Let me ask you a very sensitive question, would you ever consider sharing your security guard billing rate breakdown with your customers?
If you said “No” I think you should really reconsider.
In this article, we’ll talk about why I think it behooves all security guard companies to share their security guard billing rate breakdowns with their customers. I think that as an industry, security guard companies have operated with much less transparency with their customers than what was possible. I also believe that this lack of transparency has hurt the industry in many ways, which we’ll talk about in a different article. But for now, let’s talk about transparency in your billing rate.
As I said above, I think security guard companies should always share the breakdowns of their billing rates. I know many people reading this article think that the idea of sharing your billing rate breakdown borders on sheer insanity…or maybe even stupidity. Well, let’s talk about it.
One of the main reasons that the security guard industry struggles, is that we do not attract enough talented employees to provide the high-quality service that security guard company customers desire. So you may ask, what does disclosing your billing rate have to do with attracting high-quality security officers.
Take a Minute and Walk in Your Buyer’s Shoes
Let me ask you to consider this. Most security guard service buyers do not have an understanding of the cost associated with providing security guard services. They don’t understand your turnover, your cost of risk, the cost of uniforms, or any other cost — other than your wage rate. As such, most buyers believe that the difference between your wage rate and your billing rate is what your company takes home as profit.
So if that is the case, which I believe it usually is, when a security guard company presents a buyer with a proposal that has a security guard billing rate of $28/hour and an officer wage rate of $17/hour, the first thing the buyer is going to say is that you have to drop your billing rate. The reason that buyer says that is the buyer believes that your company will make a profit of $11/hour on this contract. Although your buyer wants you to make enough money to stay in business, no buyer wants you making that much profit.
At this point, you and the buyer have a completely different understanding of what is about to happen next. You on the one hand think “Ok, I’ll have to drop the wage rate to get the billing rate lower”. While the buyer is thinking “Ok, he’s going to shave a few dollars off of that $11.00 profit margin.” Again two completely different understandings of the circumstances. In the end, what happens is that you make less money AND the buyer gets a less qualified security officer because you couldn’t attract good quality officers to fill that post. That is a lose-lose situation for the buyer, your company, and the industry.
Now let’s consider a scenario in which you share your billing rate, your wage rate, and your cost associated with staffing the site. That proposal situates you for a MUCH different conversation when the buyer can see that you are not making $11.00/hour, but closer to $2.00/hour.
Studies Say to Share Your Security Guard Billing Rate
If you aren’t convinced yet, consider there are numerous studies that support cost transparency. Recently there was a cost transparency study published by the Harvard Business School that states:
…just as interpersonal disclosure of intimate information increases attraction, cost transparency by a firm increases brand attraction, in turn boosting consumer purchase interest.
Moreover, an experiment within the study found that diners at a restaurant were 21.1% more likely to buy a bowl of chicken noodle soup when a sign revealing its ingredients also included the cafeteria’s costs to make it. Buyers love transparency.
There is a lot of upside to being transparent with your pricing, as long as you aren’t dramatically more profitable than your competition. With that being said, if you currently share your security guard billing rate details with your customers I’d love to hear about the results. Or if you think I’ve lost my mind, I’d love to hear the reasons why. Either way please feel free to leave your comments below.
By Courtney Sparkman
OfficerReports.com is a software company that provides security guard companies with an easy way to monitor their officers, better manage their operations, and win new business. Take a tour of our software to see how we combine Electronic Reporting, Real-Time GPS based Tour Tracking, and GPS based Clock In and Out into one easy-to-use platform.
