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By Jim Knapp

It’s common in the service industry to underprice our services; whether it’s the technician not charging for all the work or the service business owner undercharging for repairs.  Competition is often cited as the reason for underbidding, but I think more often than not there are other reasons.  And the consequences of underbidding can be catastrophic for a service business.

One of the most common reasons people undervalue their skills is that they take those skills for granted.  The value to a service person in being able to fix something is very little, after all, he does it every day.  For example, let’s say a customer doesn’t have any power to their air conditioner.  The contractor finds and replaces a faulty circuit breaker.  Not much value there; finding the problem was easy and replacing the breaker only took a few minutes.  But let’s look at the value to the customer. That customer was hot and sticky, nervous about electricity and safety…..ready to move to a Motel to get out of the heat.  That is where the true value for your services is. In the customer’s eyes that repair was almost priceless. 

We tend to use money as a metric of our worth. “We should be worth what we are paid and we are paid what we are worth”. It’s easy to have your self confidence ruined by this type of thinking.  Every time a customer says “Boy, that’s expensive!” it becomes a comment on your self-worth, when really it’s just a comment on personal expenses.

Undervaluing a skill because you already know how to do it is not the only reason that trades people underprice their work.  It’s very human to form a connection with the people that you work for.  =You are at their home or place of business. Oftentimes you get to know them and like them.  It’s completely understandable that you’d want to cut them a break. Unfortunately, it’s at your own expense.

Another cause of undervaluing is focusing on our own flaws. I think we’re all more likely to remember the one time a repair went south rather than the 100 times that same repair was completed flawlessly. Because we depend so much on having the latest design and technical information it’s easy to feel like our services aren’t up to snuff.  Your knowledge and expertise have value, even if there is more to know and learn.

Lastly, humans are an optimistic lot and we tend to account for too little time or material for a service.  In our imaginations nothing will go wrong, we will have all the materials we need, and there won’t be any interruptions.  Try writing down how often a job or repair went exactly as you planned it. It’s not as common as you think it is.

For these reasons we undervalue and underbid our services. The funny thing is, when people sense that we don’t value our abilities, they accept our low opinion. Why not charge what you are truly worth? The only discounting that you should be doing is discounting the tendency to undervalue your work.

For more on pricing check out "Pricing Consistency Is King."

 

 

 

 

 

 

 

 

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