Setting the right prices for your handyman business is important as it directly impacts your success and sustainability. Running a handyman business with my spouse for over a decade taught me valuable pricing and profitability lessons. 

In this article, I provide insights on creating a successful pricing strategy based on my experience, from understanding your costs to valuing your time and skills. I also cover various pricing models and strategies to help you set prices that sustain your business.

Related: Guide to starting a handyman business

Understanding Costs

Correctly setting pricing begins with understanding the direct and indirect costs involved. We overlooked a few key costs when we started our handyman business.

Direct Costs

• Labor: Estimate the time required for each job and calculate labor costs accordingly, factoring in wages, payroll taxes, and additional labor-related expenses.
• Materials: To minimize material costs, source quality materials at competitive prices by utilizing bulk purchasing, negotiating with suppliers, and seeking discounts.
• Overhead: Account for business expenses such as rent, utilities, marketing and administrative costs to avoid overlooking overhead expenses in your pricing structure.

Indirect Costs

• Insurance: Assess liability and worker’s compensation insurance expenses to ensure adequate coverage for protecting your business and employees.
• Vehicle Maintenance: Factor in gas, repairs, vehicle insurance, and depreciation for your work vehicle(s) to adequately compensate for transportation expenses.
• Tools: Invest in reliable equipment by allocating funds for tool maintenance and replacement when determining your pricing strategy.

Understanding and accurately incorporating every cost involved in operating your handyman business helps you establish pricing that covers expenses and positions your business for profitability and growth.

Market Analysis

When starting a handyman business, you must gain insights into the competitive landscape and characteristics of your target market to help you establish an accurate pricing strategy. I explain how to conduct this market analysis, including the areas where we went astray, to help you avoid these mistakes.

Competition Analysis

Understanding your competitors’ pricing strategies is crucial to positioning your services effectively. Identifying other local handyman services, contractors, and DIY alternatives provides valuable insights into pricing trends and customer preferences. 

However, this analysis should go beyond pricing and include services and value propositions to fully understand how your competitors position themselves in the market and the factors influencing their pricing.

When we initially compared our competitors, we made the mistake of only performing a superficial analysis. We only looked at what they charged for services similar to ours and didn’t take into account their reputation and quality of service. 

A handyman service with extremely low rates caused us to lower ours to compete, but that company used low-quality materials (and often received complaints), allowing them to charge less.

Target Market Identification

Understanding certain characteristics of your customer base helps you tailor your prices to your ideal customer. Identifying your target market requires a deep understanding of: 

• Demographics, including age, income level and occupation, to identify characteristics of your ideal customers.
• Psychographics, including customers’ preferences, behaviors and lifestyle choices, to customize services and pricing.
• Geographic location to adjust prices based on local economic conditions and demand.

Our target demographics and psychographics often led us to homeowners who were busy professionals or seniors without the time, skills and/or tools to tackle various home maintenance and repair tasks. A mistake we sometimes made was overgeneralizing and assuming that all potential customers who fell into this target group had the same needs or shortcomings.

For example, we once quoted a job to a homeowner we identified as a busy professional who we assumed didn’t have the time or skills for the job. However, this person enjoyed performing their own home maintenance on weekends and felt our pricing was too high for something they could easily do themselves.

Related: How to find handyman jobs

Value-Based Pricing

Highlighting the unique selling points that set your services apart from your competitors defines your value proposition and lets you create value-based pricing. However, you must understand what aspects of your services customers value most to align your prices to the perceived value customers receive.

Our handyman service was noted for its reliability, quality workmanship, meticulous attention to detail, and dedication to customer satisfaction. This insight enables me to craft pricing tiers reflecting the service quality and benefits provided. 

For example, we offered basic, standard, and premium pricing, often based on the quality of materials we would use, allowing customers to choose the option that aligned with their budget and desired result.

Pricing Models

We’ve learned that it’s impossible to accurately estimate how long a task will take every time. However, with experience, you should be able to get close most of the time, bringing us to pricing models. You have two primary options when calculating rates: hourly or flat rates.

