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Thread: Let's Play "What Would You Charge"

  1. #76
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    Quote Originally Posted by Ross Moshinsky View Post
    This site illustrates what's going on in the engraving industry. You have "real businesses", "home businesses", and "hobbiest businesses". As a result, you see different thinking, different situations, and different pricing practices. It's very easy for a home business to charge less. They don't have any real additional fixed costs. As a result, they can easily afford to charge less. Imagine if rent, utlities, ect all went away or went down to essentially 0. It makes bidding lower on certain jobs easier because you have that flexibility. Home businesses often have to charge less, unless people don't know you operate out of your home. Home businesses, in general, have a horrible reputation for being unreliable. How many B&M stores get customers coming in with a job because their guy dropped the ball or couldn't handle the job?

    The other thing that's going on in the awards industry is there are a few big companies that have really dropped the price on everything. They have low cost employees ($10-15/hr) and are making their money on numbers. They don't want 10 plaques where they make good money. They want 100 plaques and they'll make okay money on each. I contacted one of the companies last month out of curiosity if they could do a very rush job. Their answer was no problem and the price was the same. Who am I to tell them how to run their business? I don't know if they're actually making a profit but I do know they've expanded their business 3 times over the last 10 years. They could be in huge debt with their fingers crossed that they'll keep growing and pay off their debt in a few years.
    Quote Originally Posted by Bert Kemp View Post
    My point exactly Scotts statement doesn't hold water. If he doesn't adjust his prices for what the market will bear he will lose. He's getting 12 today but whats his name is doing it for 11 so who gets the job.
    I run my business form my garage (well, basement actually)... but you can bet your sweet bippy I don't charge basement prices. I did when I started, and that quickly grew old. I wasn't making a true "profit". I think Steve and I would be competitive in pricing models. And while I may have lower overhead (no employees, no building rent, etc.), I feel no need to reduce my prices to get business. All of my business is word of mouth, not a shred of web advertising (well, advertising of any kind).

    My workshop is down... has been since I moved into the new house months back, which means I'm sending all of my work to a sub-contractor(s). I hate taking less profit, but I'm still making a profit with very little work. I trust this small group of people, and I know their quality is to my high standards. Occasionally I have to step in with new projects to make sure everything is just right, but that's mostly a one-time shot. It will do until I can start taking the work back in house again.

    But because I charge the prices I do, like a real business, I can afford to eat some profit via sub-contracting... I keep my business running, which means I don't lose special customers. If a typical garage business loses their workshop (or just the laser), how many of their customers will be lost?
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  2. #77
    Bert, I think you've grossly misunderstood what I've said. I did not say that the price in every market was the same. I said the price is what the market will withstand. If the market in rural USA is $6, then the value of that service is $6. If the market for the same item in Manhatten is $18, then the value is $18. What I said was that we set our price based on the market value of the product based on competitive analysis in our area. We don't offer different pricing for a two location customer verses a 20 location customer when they are ordering the exact same item and quantity. The market set the price, not the customer.

    We must be doing something right, we've been featured in several trade magazines, made the cover of a sign magazine, and get to pick and choose which customers we want to work with for the most part. If that means we have no idea on how to price jobs, I guess we will stick to not knowing.
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  3. #78
    If I can have lower cost I will still try to get top dollar. The problem with our business is determining what the going rate is. On some items it is easier than others. Every time I try to look at what others charge I keep finding cheaper until it is too cheap to be worth it. So I just go back to having to think for myself.

    I try to simplify my decisions whenever possibly. What goes on inside my head, four walls, etc is what I know. It is much harder to find the truth from customers. I try to just stick with knowns vs guessing unknowns. In my business I just figure customers can lie, but i can't. I also know I can't be everything, to everybody, every time. Some customers I just can't please.

    I routinely have to be the best value for my customers whether I am in a bid situation or not. I seldom have the luxury of knowing what the right answer is.

    In the past 40 years I have had to deal with some things, including people with no overhead that were going to put me out of business. I'm still here and they aren't. Sometimes we charge more and get it. I also have had times where I am just not getting a job being cheaper. At the beginning of the day my goal is to make a profit. Not break even or lose money. Since I am not that smart or can tell the future I try to get more money whenever possible. We will all do what we need to survive. I just don't like to start out in survival mode.

