The 7 Best Pricing Strategies For Heating & Plumbing Businesses

For any trades business, pricing is foundational. It directly impacts how much money you earn, how many jobs you get, and how stressful it is to run your business.

So why does pricing strategy often fall to the wayside? It turns out that it’s all to easy with all the jobs, paperwork, and admin you need to get done to keep the business ticking. More often than not, though, a well-designed pricing is all that separates you from hitting your business goals.

But your prices aren’t just a calculation (or a guesstimate). It’s also a strategy where you take your key business numbers and figure out how to best use them. Do you want to drive growth? Widen profit margins? Or maybe venture into bigger jobs that need well-planned estimates?

In this blog, we’ll summarise all of the effective pricing strategies for your heating business and what they’re best for so you can quickly & easily find out which one(s) to use.

Hourly-rate pricing

• Most versatile pricing strategy. Best for jobs where the time required is uncertain and can vary widely.

Hourly-rate pricing is a simple yet extremely effective way to price your heating jobs. 

The basic idea of hourly-rate pricing is to work out how much to charge for an hour of your time. This number should factor in all costs from overheads to labour and should be costed for billable hours to exclude holidays, sick days, driving, admin work, and so on.

With this number, you can then estimate the time it takes to complete a job and simply multiply the two. Remember to add on material costs that of course vary from job to job.

For example, if your hourly rate is £75, a job that takes 2.5 hours can be quoted at £187.5.

You can read our full guide on calculating your hourly rate here, which includes a free pricing calculator.

Just remember that hourly rates aren’t always the best for short jobs that take much less than an hour. Most heating businesses using hourly-rate pricing avoid this issue by adding a minimum charge (usually an hour’s labour) or by moving onto flat-rate pricing for small and predictable jobs such as gas safety checks.

Cost-plus pricing

• The best pricing strategy for keeping a consistent and care-free profit margin.

Cost plus pricing is another simple and effective way some heating businesses price their jobs.

This strategy involves taking all the associated costs with a job, tallying them up, and adding your profit margin on top.

For example, a new boiler installation job might have materials that add up to £1,650, labour costs of £750, and overheads of £170. Your total costs are £2,570 and, with a 20% profit margin, your quote would total £3,084.

Note that while adding up the cost of all the materials and overheads can be relatively simple, knowing how much to charge for your labour can be a bit more complex.

Competition-based pricing

• Good for staying competitive in the local market and avoiding being underpriced by competitors.

Competition-based pricing (also known as competitive pricing) involves looking at what other heating businesses in your local area are charging for their work and pricing at a point which either matches or beats them.

For example, if a competitor is charging £80 for a gas safety check, you could match that or charge something like £75 for the same service.

One of the goals of competition-based pricing is to ensure you never lose out on a job based on pricing. However, it can also cause a race-to-the-bottom type scenario if your competitors are also pricing with the same strategy. Because of this, we would still recommend keeping a close eye on your costs so that you can maintain a healthy profit margin – regardless of what your competitors are doing.

Market Penetration Pricing

• Good for quickly gaining market share or attracting new customers with lower initial prices.

Market penetration pricing is a strategy where you set lower-than-average prices to quickly gain a bunch of new customers. This strategy is mostly used by new businesses entering an already competitive market before switching to another pricing strategy when they have a decent sized customer base.

For example, if the average price for a gas safety check sits at around £70 in your area, you could put your prices at £50. You’ll often see brands pairing a market penetration pricing strategy with other aggressive marketing tactics like online advertisements.

Find out the average prices for common heating jobs broken down by UK region here.

Since keeping a wide enough profit margin is incredibly difficult while on a market penetration pricing strategy, this is often a temporary measure before gradually raising prices.