The Biggest Lie in Plumbing: "You're Too Expensive"

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A customer tells you you're too expensive and you flinch. You knock a few hundred off, maybe throw in something free, and drive home wondering why there's nothing left at the end of the month. Dennis says that reaction is based on a lie, and the day he stopped believing it was the day his profits changed for good.

In this episode, Dennis walks through the one man truck exercise, a pricing breakdown every contractor should sit down and do before they quote another job. He covers everything that goes into the real number, from material shrinkage to customer satisfaction budgets to paying yourself what you're actually worth. Then he gets into what to do when the customer pushes back, and why "too expensive" and "I can't afford it" require completely different responses.

Topics discussed:

00:00 - The day he stopped arguing about price
00:43 - The one man truck exercise explained
01:08 - Material shrinkage and the costs nobody tracks
02:32 - Why you need an office person and an apprentice from day one
05:00 - Word of mouth is nice but it's not dependable
05:50 - Your customers are investors in your company
07:01 - Charge for what you want, not what you have
08:45 - Profit isn't what's left, it's what you charge for
11:06 - Build hours, efficiency, and how flat rate actually works
13:37 - When "too expensive" is a lie and what to say instead

This episode was produced by Podcast Boutique

The Podcast that helps plumbing and heating service contractors stop working for free and actually turn a profit. 

