July Lunch & Learn - Price Like a Pro: Pricing for Profits and Fairness

Lunch & Learn Topic:

An interactive workshop on pricing strategies for plumbing businesses, led by Kimberly Kean. Thank you to our sponsor PRICOR Technologies!

Key Takeaways

Two labor pricing methods presented:

1. Quick & Easy (20% labor rule)
2. Comprehensive Annual Cost Analysis

• Detailed walkthrough of annual cost calculator, covering labor, benefits, equipment, marketing, and overhead
• Final calculated hourly rate: $595.31 (with 30% profit margin) for a hypothetical 5-truck company
• Material pricing and markup tiers are crucial for maintaining profitability alongside labor rates

Lunch & Learn Topic Details

Quick & Easy Labor Pricing Method

• Based on 20% labor cost rule: Labor cost x 5 = Selling price
• Example: $80/hr labor cost → $533/hr selling price (assuming 6 billable hours/day)
• Useful for quick checks and benchmarking, less comprehensive than full cost analysis

Comprehensive Annual Cost Analysis

• Detailed spreadsheet covering all business expenses:
  
  • Labor costs: Owner salary, plumbers, apprentices, admin staff
  • Benefits: Health/dental/vision insurance, retirement contributions
  • Equipment: Trucks, tools, cameras (e.g., $35k/yr for general liability insurance)
  • Marketing: 8.5% of revenue (~$229k for $2.7M company)
  • Overhead: Shop rent, utilities, software subscriptions, professional services

Material Pricing and Markup

• Critical to pair with accurate labor rates for overall profitability
• Suggested markup tiers based on material cost:
  
  • $0-$50: 100% markup
  • $51-$250: 75% markup
  • $251-$1000: 50% markup
  • $1001+: 35% markup

Final Price Calculation

• Based on annual work hours, 50-55% billable efficiency
• Includes 10% for employer taxes (Social Security, Medicare)
• Example result: $416.71/hr cost, $595.31/hr with 30% profit margin
• Recommendation: Round up to $600/hr for simplicity

Actionable Next Steps

• Attendees to review their own pricing strategies using insights gained
• Consider implementing tiered material markup system if not already in use
• Contact Kimberly to join her upcoming 13-week business finance program
• Register for Next PHCCWA Lunch & Learn: August 6th on "Hiring and Retaining Top Technicians in a Competitive Market" with Dennis Hamon, aka "Dennis the Apprentice"