Steel tariffs and protecting your margins as a sheet metal contractor
Five tips for navigating increasing construction material prices
Few businesses are caught in a vice more than sheet metal contractors. In light of the continuing steel tariff fallout, contractors are understandably worried about whether they can hold margins by passing along the commodity price increases with a markup. Some sheet metal contractors will try to hold gross profit by passing along an incremental price increase alone. Others will reduce profitability by only passing part of the price increase. But there are other options available that can help you navigate the price increases brought on by steel tariffs:
Signal price increases
Sheet metal contractors can signal price increases so that customers expect them. Similar to the beer and soft drink manufacturers, announce a price increase and gauge reactions. The actual price increase can be more or less than the announcement.
Increase prices selectively
For repeat customers, hold off the full price increase for now, letting them know they are receiving special treatment due to their loyalty. New customers or less steady customers may pay the full amount of the increase.
Sell residential work on payments
Price as needed but work with third party financing companies to finance jobs so that monthly payments can be sold. Frankly, contractors should already be selling consumers this way. It’s how people think and how they make most major purchases from cars to appliances.
Bundle to add value
If prices must increase, find value adds to bundle with the sale to increase perceived value. This was practiced by Donald Trump himself, when he threw in luxury automobiles with purchases of condos during a real estate slump.
Take something away
Reduce the price, but only if the customer agrees to remove a service, product, or part.