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Transcript

SPEAKER_00 0:00

The day I stopped arguing about price was the day my profits exploded. They said you're too expensive. No, you're not. If they can't afford it, that's a completely different conversation. Too many plumbing contractors hear those words, you're too expensive, and they immediately panic. They lower the price, give away all their profit, and then wonder why they're working harder every year and making less money. Hi, I'm Dennis. Dennis, the apprentice on most socials, and I've spent 25 years building and operating a double-digit, profitable, big, beautiful plumbing company at $12 million in sales before finally selling. Now I invest what I've learned into you so you can grow and scale and even enjoy your business along the way. Today I'm going to show you the one-man truck exercise. The exercise every contractor should do before they ever set another price. First, we have to come up with our annual budget, right? And to keep the concept simple, let's start with just you, the business owner. How much for your truck? Gas, truck wrap, maintenance, insurance, tools, marketing, etc. And what about material shrinkage? What's material shrinkage? Material shrinkage is, you know, when you tighten that bolt one too many times when you're installing the toilet and it cracks and you have to go get a new one. It's no one's fault but yours. You're not going to charge the customer more, right? That's material shrinkage. Or what if you throw in a quick P trap but don't charge for it? Material shrinkage. What if the part's been bouncing around your truck for six months and then you go to get it and it looks pretty rough? Too rough to install. So you throw it away and go buy a new one? Material shrinkage. What happens when your employee gets a few things and installs it in their house or takes care of their mom? Just a P trap. Doesn't tell anybody. Material shrinkage. What happens when your apprentice installs all the wastework and it's not right and you gotta tear it out and do it over? Material shrinkage. What is that in a year's time? It's a cost, right? So you gotta figure that out. And this is the spirit you figure all this stuff out. How much is all this stuff gonna cost for a year? Here's a key point. You have to have a shop. You have to have an office. And if it's your house, well, what's the house rent? Like the business does cover these things. So how much does it cost to rent a shop? We're probably not gonna go buy a big, huge shop just yet, right? But for a shop property or a shop where you can run three or four trucks out of and have an office person and have a place for all your stocks and a place for your trucks? How much does that cost in your area? You gotta figure that out. Now that you got a shop, how much for electric, water, gas, utilities? How much for a computer? How much for furniture? How much for a fax machine? Do we still have fax machines? How much for a copier? How much does it take to wash the truck once a week for a year? See, this all has to be figured out. You gotta figure all this stuff out. And so now we gotta shop we have a shop. How much are we gonna pay the office person? We have to have an office person. We're trying to build a business here. Like, yes, you can be a one-man kind of rolling on your own. You're not gonna build any business on your own. And if everybody did that, society would collapse. You know why? Where do you think plumbers come from? They're trained. Like if you're a licensed plumber, we need you to train a couple apprentices. We need you to replace yourself. At least you have to have an apprentice. A lot of times when I talk to someone and they're starting a business, I say, What's what are you gonna do? They're gonna, they're gonna try to hire a licensed plumber. And I'm like, well, what decent plumber is gonna leave his secure situation and risk all that on your insecure little experiment? I mean, you haven't even proven that you can run and build a business and take care of yourself, let alone someone else. My point is, if you find someone, there's probably a reason they're on the market. So may I strongly suggest that you have an apprentice, that you find a good young person that wants to be a plumber and they're out there, they're everywhere. Here's a hint: if you don't know where they're at, go to your high school, see if they're involved with Skills USA, talk to the Skills USA people and find out if they've got a few people that want to want into the trades. Skills USA is kind of like it's kind of like FFA. Remember FFA, the future farmers of America? There's Future Farmers of America for farming, but there is Skills USA for the trades. Almost every trade, like 115 different trades they they represent. So if you're looking for a good young person, go to the high schools. Ask do they have any seniors that are interested in the trades? And they'll have a few. And they might even be in plumbing already. So get yourself an apprentice. How much are you gonna pay your apprentice? How much are you gonna pay your office person? Are they gonna have uniforms? How much are uniforms? Right? All this stuff adds up. Marketing. How much for marketing? What are we gonna do? Oh, we'll just do word of mouth right now. Hey, we're trying to build a business here. Is word of mouth gonna work forever? It's wonderful. It's nice to have word of mouth, but is it dependable? What if it runs out? Like if we add someone, if we what about our apprentice that's been working with us for a year and you've just poured everything you have into them and they're getting good and they're ready to be on their own. Do you have enough calls? Yes, they're probably not ready to be on their own after a year, but you get my point. When they're ready to be on their own, will you have enough calls? And here's the deal. If we come up with numbers of things we already have, like, well, we're not gonna get uniforms right now, we're not gonna put that in the budget, or we're not gonna buy a new truck, we're gonna use my existing truck. If that's how we figure out our price, what's gonna happen is there won't be any money to get what you really want. Have you ever heard the concept that the customers are investors in our businesses? Do you know how that's true? It's true because where do you think the money comes from to buy the new truck, to buy the uniforms, to pay the gas, to pay the apprentice, to pay the office person, to