When you first start a flooring business, how to price flooring can be one of the hardest things to navigate. How do you make sure that you’re covering your expenses while still giving your clients fair and reasonable rates?
You don’t have to figure it all out on your own. Read on to find out how to determine costs, how to calculate a rate, and when to offer discounts and upsells.
Step 1: Determine Your Costs
Before you set any flooring service prices, you need to determine how much your costs are so that you can make sure you charge enough to stay afloat.
There are three main expenses your jobs need to cover: your personal living costs, your flooring business overhead, and your taxes.
1. Personal living costs
Your personal living costs are things like your rent or mortgage, groceries, and bills. If you don’t know how much your monthly living expenses are, now is a good time to add them up
Average out your monthly costs by adding up expenses from the last year and diving them by 12. This will help to average out seasonal costs like heat or air conditioning.
2. Business overhead
Business overhead is made up of the costs necessary to run your flooring business. For example, your materials, tools, office, and employee wages. If you already have a year’s worth of bills, average them out over 12 months to make up for seasonality.
Pro tip: If you aren’t sure how much your business costs are, start tracking your expenses now so that you can begin to get an idea of how much your monthly overhead is.
As an entrepreneur, you have two types of taxes to pay: business and personal. How much you have to pay depends on where you live and how much you make.
Business taxes can be made up of both federal and state taxes, so check with your state to see whether you have to pay state taxes or not.
Step 2: Calculate Your Hourly Flooring Job Rate
Now that you know how much you need to make to cover your personal and business expenses, you can calculate a base hourly rate. This is the amount that you need to make to cover your costs.
Start by adding up all of your expenses for an average month. Let’s say you spend an average of $5,000 a month on personal and business expenses.
You’ll also need your total tax rate here, which depends on your state and income. We’ll use 20% as an example.
Next, figure out how many hours you work (or plan to work) each month, on average. At 35 hours a week, that would be 140 hours a month.
Pro tip: If you aren’t sure what your monthly billable hours are, you can start tracking your time on the job to get an idea of what you work each month.
Now, here comes the math.
Take your total monthly expenses and divide them by your total monthly hours. Here’s our example:
$5,000 / 140 = $35.70
That’s how much you need to make per hour just to cover your living and business expenses. But you still need to calculate your taxes on top of it.
Since we used a 20% tax rate as our example, our calculation would look like this:
$35.70 * 0.20 = $7.14
$7.14 is the amount you need to add to your hourly rate ($35.70) to cover taxes, which gives us a total of $42.84 an hour.
So, in our example, we would need to make $42.84 at 140 hours per month in order to cover costs. But you don’t want to only cover your costs, you want to make a profit as well.
Step 3: Include Profit in Your Hourly Rates
Profit is the amount that you make on top of your expenses. It’s what you use to grow your flooring business, weather tough seasons, and cover unexpected issues with equipment or materials.
One of the best ways to calculate profit to add onto your hourly rate is to look at what your competitors are charging. When reviewing other flooring companies pricing, make sure they’re:
- Local: Businesses outside of your city or town may have higher or lower rates than your own.
- Similar: Competitors that offer different services or that specialize in certain flooring jobs will price based on those things. Choose competitors whose services are comparable to yours.
- Targeting the same clients: If you serve residential clients, don’t look to competitors who focus on commercial jobs. Pricing between residential and commercial jobs can vary by a lot.
- Legitimate: Base your rates on legitimate, professional flooring businesses in your community. Try not to use odd job ads on sites like Craig’s List to set rates.
The average cost for flooring installation in the US is $2950, but that can change significantly depending on the size of the job, material, location, and flooring expert or handyman who’s doing the job.
Step 4: Get the Most Out of Pricing Your Flooring Jobs
Strategic pricing can also help you to turn a healthy profit. Upsells, discounts, and group rates can help maximize the profitability of each flooring job you do.
When you send out an estimate for a job, you can use it as an opportunity to upsell additional services or materials. Jobber’s quoting software allows you to offer add-ons and packages right in your quotes.
These upsell techniques increase job sizes and profitability without much extra footwork on your part.
Discounts can be a good way to increase job sizes and attract new clients. However, you need to make sure you offer them strategically and leave yourself enough room to cover your expenses and make a profit.
When offering discounts, try to do so as part of packages, group rates, or upsells, so that you have more control over how much you make.
For example, instead of offering 20% off any job, offer 15% off of laminate flooring or tile for jobs over a certain square footage. Or, on jobs that meet a minimum size, offer a small standard service at a lower rate than usual, like sanding, finishes, or sealants.
Group rates help you to get more jobs into your schedule, which can help to keep you busy and pay the bills. While group rates for flooring jobs might seem like a stretch, there are all kinds of things that you can do to encourage neighbors and family members to go in on your services.
For example, in older neighborhoods where many of the homes were built with wood flooring, you may be able to find a number of aging properties where the floors need to be refinished or stripped. Alternately, carpet cleaning is a simple and straightforward service that applies to a lot of different homeowners.
When offering group rates, try to focus on general services that many different homeowners could use. Think about the area you’re targeting and what the homes are like. New homes won’t necessarily need new flooring, but they may need help with maintenance and cleaning.
Homes in older neighborhoods may need more extensive work, like refinishing, stripping, or new floors altogether.
Consider the neighborhood and the homes that are in it when offering group discounts so that you can offer relevant services to clients.
Pro tip: Use Jobber’s flooring business software to schedule manage jobs from start to finish.
Pricing flooring jobs properly takes a lot of work, but it’ll pay off in the end when your bills are covered, and you have the money you need to grow your flooring business.
Many business owners make the mistake of jumping in headfirst and setting prices before doing their research. While it may be tempting to forego the calculations and copy what another business is charging, this strategy won’t work out long-term.
Taking the time to price your flooring jobs carefully—and with industry knowledge to back you up—can be what keeps your business going strong while others tap out.