Leveraging Cost Increases

It is the 800-lb gorilla in the room that cannot be ignored – cost increases. Here is how to discuss the topic with your clients successfully.

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At some point, you are going to need to address with clients the 800-lb gorilla in the room – cost increases.

The inflationary cycle our economy finds itself in has made everything more expensive. Most small-business owners (92%) reported the cost of supplies or services needed to run their business has increased since the pandemic started, according to business.org. This year, 71% of small-business owners reported at least a 20% increase in costs for supplies and services.

As a result of inflation, 89% of small-business owners have had to increase the price of their products or services since the pandemic began, according to business.org. Almost half (45%) have raised prices by more than 20%, while 44% report raising prices no more than 15%. Just 11% of small-business owners report no price increases.

Across the board, business.org reports small-business owners are feeling the financial weight of increasing inflation, with 60% concerned about the financial health of their business because of inflation. Likewise, 37% report customers have complained about inflated price increases, and 30% believe raising prices will deter customers from doing business with them.

And without a doubt, it has increased your cost of doing business heading into Winter 2022-23. What makes this more complicated is, as a professional snow and ice management contractor, your job is to provide winter service solutions for your clients, but the costs to provide and perform these solutions is eating away at your profit margins.

Sales coach Marvin Montgomery says there is a method to successfully address this matter with your clients, and most importantly, keep them as your clients. For starters, everyone is feeling the pain associated with the current economic cycle. They are experiencing the same inflated prices – both at professional and personal levels – that you are approaching them through the introduction of a surcharge or in the increased price point of a new winter services contract.

“Your clients feel the same spike in the price of gas at the pump that you’re experiencing,” he says. “They’re seeing the prices going up at the grocery story and the cost with purchasing goods and other services for their business. It’s an unfortunate fact, but at least this helps level the playing field by establishing common ground.”

There is some price conditioning snow professionals can strategically employ when addressing cost increases with clients, and it will help to take the fright out of that 800-lb gorilla you just introduced when talking about the cost of Winter 2022-23 snow and ice management services.

First, avoid sticker shock with clients. “Stop hitting clients over the head with that whole big amount,” he says.

Instead, break the new figure down into its component parts. This helps clients understand where the money is going and what accounts for the increased price tag.

“Some clients can’t digest the full amount [of a cost increase],” Montgomery says. “For example, when you go buy a new truck, the dealer doesn’t sell you a $60,000 truck. No, they sell you a truck at $375 a month.

“Break down your snow and ice management solution into another more manageable figure – per plow, per event, per month or even per week if you need to – so it’s a digestible amount,” he says. “Explain to the client that, while [the increase] may sound big, it really only breaks down to X, Y and Z.”

And do not forget to justify the investment the client is making in contracting with you for their snow and ice management, and what that return will mean for them in the coming months.

“You want the client to know that, when they’re dealing with you, they’re going to get a great return on that investment by using your snow and ice management service,” he says. “And even though it is going to cost them X this winter or over the course of a new contract, here’s what they’re going to get by using you. When you do that, the client looks at the cost increase in a whole new light.”

Lastly, the increase – coupled with the economic uncertainty heading into winter – can be used to create a sense of urgency with clients who are either on the fence or are price shopping with other snow and ice management firms, Montgomery says. “In today’s economic climate, you can’t hold that price for 30 days while the client decides,” he says. “Now, I’m seeing some contractors only holding that price for 15 to 10 days because you don’t know what tomorrow may bring and what effect it may have on those prices.

“Therefore, you can turn this into a positive by reminding clients that this is the best time for them to lock into the price you’re presenting them,” he adds. “If they wait too long it very well might cost them more and is something they can avoid.”

Mike Zawacki is editor of Snow Magazine.

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