Is your trade business prepared to address the abrupt fluctuations in pricing for materials and supplies that may happen as a result of the recent tariffs and trade protection measures enacted by the federal government?
Price shocks—whether from newly imposed tariffs, inflation, a global pandemic, or natural disasters—can wreak havoc on your business’s profit margins if you fail to pay attention and do nothing to safeguard your profitability.
In a recent webinar, ServiceTitan experts join Strategy Consultant Tim McGuire to discuss key ServiceTitan features, best practices, and strategies to help contractors adapt and thrive in this changing environment, including protecting your margins, managing pricing effectively, and communicating confidently with customers.
With our expert advice, learn how to:
Utilize job costing reports to understand the impact of material and labor costs on your bottom line.
Master ServiceTitan features like pricebook bulk editing to respond to tariff-driven cost changes.
Develop effective communication strategies and talk tracks for your technicians to address customer concerns about price increases.
Job Costing Reporting
To protect your profits, you must first know what your profit margins are or what you want them to be, says McGuire, owner of High Winds Success and a ServiceTitan certified provider. That process starts by running job costing reports in ServiceTitan and looking at your gross margins and materials as a percentage of total sales.
“If you're not carrying through with these steps in your job process and in your invoicing process, the reporting is not going to really give you anything,” McGuire says. “I’ll show you the values that I’m talking about, then we're going to drill into a couple of the jobs that show up in this report.”
Under the Job Costing Reporting tab, click on job costing summary report.
In this job costing summary report, you can identify your profit margin on any job. To determine profitability, you compare the cost of labor, materials, equipment, and overhead against the total revenue for the job.
“If I'm talking about residential installs, we're generally looking for a profit margin of greater than 45%. On my service side, I'm usually looking for a number a little bit north of 60%, and you're not really going to know that unless you have the detail to provide that information to you,” McGuire explains.
The job costing summary report breaks down all of your material costs on a job, including material costs as a percentage of total sales.
“That’s industry best practice,” McGuire says. “It's generally going to tell you that you want to range between maybe 16, 18, or 20% for your cost of materials as part of your total job.”
At a glance, the report shows you the total materials cost, as well as the percentage of total sales. If you have a job listed with zero material costs, you may have purchased materials directly for a job through a purchase order, and those costs are automatically built into your PO costs.
“The system is great, because here I'm seeing straight added materials percentage, but then I also see my PO costs and those PO costs as a percentage of total sales,” McGuire says. “So, I’m still getting that number.”
Then, to the right, you can find your totals for everything, including total margins for the job itself in either dollars or as a gross percentage.
“This report allows me to look for outliers when I'm looking at a job and I'm seeing a margin that's really off, that's either too low or ridiculously too high,” McGuire says. “Ridiculously too high is not always a good thing. It usually means that materials or equipment, or labor costs, have not been associated with the job properly.
“When I'm seeing a 90% margin on a job, something's wrong,” he adds. “Drill into it and take a look.”
You can click into, review, and edit any material costs associated with any job. For instance, you may discover cost increases on certain materials in your pricebook or material percentages of total sales that are too high, both of which cause your profit margins to slip.
“Being able to drill into these to take a look at the cost of these materials is an important first step in me making the decisions as to whether I need to make price adjustments to what I'm charging for customers or other things I might need to do,” McGuire explains.
Drill down into each job’s invoicing to make sure all material and equipment costs are properly added to each individual job. You can do this in three ways:
Use ServiceTitan’s inventory module to automate this process for technicians in the field, linking tasks to materials used, then triggering replenishment and procurement.
Create a task for the same materials used on certain jobs, then automatically link this task in the materials section to make it easy for techs to remember.
Directly purchase materials with a purchase order, and the system automatically adds those PO items to the job itself.
“So, three different ways of getting this information onto the invoice. I don't care which method [or combination of methods] you use. But if you're running job costing reports and you're seeing 100 percent margins on every job, you're leaving out a really important step,” McGuire says.
Finally, if the job costing summary report shows shrinking profit margins on certain jobs, you need to ask yourself two questions:
Are we priced right?
Are we communicating with vendors to know when to expect price increases?
If you’re communicating with vendors and factoring material cost increases into your pricebook in real time, you’ll quickly see whether you’re priced right to protect your margins and you can adjust your pricing accordingly.
Bulk Editing Your Pricebook
When price-shock events occur, do you immediately check your pricebook or start calling vendors to see how it might affect the cost of your materials or supplies? Many contractors do both, and some even choose to overstock that inventory item before the price goes up.
Sena Sadeghi, ServiceTitan Senior Manager of Customer Programs, explains a few things you can do inside your pricebook to stay on top of price increases and better protect your margins.
The first is Edit Mode (shown below, on the right).
“Rather than having to click my three dots, edit that service, go in one by one and edit each little thing in my pricebook, that Edit Mode toggle allows me to do inline editing and it allows me to do it in mass,” Sadeghi says.
