. Like how did you handle that with the customers?

Basically, what I try and do is you don't want to be upping your prices all the time. You know, I think an annual price increase is acceptable. If you start doing it all the time, it's hard to keep on track of. And you don't want to be doing a service for someone one week for a certain amount and then going back to one of the neighbours and charging them more the next week. So at the minute, our prices have been the same for quite a while now, but we had to put them up quite a bit the last time just to cover the, the props it rising in the future a little bit more, because you don't want to be going up and down with your pricing all the time. You can always add a few extras in here and there, you know, if you put a bit of wriggle room in. But yeah, it's just trying to— you've just got to have some belief in yourself and what you're doing and not be worried. Every time we've had a price increase, customers have never batted an eyelid. You know, you always worry that they'll get someone else or this, that, but if you've got existing customers, they're generally happy with your service because you've been there before, they know what you're about, they can see you might do things differently and they're happy to pay for that. And if they're not, unfortunately they're not. You can't sustain doing cheap work and I'm not prepared to do less or lower the standards. The work's got to stay at a high standard. So if you've got to have more money to support doing that, in my opinion, it's the only way to move forward.

I think also that you mentioned earlier about working out all of your costs takes a large amount of time. And I think if you know your costs and you've sat down and you've done all the maths, when you actually speak for the quotes and stuff, that certainty will come across.

Yeah. And luckily, fortunately, I've never had to be in a position where I've had to defend anything like that and justify it. And to be honest, I don't know whether I would, because you could just say, listen, that's pretty much all the work we do. The customer knows the price before we've started the job. So it's not like, you know, we're going there and get and then the customer's like, oh, that's too much because I wasn't expecting it to be that. They know the price beforehand. So yeah, you know, it's— I wouldn't feel good, you know, somebody says, you get it now and again, that's more expensive than what I was expecting. And you'll say, well, what were you expecting? And more often than not they'll say, well, I don't know, I've not had a new boiler for 20 years, I don't know what I was expecting. And I was like, well, I can, you know, we've priced this as well as we can to do it to the standard that we do it. And that's all you can do really. You've just got to have some pride and stick to your guns. And you know in the back back of your mind you've worked it out correctly. As I said, if you can just drop hundreds of thousands off a quote, I wouldn't think people are going to question your integrity then.

What would you say to somebody like, or possibly your earlier self, when you're working night and day and the prices were too low, what would you kind of, what things or advice would you kind of give to somebody in that situation to just kind of, if they wanted just to provide a much higher level of service? Because you've mentioned previously that your gas Servicing takes an hour, an hour and a half by the time you do everything.

Yeah.

How do you kind of transition from one to the other?

I think I should have just had a bit more confidence in the beginning. If you're going to start your business up, you're worried about getting income, paying the bills. It's usually to set a business up costs a lot of money. So you've got that on your shoulders. But by having your prices too cheap, it doesn't do you any favors that I found. Because as I said, if they're too cheap, you attract the wrong sort of customer and you end up a busy fool. Is if you know your worth and you know that you're, you know, you're good at what you do, you've got to charge for it. You know, if you've had— some people have had years of experience, you know, that makes them do things quickly or quicker. You know, you shouldn't be penalized for that. It's because they know how to do it correctly. So yeah, don't be trying to be the cheapest, or it doesn't work. I think if, uh, I think if you open— because being a gas engineer, you know, it's quite a serious thing to do. You're looking after people's gas appliances. You've got a lot of training, a lot of insurance, you've got to do it right. You don't want to be offering like discount bargain basement services and things like that. You want to take some pride and raise the standards, do things right. You know, if you service a boiler, you're taking the condensate trap out, you're pumping up the expansion vessel, you're testing the water pH, you're testing the flow rates, you're doing the minimum maximum, you might be gas rating it. Some people do tightness testing on the service. You know, it all adds value if you're doing things right and checking things out. Then you know you've got to charge for it. Do things correct.

