At the recent National Pavement Expo in Nashville there seemed to be quite a bit of talk among contractors concerning pricing of sealcoating. In addition to the most-asked question of “how much should I charge?” was the annual complaint of sealer pricing to the end user being too low. We heard plenty of stories of contractors charging the same rate they charged three, five, even seven or more years ago, and the question is “How can any business survive doing that?”
Well, the answer is, you can’t.
Price is comprised of a lot of factors, the most important of which is your costs. And regardless of the “going rate” for sealcoating in your market, if you don’t know your costs you can’t possibly properly price your work. Because costs – we don’t need to itemize them here -- go up across the board and if you’re charging even close to the same rate you were even just a few years ago your company bottom line can’t be looking too good.
True, you can make up slimmer margins by volume work (though you’re working a lot harder for those dollars), and there are some ways to improve productivity so you probably can justify some degree of holding prices down. But contractors who refuse to raise their prices while their costs go up are destined to be selling equipment in this magazine’s Classified Ads section. That’s something that numerous presenters tried to get across at NPE, and it’s something that came up at the Sealcoating Roundtable as well as in small group conversations in the hallway.
Does this mean you have to always hold to your price? Obviously not -- some clients have earned lower pricing, some jobs are larger so they can get a break, some jobs are closer so it doesn’t cost as much to mobilize for them -- but it does ensure that you know how much you’re not getting when you settle for less.
If the sealcoating industry – the sealcoating business – is ever going to get where it needs to be, where jobs are profitable and companies can afford to expand and develop, then contractors need to price their work appropriately. So look at your costs, all of them, and figure out what it really costs you to send a 4-person crew out to sealcoat a parking lot (or a two-person crew to sealcoat a driveway). If you aren’t charging enough to cover that cost and make a reasonable profit then you need to raise your prices; if you say your market won’t accept the prices you need to charge then you need to define your company so your market will accept your rates. You need to differentiate yourselves so you can demand – and get – more for the work you do.