“I almost never work for clients who get multiple bids; it’s a huge waste of my time.”

Ring true?

It’s a quote from a general contractor in Saturday’s Sweat Equity column in the S.F. Chronicle’s Home & Garden section. It hits the nail on the head (pardon the pun) in terms of something all business people face: the price-service gap between us and our customers.

The article addresses, for instance, how customers don’t understand how expensive it is to run a legitimate business – licensed, insured, pays all taxes, etc. Many contractors operate on profit margins of less than five percent. That means, to be concrete, that you do a million dollars’ worth of work, you take a million dollars’ worth of risk, and you make a $50,000 profit. A lot can go wrong when doing a million dollars’ worth of work.

But from the customer’s standpoint, “Who cares?” She or he has every right to expect good service at a decent price from nice people, and doesn’t know the ins and outs of your business. So how do you bridge the gap?

1. Sell the Invisible. Maybe your customer would be thrilled to pay your price but doesn’t yet know why you’re worth it. I’m inspired here by Harry Beckwith’s 1997 yet ever-so-current book on marketing.
2. Know your costs. It’s the only way you’ll know how much you need to charge to make a profit.
3. Know your industry. How do your costs, your prices, and your profits stack up? What’s considered reasonable? Benchmark your business.
4. Don’t be greedy. If chance delivers you an occasional windfall – fantastic! But never gouge a customer: it’s not ethical, and it’s not a good long-term business strategy.
5. Be willing to walk away. Walk away to protect your business, yes, but also to protect your customer, who won’t be happy if you say “yes” to the wrong project.