Bonus Money: Miscellaneous Profits
The ‘miscellaneous’ refers to charging a small amount on every invoice to cover the miscellaneous items that you don’t often invoice for. These could include trim parts, small cables, shipping / delivery, trash removal, design, credit card fees (only include this item if you are legally able to charge for them in your area), drive time to name a few…
I would recommend you add a percentage, perhaps 3-6%, on every invoice to cover these above items. I would only do this on invoices that include both equipment/parts and labor. Service calls may qualify for this as well.
In the automotive repair world, you may see these as shop fees on your invoice. It’s a small fee to cover the little parts that are not worth tracking from an inventory standpoint but they (shop owners) pay for and use them on a daily basis.
Keep in mind, we’re not recommending that you price gouge your clients by any means. This article is about charging for all the little stuff that you likely aren’t billing for. Ultimately, this Quick Win is designed to help you come up with a way that will get you paid for your smaller services and parts, while also raising the least amount of resistance from your clients.
Here are a couple options of how this could work for you:
Option 1 (recommended)
Let’s say you have an install sale of a small outdoor audio system. We are using simple math and for simplicity sake we didn’t add the tax since that varies in each state:
$3000.00 for Outdoor Audio system
$1000.00 for Labor
$200.00 for Miscellaneous <- ($4000 total from 2 previous lines * 5%)
____________________________________
$4200.00 Total
So let’s look at this example and see what it adds to your bottom line. Let’s say you did $100,000 in sales a month, this misc line item at 5% is another $5000 a month, for the year you added $60,000! Now that is a Quick Win!
Option 2 (more manual, and more hidden)
Another option to include the miscellaneous increase is to build it into the cost. This method can get a bit more complicated since it’s something that would need to be calculated and added manually each time in order to redistribute your misc line %.
What does that look like? In the example above, it could look like charging $3100 for Outdoor Audio and $1100 for Labor. This would still get you to the $4200 total, again, it’s just more manual.
Tips
A couple more tips regarding this miscellaneous line item:
Don’t have your misc line end with .00 like $100.00. In the example above, it’s easy math that we wanted to show, but in reality, that $100 will be questioned more than $97.58 or $103.22. An easy way to accomplish this: if you wanted to add the misc line at 3%, instead choose 3.05% or 2.97%. This will give an odd result that doesn’t look like you just tacked on another $100.00. They will assume there is a bunch of little stuff that adds up to that number. It’s the same psychology behind why every infomercial sells their product for $19.99 not $20.00. Those pennies don’t make much of a difference, but the concept is well tested. So try not to have your misc line with numbers that end in $.00
Also, if your misc line is on the edge of breaking into a double or triple digit number, or the next multiple of $10 / $100, manually adjust it to keep it a bit below. It’s another similar psychological tactic as above.
- For example
- $289.22 vs $305.80.. it pushed to the next $100, try to keep it under $300 in this case.
- $97.58 vs $103.22… even though it’s only about a $6 difference, the 3 digit number seems a lot bigger.
Are you thinking, “My clients will never go for it”?
You’ll find this experience helpful, this is a real world example from one of our clients:
“We added about 3% on every invoice with hardware to cover our miscellaneous expenses. We weren’t breaking out every connector or small cable, so it made sense. We also used it to cover shipping costs and delivery of products to the job site. There were a lot of things listed in the line item on our invoices, so most clients didn’t even question it. Over time, we got it to about 6%. Like anything sales related, we could discount it or remove it if the client took issue with it, but for the most part it wasn’t even questioned. We had to make sure that we explained what it was, in a way where they wouldn’t have even thought about it. Keep in mind retailers like Best Buy will sell the TV, but then you as the consumer have to go get it, or maybe it was shipped but you have to bring it in the house and if it’s a big TV that can be a big job. Now you have to unbox it carefully and then there’s still a bunch of trash left over that retailer doesn’t take care of. What about the old TV and mount? The old cables? All of those little things can be brought up and the client will usually understand why you’re charging for it.”
This is likely the ‘Quickest’ Win that we have… you won’t need approval from your clients, there may be some internal resistance from your sales team, but hopefully the pointers above will be helpful in overcoming them. In the end, as mentioned, you can always remove the line if a client refuses to pay it, but we’re confident you’ll see that as an exception more than the rule.
Hopefully this gives you some ideas on how to make sure that you’re getting some extra money on each project.
As always, if you have any Quick Win ideas or questions, please drop us a line. We’re here to help!
COVID-19 Note: You have no doubt already made changes to ensure the safety of your teams and your clients due to the coronavirus. This misc line item can be explained to clients that this helps cover the costs of small parts, PPE and education of our teams on how to keep everyone safe. As you’ve already realized, masks, sanitation wipes / sprays and foot covers are not free. Not to mention the time it takes to train your teams on safety protocols.