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Yeah, so sometimes people will ring or email you and ask you for discount, and it's not something we do because we've already quoted for the best price possible. And I've often found that— imagine you have a— it's classic double glazing salesman tactics, isn't it? You know, someone— you get a price for these windows, they're £10,000. If you sign today, it's £5,000. Well, to me, if you phone up a tradesman and they can massively discount a job, they were going to rip you off. You can't be offering discounts. You've just got to price things the best you can and stick to it. So I've had an instance this week where somebody asked if we can offer a discount for pensioners, which I'd love to be able to do, but I've already put the best price in I can. But there's some parts of this particular job where the gas pipe might be undersized, and we won't know until we're in there taking the floors up. And I've sort of said, well, this is the worst case scenario. So if we lift them boards up and there's a, there's a correct size gas pipe in, we won't need to upgrade it. Then there will be a discount because we can knock that off. And I find when people are open and honest with you and you're open and honest with them and say, no, listen, I've already given you my best price, which I have, I can't offer a discount, they quite often ring in and book the job. You know, they can see that you're being honest, and I think that really helps.

Pricing is a funny, funny thing. It covers like your personal view of your own self-worth. There's this— it's just, it's a challenging thing.

Yeah, really tricky. You know, we sort of see, well, I can get it done for this price. And like I said previously, you're not getting the same job done. We'll see these jobs that have been done by people who've done it cheaper than us. It's very rare that you see condensates fitted correctly. You know, there'll just be 32 or 40mm plastic running down the side of the house. It's not insulated, not insulated through the wall. You know, there might not be inhibitors added. There's just corners cut everywhere. We find that especially on some of the combi swaps that we do, you know, there's people doing combi swaps in a day, which is like quite an industry standard. But we find that a lot of combi swaps take a day and a half, 2 days, because it can take a whole day to flush a heating system out properly. You know, you can't just swill it around. And but it's extremely difficult to put that over to a customer. You know, you're saying our price might be £1,000 more expensive than theirs. You're going to be left with a system that's going to work a lot better, last a lot longer. And one of the most important things to us is because of the long warranties, we want manufacturers to turn up to our jobs and go, you know what, there's no warranty issues here with the install because I keep hearing and finding things out where manufacturers are going in testing water and it's failing a water test and they're not covering PCBs or stuff like that. And then, you know, imagine the sort of feeling the customer would have about you if they trusted you to fit a heating system and then the manufacturer's come out and gone, warranty's void because it's been fitted wrong. You know, you just— I don't know how people can get away with doing it, to be honest.

It's just kind of tricky though because like, as an industry as a whole, you know, the average prices is not increasing, you know, like with inflation or anything like that. Um, it's, it's just, I don't know, there's, there's something in there that's, you know, there's, it's hard to find gas engineers at times. Yeah. From like a, from a, uh, I'm shooting from a customer's point of view, and yet the pricing is still really cheap and it just doesn't quite make sense. You would expect if it's hard to find gas engineers, you would, you would expect the prices to be rising. I have a theory that quite a few engineers may be looking at how much the company is charging their time out for, possibly thinking that I could do it cheaper, then going out working for a year or two, and then working out that, you know, it's expensive to run a business. Tax, running a van, tools, all of these things that they didn't quite think about. And, um, this continuous kind of cycle may be lowering the prices overall. So this is where this competitive competition on price comes from.

Yeah, the industry is in a bit of a bad way, to be honest, and a lot of it is down to people pricing too cheaply. So if everyone stuck to their guns and charged their worth, the industry prices would come up. So if you use a solicitor and they charge you £150 for sending a letter, people just pay it. They don't even question it. They say, oh, solicitors are expensive. You go to the dentist and have a filling, it's £180. People just pay it, you know. It's— but it's because solicitors and dentists all stick together. They're not trying to undercut each other and make the market, you know, a cheaper place. Their services are sought after. There's no one else can do it, and they charge for that, which is exactly the same as being a gas engineer. But unfortunately, the gas industry on a whole and the boiler industry has been in quite a big decline over the last few years. I think it's because of certain broader changes that governments have brought in. The industries have struggled And I know at the moment, like, we've had our election and we're waiting for the results to be counted, and the certain parties that might get in power are on about removing the boiler ban in 2035, reducing gas prices, stuff like that. So the industry could grow again and it could be in a better place, but it won't do if everyone's racing to the bottom by charging the cheapest prices. I just don't know where it comes from. It's same if, you know, there's a lot of industries out there where, you know, you want a good garage, you pay for it. You want a good dentist, you pay for it. You want a good lawyer, people are happy to pay for it. Estate agents, stuff like that, them prices are all set there, aren't they? I think any industry where people are trying to outdo each other on price, it just lowers the whole standards and the whole industry. Whereas, you know, if we all stuck together and sung from the same hymnsheets, which is difficult to do because we've all got different running costs, but just have a bit of pride and self-worth and, you know, go, you know what, I'm not going to rush around. People might think that they've not got enough experience or stuff like that, so they should be cheaper. They shouldn't be. If they're doing a good job, they should charge for what they do. You know, you're only going to get better. People are only going to learn. Yeah, I think it's just the whole industry needs to change, to be fair.

