Everything goes up in price as the years go by—right? Not everything, the average price to sealcoat a 700 sq.ft. driveway has decreased by 45% over the last 20 years. Depending on which side of the coin you’re on, this is either good or very bad news. How is this possible? Everything involved in running a sealcoating business has increased since 1992. Here are a few examples of operating expenses for sealcoaters that have increased over the last 20 years:
• Labor costs have increased by 70%
• Sealer price per gallon has increased by 115%
• The price of gasoline has increased by 230%
• Insurance costs have more than doubled
Fear is the biggest reason sealcoaters have been reluctant to raise their prices—fear of losing customers to competing sealcoaters that either with low overhead or inferior products or service, have been able to continue to offer unreasonably low prices. Fear, however, shouldn’t drive your business decisions. Building a profitable sealcoating business does not mean that you must offer the lowest price. Some companies will choose to use lower quality products to keep their material costs low, which in turn will allow them to undercut fair pricing models.
Although pricing is certainly one of the factors to consider in operating a successful sealcoating business, it’s not the only factor, or most important. The increases noted above will continue to rise; to profit you will have to raise prices or offer an inferior product or service. Raising prices will lead to some customers choosing lower priced sealcoaters; but the alternative of trying to meet those prices is not working. There is no profit to be made when pricing is the only goal of a sealcoater.
Many homeowners focus on price, it’s your job to take the focus off price and sell them on the value they will get with your company. Explain the product you will be using and its benefits, tell them about your crew and how you handle scheduling. Provide a written estimate, product data sheets (some manufacturers provide data sheets or print one off the internet) and your business card. Homeowners are leery of contractors; the more information you give them and professionalism you display, the more likely they are to trust you with their business. Once you establish yourself as a professional who offers quality products and service, your customers will agree to pay you what your services are worth.
If a customer is focused on price, explain to them possible reasons for why some sealcoaters have lower prices. Help the customers understand that if they choose the lowest price, they may also be choosing inferior and unreliable service and lower quality— possibly diluted—materials (for example, customers should be advised that sealer is water based and the more water added to it, the less it costs the contractor per gallon). The customer should understand that although some sealcoaters use inferior materials, you don’t compromise on the quality of your materials or service. If the customer still wants to go with the lowest price, you should move on to those customers who value quality service and products.
Although following a business plan of offering better materials and service at a fair price may result with you having fewer customers, still, in the end, you will have the potential for making more money on each project. To be a successful sealcoater for the next 20 years, you should not only focus on price. Follow reasonable price models and use some of the informational based sales techniques described above. Doing so will help create a customer base that will pay fair prices to have their driveway sealed by a reputable and reliable professional sealcoater.
Dan Browne writes about pavement maintenance for both consumers and asphalt sealcoating professionals.