You can also edit and add more columns. Clicking the checkbox next to any item automatically adds it to your list of services to edit in Edit Mode. For instance, you may want to click on “Upgrades” and “Recommendations” to fully inform your pricing models.
In Edit Mode, you can click the top checkbox to select everything, then scroll to the bottom to see how many items you have selected. If you prefer a more granular approach, you can use filters to find the specific items you want to edit.
For example, you might filter by category, then adjust service hours on multiple items in that category with bulk editing. If you want to edit pricing on a particular job, just click on the specific price and change it. You can easily change pricing based on a flat dollar amount or a percentage, round up to the nearest dollar, and change pricing quickly on one item or multiple items at once.
And, of course, this works in reverse if you need to decrease prices in certain areas.
“Use these filters to your advantage, especially when you're editing in mass,” Sadeghi says. “There are so many different ways you can filter inside of the pricebook. This will make your life very, very easy when mass updating.”
The same Edit Mode is available for materials. Here, you can still filter by category and other items, but you can also filter by vendors to spot price increases quickly.
“A lot of different filters you can use to make sure your pricebook is being narrowed down and you can make those updates to your pricing or your costs,” Sadeghi says.
Dynamic Pricing
For residential contractors using ServiceTitan’s Dynamic Pricing feature, the experts advise checking to make sure your pricing rules are set up correctly.
Dynamic Pricing allows you to adjust pricing for flat-rate services based on multiple factors, such as after-hours jobs, add-ons, membership discounts, and more. You set your own rules based on your company’s billable rates, markups, surcharges, and custom modifiers.
Sadeghi suggests checking the markup tables in your Dynamic Pricing rules to make sure your thresholds, percentages, and gross margins are correct and where you want them to be. Also check at the bottom to see if you have “generic costs” checked off, which means the service price never changes regardless of the job.
“It's just going to stay at whatever price you set it at,” Sadeghi says of generic costs. “I would imagine most folks probably have ‘exact cost variation’ selected here, so that way it will change the price and recalculate that service price based off of our markups and our rules above.”
Once you’ve made any price adjustments and double-checked your markups in the pricebook, you can preview the price change to see the breakdown of that calculation.
“This preview is extremely useful and a really good way to check that my margins and prices are exactly the way I want them to be,” Sadeghi says.
»Ready to set up Dynamic Pricing? Watch this Blue Collar Nerd video for instructions.
The #1 newsletter for the trades.
Client-Specific Pricing
For commercial contractors, ServiceTitan helps you automate your commercial rates with Client Specific Pricing.
Client Specific Pricing allows you to set up custom rate sheets and labor time for every client to automatically calculate the right price every time you complete a job for that client. This helps commercial contractors save time and protects their margins.
You can create custom rate sheets with specific markups and discounts for materials, equipment, and other direct costs.
“You can tailor these rate sheets based on terms you've negotiated with your customers,” says Matt Campos, ServiceTitan Lead Product Marketing Manager. “Maybe it's based on their location, their history, the volume of work you've done with them, and so forth.
“The beauty of client-specific pricing is that it's going to really help you home in and determine what you want and expect your profits to be,” Campos adds. “And it's going to help you create the standardization and remove the need for your team to make manual calculations.”
Client-specific pricing allows you to build more accurate pricing, gives you the flexibility to cater to the unique price needs for different customers, and improves profitability by enabling you to make quick adjustments for fluctuating costs.
»Ready to set up Client-Specific Pricing? Watch this Blue Collar Nerd video for instructions.
Other Tips and Best Practices
McGuire offers a few bonus tips for protecting your margins.
1. Communicate with your vendors.
“Obviously, they're under a lot of pressure right now, your suppliers specifically, but you're an important part of what they do,” McGuire says. “Communicate with them, indicate to them that you want to have notice when price changes are going to happen. If you don't have a great relationship, a big communication with your suppliers, this is the time to start establishing it.”
2. Associate all materials in your pricebook to “default replenishment vendor” or identify the primary supplier of those materials.
“Even if you do it for the default supplier, if you know what your general purchase cost is for that item, add it in so you're getting accurate job costing,” McGuire says.
3. Add expiration dates to customer estimates.
“The margins on that invoice or estimate that we give today could very well be very different if that customer decides to move forward a month from now. Those costs could increase,” McGuire says. “We could maybe shorten that down to 15 days. That customer has to respond within that timeframe or the estimate is no longer valid.
“Make sure you're protecting yourself in those situations,” he adds.
4. Communicate with your team about the impact of material price increases.
“I think the folks who are going to feel the most pressure in this situation are going to be your salespeople. They're going to start to see prices increase, they're going into the homes of customers and presenting estimates that now have higher prices than they did even a week earlier,” McGuire says. “There's going to be a lot of pressure on those salespeople to discount.
“It’s really important that you're starting to have those conversations with your sales teams and letting them know what an important role they play in protecting the profit margins for the business itself,” he adds.
»Watch the full webinar on demand.