You're quite right. There's some external factors, governments, whatever. But there's also, you know, self-inflicted as well. Yeah. But yeah, even that point about being less experienced, it might take you slightly longer. If you're pricing per job, you know, that will even out as you get more expensive, more experienced., you know, you can go faster.

Yeah.

So yeah, it's just, uh, I don't know a way that, you know, everyone could come together and just agree. I wouldn't say like a set price or anything like that, but at least lift it up a little bit more because it's just, I don't think it's that sustainable over the long term, you know, not the route that it's going at the moment.

No, you know, you hear of people, um, I was on Facebook the other week and there was somebody on there on about a company that they do contract servicing for. They were paying them £27 a service. Now, if I was going to send one of my engineers out to do a service for £27, by the time I've paid their fuel and wages, it's going to cost me probably £15, you know, to do a service.

Was that including their own tools? Yeah, so that's their own tools.

The only way they're ever going to make any money is by not doing it correctly and doing 10 jobs a day, in my opinion. But yeah, it's stuff like that that I believe is just absolutely ruining the industry. You know, instead of— people get worried, there's a lot of people I speak to who haven't got the work that they used to have. It's definitely this time of year, particularly sort of Easter onwards, I find that it quietens off a bit. Customers are deciding whether they're going on holiday or having a new boiler, and it could be hard. And then people, people get desperate and do what they need to do to survive. But the problem with that is it just ruins the industry, you know. I'd like to think if they held on a bit, perhaps, perhaps did a bit of social media marketing, took some pictures of their work, put it out there, got the reviews coming in, they wouldn't be in that position. I get a lot of A lot of people, oh, I don't know how you have all the time to do this social media. Well, if I didn't, my business wouldn't be where it is today because it's because of that marketing that it's got to where it is. And I don't make a massive amount of money. I'll be perfectly honest with you. My employees make more money than I do at the moment because I plough every single penny back into my business. You know, vans, training tools, it's all expensive. Hopefully one day that'll pay off. But yeah, it's a tricky balance. Just kind of in summary, What's kind of like the simplest way to work out if you're charging enough? I suppose the simplest way is if you've got any money left in the bank at the end of the month after you've paid all your bills.

I would suggest that, but also keep in mind tax. You might have some money in the bank, but it might not be yours.

Yeah, that's it. So that's another mistake I made early on as well. You've got to think about the tax on VAT that you might be paying and put that to one side, because if you don't, when you get them bills, it is a it's hard. The other thing I really like on the Gas Engineer software, on the home page, it shows you your income every month and last year's. So it's, it's really nice to see, and you can change the dates as well, so you can see how you're doing this year compared to last year and what changes. And the other good thing about that is it's a great way to see your income for certain months and, and for the year, you know, to help you work out your business running costs. I remember when that, that feature did disappear briefly and I was gutted, and it luckily it came back. I think a few people like myself must have emailed and said, what's going on here? And then it come back because it massively helps me, that does.

Yeah, I appreciate the feedback. Yeah, that seasonality is kind of tricky to know without having the previous year or extra data.

Yeah, and you can actually see the seasonality on your income. The graph literally goes like that. You know, towards the beginning and the end of the year when it's the coldest months.

Okay, well, thank you very much for your time. Really appreciate you coming on again, and thank you all your advice. And I hope that helps some gas engineers out there with their pricing and just, I'm just kind of thinking about it in a little bit more detail.

Yeah, yeah, thank you very much for having me, and I hope some of the advice and that that we've shared helps other people out. And if anyone's ever stuck tell them to give us a shout and, you know, I'll help them as much as I can.

Yeah, and that's Dean from Jones to Gas. Thank you very much, appreciate it. Thank you very much.