Hourly Rates

Calculating fair hourly rates involves considering time, expertise and overhead costs. Hourly rates offer flexibility by allowing for adjustments based on the actual time spent on a project. However, this flexibility can lead to unpredictability in pricing that customers don’t like and sometimes causes perceptions of inefficiency that can damage your reputation.

When we quote hourly, we typically provide a range of how long we estimate the job to take for better transparency. This range allows customers to see the high end of what the job might cost and helps them determine whether it accurately reflects the value of our services.

Flat Rates

Using a flat rate simplifies the pricing process for customers while ensuring profitability for your business. Customers tend to like flat rates for the predictability and complete transparency of upfront pricing that reduces the risk of unexpected costs. This model requires you to develop standardized pricing structures for typical handyman jobs. The potential downside is when a job takes longer than anticipated due to an unforeseen issue, increasing the risk of underpricing a job.

To create flat rates, we begin with an hourly rate, then determine how long a job typically takes and multiply that time by the hourly rate to land on a flat rate. My spouse and business partner is notorious for being overly optimistic about how long a project will take – not uncommon among handymen. 

Unfortunately, this habit can lead to underestimating your flat rates. I habitually doubled the time he said a job would take and used this instead. Although this sometimes meant we didn’t get a job, I’d rather lose a job occasionally than continually underbid.

Related: How to start a handyman business while working full time

Pricing Strategies

Besides pricing models, setting prices as a handyman also involves pricing strategies. Numerous pricing strategies exist, but here are four of the most common ones to consider.

• Cost-Plus Pricing: Calculate the total cost of providing a handyman service and add a markup to ensure you cover the costs while generating a profit.
• Competitive Pricing: Adjust your rates relative to competitors’ pricing, which requires you to regularly conduct competitor analyses to ensure your rates remain competitive within your local market without compromising profitability.
• Penetration Pricing: Offer lower introductory rates when entering new markets to attract customers and gain market share quickly, which comes with the risk of failure due to reduced profit margins.
• Premium Pricing: Establish your business as providing high-end services and commanding higher prices than your competitors based on the perceived value.

By strategically implementing these pricing strategies based on market dynamics and business objectives, you can maximize revenue, attract customers, and set your handyman business up for long-term success.

Related: How much does it cost to start a handyman business

Adjusting Prices

Setting your prices as a handyman isn’t a do it once, and you’re done process. You must constantly adjust your prices to remain competitive and maintain profitability. Some common reasons you might need to adjust your rates include: 

• Responding to Inflation and Market Changes: Monitoring economic trends and adjusting prices accordingly is essential for staying ahead of inflation and market fluctuations to cover expenses and generate a profit while remaining competitive.
• Seasonal Adjustments: Anticipating fluctuations in the demand for handyman services based on seasonal trends allows you to adjust rates accordingly. In the winter, we replace warm weather jobs like exterior painting and power washing with in-demand services we charge a premium for such as snow removal and salting sidewalks.
• Customer Relationship Management: Increasing prices for handyman services is necessary for various reasons, such as higher costs for materials, but justifying price adjustments, offering loyalty incentives or introducing new pricing tiers allows you to leverage customer relationships to mitigate any potential backlash.

Communicating Prices

Building trust and transparency with your customers through effective communication of prices is essential to the success of your handyman business. Key strategies include: 

• Transparent pricing, including labor, materials, overhead costs, and other factors influencing expenses, fosters customer trust. We also do everything possible to avoid unexpected charges to increase customers’ confidence in hiring us.
• A clear pricing structure that includes communicating our rates in an understandable manner avoids confusion and empowers our customers to make informed decisions.
• Educating customers about value helps justify our pricing by demonstrating the quality and benefits of our services and the peace of mind they receive when they hire our company. Providing customer testimonials and before-and-after photos are great ways to illustrate the benefits of choosing us.

Final Thoughts

Creating a pricing strategy is a multifaceted process essential to your handyman business’s success. It hinges on conducting a comprehensive market analysis and implementing strategic pricing models to maximize profitability and customer satisfaction. 

However, you must remain flexible and willing to adjust prices in response to economic trends, seasonal fluctuations, and customer needs. By continuously evaluating and enhancing your pricing strategy, you position your handyman business for sustained growth in a competitive landscape.