buy the computer. Where does that money come from? It comes from the customers. See, the customers give us money in exchange for our skill set and the work that we do and the problems we fix and the problems we solve. They give us money. It's like an investment in our company. And so when we're working up our budget, we have to work in the budget the things we actually want. And now I'm not saying a ski boat, but do we want a new truck? Yes. Do we need a new truck? Yes. Does a customer want you to have a new truck? Yes. Do they want an old beater to show up in front of the house? Probably not. They would like a new truck. This just happened to me the other day. I had an electrician come to my house and their truck was a little bit older. Would you believe it dripped oil on my new driveway? I have a new driveway. And they dripped oil on my new driveway. They need a new truck. Or they need to maintain their truck, right? So this is super important. In the one-man truck exercise, you have to write down what you want. What kind of service do you actually want to put on the road? You had dreams, right? You might be looking at this video because you've got questions. Things aren't quite as easy as you thought. Things aren't quite going as well, and you're wondering why. That might be why you found this video. One of the reasons why is because we're not charging for what we want. We're charging for what we have. You have to charge for what you want to have the money to get what you want, to put the kind of service on the road you'd be proud of. Does that make sense? It's kind of a weird concept to get at first, but it's super important and it's real and it's valid and it's as true as gravity. You have to charge for it if you want it. I do an exercise in my program with my clients much more in depth. This takes several hours to figure out, actually, to get it right. Taxes, customer satisfaction, how much money do you want in the budget to give back? This changed our lives. When we had a complaint before we learned this, we would fight for every dollar. We'd go to small claims court if we needed to, because we'd done the work. They signed the contract up front, they knew the price. We did the work and they owe us. And we won in court. The problem was it was exhausting emotionally to get ready to go to court, to be in court. Even though you win, everyone in there looks at you like you're ripping somebody off. It sucks. It takes a day to recover if you've got a soul. And so when we figured out, no, you put that in the budget. Where no matter what happens, no matter how good you are, you're gonna have some complaints, you're gonna make some mistakes, or your employees are gonna make some mistakes, and you're gonna have to fix some stuff. Yeah, put it in the budget. That way, when it comes up, you've got money in the budget to fix those things, and it's not so upsetting and emotional. Hey, we haven't even talked about profit yet. Profit, profit isn't what's left. Profit is you have to charge for that. Like what percent do you want 10% profit? Let's say our number is up to $600,000. Well, if you want 10% profit, that's we have to have we have to add $60,000 to all our numbers so that we have profit. How much are we gonna pay you? How much do we pay ourselves? Here's a point you should at least pay yourself what you earned before you quit working for somebody else. Doesn't that make sense? Like, why would you take on all this risk and all this chaos and now you've got to learn a whole nother thing? Like you're a good plumber, but now you gotta become a businessman. And if you haven't figured it out yet, there's all sorts of stuff. There's marketing and taxes and culture and employees and hiring and firing, unfortunately, and issues and complaints. It's like, oh my goodness, it's there's so much to it. And a lot of plumbers don't realize that. A lot of techs don't realize that, but it's so true. So you have to charge for it, right? And so, how much are you gonna pay? How much do you want to make doing all this work? You gotta put that in the book, you have to put that in the number. So here's the deal. We come up with all the numbers. Let's say it's $700,000 or something like that. $700,000, $600,000, $500,000, whatever it is. I have a question for you. Have you ever sold that much before at your previous company? Did you sell that much? That's what you just came up with is how much you need to sell a year to make this all work. This is what every company does. Every company in the world figures this out and does it. That's what business is. How much does it cost? And then how do we charge more than that so there's some money left over? That's that's called business. Okay, I digress. Back to the one-man track exercise. Once you have all your costs figured out and your total price, then you have to divide that up by the hours that you're going to work. Like 2080 is 40 hours a week, 50 weeks a year. We have a two-week vacation. So it's not 52 weeks in a year, 50 weeks in a year because we're gonna try to take two weeks off. So are we working eight hours a day, 10 hours a day? What are we doing? Let's say eight hours a day, because then after all that, now we're gonna have to go figure out how to run the business after all that, right? So if eight hours a day, how many days are you turning wrenches? I mean, how many hours are you actually turning wrenches? Like if you think about it, all the driving around, going to that parts house and doing all this stuff, talking to the customer, handling the complaint, talking to the neighbor, there's all the stuff that happens that takes you away from hands-on tools. So we have to figure out what a hands-on tools number is. Like let's say if we work, if we're at work eight hours, let's just say 10 hours a day, and we're able to be 50% efficient, that means five hours of the day will actually be hands-on tools. It's kind of weird to think about, but if you're in service, like I'm talking mostly to service companies, if you're in service, you're doing really well if half your time that you're logged in at work, you're actually working the tools. So that's efficiency. That's called efficiency. And you come up with a build hour. A build hour is hands-on tools hours. And then you figure out your, you take your all the money you need to make, the 600,000, 600,000 or 700,000, whatever it is, divide that by your build hours for a year. So if it's five hours a day, or let's make it easy, four