Taking on the Challenge of Increasing Operating Costs

Material and equipment prices are particularly volatile right now, creating a challenge for businesses. To stay the course consider what you can control versus what you can’t.

Taking on the Challenge of Increasing Operating Costs

Anja Smith

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Material and equipment prices are going bananas. Skyrocketing. Haywire. Wacko. Whatever word you prefer, it’s out of control with no end in sight.

The causes are complex, multifaceted, and frankly, don’t matter. They matter in the big picture sense, but not in the day-to-day white knuckling of keeping your plumbing company thriving. It's hard to maintain positivity and perspective in times like this.

I can’t pretend to be the most emotionally mature person in the world, so I find peace turning to the wisdom of my mentors. For me, that’s my late grandfather. He was peaceful on par with Gandhi and I inherited none of it. While the words weren’t his, I can thank him for bringing this passage into my life: “Grant me the serenity to accept the things I cannot change, courage to change the things I can, and wisdom to know the difference.”

You don’t have to be Christian or even religious to appreciate the valuable lesson in those words. Let’s talk about what you can change versus what you can’t.

Change: Your prices

If you are on time and materials pricing, make sure your employees have an updated price list of common materials. If you are using a flat rate system, monitor your parts allowances carefully and either implement across-the-board markups to account for overall fluctuations or review the applicable categories as often as necessary. I understand this is a lot of work and kind of a bummer, but it is critical that your prices reflect the market cost of material.

Maintain an open conversation with your staff about what is going on with prices and help them understand that your small business is not the place for those margins to get squeezed. If you need permission to maintain your profit margin and pass that cost along to your customer, this is it. You have permission. It is critical that you are profitable. Protect your interests so that you can live to plumb another day.

Let go of: The deal the guy down the street gets

The value of a nationwide account has become magnified and multiplied. The more purchasing power a business has, the better it is going to do right now. It’s not fair, but it is the way a free market works. Capitalism isn’t always fair. You can’t change this reality. Other people might get parts you can’t get, water heaters you can’t find, and prices you can’t touch.

For your own sanity, let it go.

What you can do is double down on the services and offerings that are free game. If you can’t get water heaters, don’t advertise those services right now. Talk about sewer line replacements, drain cleaning, leak inspections, or whatever else you have going on. Challenge your staff to sell jobs that maximize investments you’ve already made. Get that hydro jet out five days a week.

This is an area you can not only control but find a new way to thrive in. Have some fun with it and involve the entire staff because you aren’t the only one stressing about it.

Change: The conversation with the customer

Normally when a customer complains about a price, I roll my eyes. In normal times, I have a strict rule about not justifying what they perceive to be high prices. (The reasons are a rabbit hole I’m going to resist.)

But right now, customers will balk at pricing, and they are justified. I’m balking at pricing. Their outrage is understandable. It really sucks to be the person with a rusted out water heater right this second. That is drawing the short stick, without a doubt.

So I’m changing my usual perspective on how we approach pricing conversations with customers. It’s OK to let them know that you hate these prices too. Hear them out, empathize, but be firm. Do not give away your labor.

Another change you might make to normal policy is to offer repair options you normally would not recommend. The price differential may have improved to a point where the customer deserves the option. As long as you provide excellent documentation about warranties and expectations, there is nothing wrong with a repair — assuming you can get the parts.

Let go of: Expectations

My wife has this half-joking mantra of “aim low and achieve.” I used to hate it. As a Type A personality, I thought it was lazy and annoyingly cynical. But recently I’ve come around.

Right now might not be the time to reach for the stars. The market is super volatile and we don’t know what tomorrow will bring. You and your staff will get burnt out if goal after goal goes by unmet. Failure isn’t a fun feeling and we humans can only take so much. Give yourself and your team some easy wins. It’s been a tough couple years and we all need a little achieving to celebrate.

About the Author

Anja Smith has worked in the plumbing industry since 2012 in Greenville, South Carolina. You can find her on LinkedIn at www.linkedin.com/in/anjasmith.



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