Construction businesses have extremely volatile pricing pressures, which can make it challenging for them to set the right price for their services. According to a report from the American Institute of Architects and Construction Management Services Group, Inc., construction companies are generally able to raise prices as a result of increased demand and improved market conditions. However, these opportunities for price increases are also accompanied by competition, with new home construction firms emerging and existing players launching new offerings. In this dynamic environment, how can construction businesses successfully price their services?
Identifying the Key Selling Point
When pricing their services, construction companies should identify the key selling point of their product or service. The key selling point is the main reason customers should buy from a particular construction business. For example, a construction business that specializes in new home construction might highlight its design team as the key selling point. The design team might be highly qualified and able to create the exact type of home the customer wants. Identifying the key selling point will help construction businesses set the right price point for their services.
Using an Average Price Markup
A price markup is an additional amount added to the cost of a product or service. A price markup can be used to help construction companies set their price point. For example, a contractor might add an average price markup of 10% to their cost to arrive at the final price for their services. Price markups are generally used in industries where there is plenty of competition and it’s difficult to set a standard price for a product or service.
Construction firms should also keep the cost of materials in mind when setting pricing.
For example, if there is a shortage of beam hangers or any key materials, the price of this material will increase and have an impact on the final price of a project. This can happen regardless of whether a firm is a general contractor on a project or if they’re working as a subcontractor. Construction firms should be aware of fluctuations in the cost of materials, which may affect the pricing of their services.