hours a day times five days a week is 20. So 20 build hours, 20 build hours a week times 50. There's a thousand hours a year. So you take your big number divided by $1,000 a year, and that's your billable hourly rate. Now, your billable hourly rate, you times that by how many hours it's going to take to do a job. How many days, how many hours on average does it take to do a water heater in your area, right? In my area, we figured two and a half. Yeah, if things go really well, if it's in the garage, you might get it done in two, or maybe even an hour and a half if you're really good. And if you're a new apprentice or if it was just a little bit of struggle, it might take three and a half, right? But should the customer pay for your inexperience or your apprentice's inexperience? No. Should you get docked? Should you not make as much if you're super efficient and have the right tools and have done it a number of times? No. So we charge one price. The average is two and a half build hours times your billable hourly rate equals your labor rate plus all your parts and the markup equals your task rate, your flat rate. That's how flat rate works. Yeah. So that's your number. If you've done all the work and figured out your that number, let's just say it's $2,500 for a lot of here, just as the number. Now back to the original point of this video. When the customer says that's too expensive, what are you talking about? No, that's that is the price. That's what it takes to put this on the road, to put this kind of service on the road. See, so they're lying. Now they may not be malicious about it. They might not be intending to lie to you, but they're saying an untruth. It's not too expensive. It is the right price. When you ever hear you, you hear a coach people say you have to charge the right price. This is what they're talking about. You have to figure out in your area what it takes for you to put your level of service that you would like to put on the road, on the road. And that's the right price. So the customer is telling you a non-truth that you're too expensive. And we believe it so often, don't we? Don't we go, oh man, I hate it, it's so expensive. And then we start discounting. And that's not the right thing to do. The first thing that goes when you discount is your profit. And if you don't have profit, then what are we doing here? It's called treading water. And how long can you tread water? I've seen companies really stubborn tread water for years. They're the ones with no apprentices, with beat-up trucks, no uniforms, and they're robbing Paul to pay Peter or robbing Peter to pay Paul. It goes both ways, doesn't it? Yeah. It's a mess. And those people aren't telling their kids to become plumbers because it sucks not to be profitable, right? So we don't want to give up our price because the customer is telling us a lie. What we want to do as professionals is understand that it is the cost of doing business. The truth, here's the true statement. The true statement is that our customer can't afford it. That's what's true. And if they can't afford it, it's probably because it's not in the budget. See, the stuff that you can't afford isn't in your budget either, right? So now we need to help them. Let's help them be able to afford it. Let's empower them with payments. Let's empower them with financing. But you know that when you go to buy a new car and you say, wow, these trucks are expensive, they don't go, yeah, I'm so sorry. Let me cut it in half for you or let me give you 20% off. No, they show you financing. They say, well, how much can you afford? So my main point is it's not too expensive. You're not too expensive. Most likely, you are not charging the right price. Most contractors are not charging the right price. Why is it we avoid raising our price? I think that's one of the cool things about the trades, actually, is in the trades you will find a deep desire not to be a ripoff. We don't want to rip people off. We want to be legit. We want to be ethical. I'm just here to tell you that the right price to be able to afford an office person, an apprentice, and an office, and decent trucks that are dependable and don't drip grease and oil and allow you to be profitable so you can be here next year to warranty your work. That's the right price. It's not that you're too expensive, it's that they can't afford it unless you offer them payments, financing, and figure out how to help them afford it. That's the key. Let's help them figure out a way to afford us rather than lowering our price so we're not profitable. Does that make sense? All right. That's it. That's the one-man truck exercise. And there's there's so much more. Like I said, with my clients, I take two or three hours to go over this. Really, there's a half a day of training to really ring out all the education and epiphanies that you will have when you do a deep dive into the one-man truck exercise. There's so much to learn and so much to understand about charging the right price. And it's maybe the most important thing besides knowing what you're doing. You have to know what you're doing. You have to be good at what you do technically. But after that, you have to charge appropriately. If you don't charge appropriately, nothing else will work. All good intentions will fail. Hey, you need to like and subscribe to the Trade Traction Podcast, the YouTube channel. I'm I'm doing deep dives into all parts of running a successful contracting business. The trades are the place to be. Does it feel that way? And if it doesn't, let's change something. Like if you change, everything will change for you. So let's fix it. Let's get you some coaching, let's figure things out, let's figure out what you're missing, and let's get you on track. And let's make 2026 a year to celebrate. So here's the deal. If you want, if you want to know more about your business and what's going on in your business, I've built a little assessment. It's in the link below. It says Trade Traction Score app, I think. And it's just a little 17 questions that will help me help you know what to do next. That comes with once you figure that out, it will tell you what to work on next with some helpful advice from me. And then even a chance to book a call and see if if you might fit our coaching program. All right, the trades are that place to be. Let's go get it, prove it, hire apprentices, grow businesses, and experience all that these trades have to offer. All right, see you next week.