    Recently a large account asked me to lower my price. It came from above the people I deal with. It would have been really easy to cut price and keep moving. I decided to say no. Why stop at no? So I also included what my value is as a vendor and some documented instances. I also am going to do a case study on an upcoming proposal to change a part. I proposed the change after visiting there shop floor. It will be neat to put a dollar amount on what my expertise saves them.

    answer this:
    Why would you want to give up profit?
    Have you ever had formal request to lower prices?
    Have you ever had to justify your price or value?

    Now, I have given things away or done things cheaply. I have had my reasons. The only requirements for me are am I aware of the reality of the situation and are my reasons satisfied.

    I don't really care that much what others do. I would probably care more if I had some way to control it. I care more about what I do, as that affects me more.
    Last edited by Mike Clarke; 07-03-2015 at 12:21 AM.

  4. #79
    Fundemental rule #1: Don't take a job if you're not happy with the price.
    Mike Null

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  5. #80
    The amusing thing about that Mike Clarke is , another part of the chain increased price, they asked you to reduce so they could either keep the same price for their end product or make a little more profit from your reduction.
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  6. #81
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    Quote Originally Posted by Neville Stewart View Post
    The amusing thing about that Mike Clarke is , another part of the chain increased price, they asked you to reduce so they could either keep the same price for their end product or make a little more profit from your reduction.
    That's what Buying Departments are paid to do, get best value at lowest cost. Which is why manufacturing in places like the far east has taken off

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  7. #82
    Quote Originally Posted by Neville Stewart View Post
    The amusing thing about that Mike Clarke is , another part of the chain increased price, they asked you to reduce so they could either keep the same price for their end product or make a little more profit from your reduction.
    Could be. It wasn't all that amusing to me at the time though! Eventually I can look back on things and laugh, but you just know some wounds are going to need more time to get over.

    My thought process: There is no way of knowing that. I could have thought up any number of scenarios as to what the motivation was but again no way of knowing. Waste of my time worrying about somebody elses internals. What to do? Worry about my end of the deal. I don't want to lose the account because of the profit. If I remove the profit then it doesn't matter. So for it to matter I have to keep the profit.

    One thing I did was call the guy I deal with and try to educate myself on the situation.

    Bottom line is I had to make a decision and take a risk. No matter what it was on me and I was the one that was going to Win or Lose. This just happens to be one I won. For now. Matter of fact I need to go in today & tomorrow to run some jobs for them. These may be the last 2 jobs I ever do for them. You never know.

    -----------------------------------

    Your comment also reminds me of how some customers will be as 'thrifty' as possible on price, yet turn around and not provide a tax exempt certificate. So my time is not as valuable as their money, but their time is more valuable than their money. All they need to do is get me the tax exempt certificate and save 8.75% tax on every purchase until the TEC expires and it is too much trouble. Another motivation not to reduce price for me. Ultimately money is not the driving force for them. BTW tax exemptions can be a can of worms. Many customers don't understand what classification they are in. Some think they are exempt from sales tax and are not.

  8. #83
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    It looks like some folks are overthinking this. The reason I can do it at a low price is simply because my laser is usually not running early in the week. I also have two employees (college kids/summer help) that can run these while doing their other work. I feel it is better to make a small amount of money as opposed to making none. I had a young man quit recently because "I am worth more than you are paying me" and I know that he is now out of work and making nothing. When my laser isn't running, it is making nothing too. Granted, I won't get rich off of a job like this, but I won't starve either.
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  9. #84
    And that might be a great strategy for you right now. However, if you price them low, and then you get slammed with other work that pays twice as much, then what? That's the reason some of us price to the market. No matter if I'm a one man shop at home, or a 10 people company with 10,000 sq. ft, the price is set by the market.

    What tends to happen (seen it many times), is people price things really low because they have "low overhead", then they get flooded with business because of their low pricing. Then they start growing and they end up growing into a place that has bills, lights, rent, other utilities, insurance,dumpster, etc, and with all of that added in, now they can't do the work for the "low" prices. Once that happens, they start raising their prices to cover those things. When they do, many customers go looking for the next cheapest guy in to pop up on the scene. Then they are left with all the expenses and few of the customers. I've watched it happen many times in our area.

    If you set the price to the market, then it wouldn't matter where you were working from or what you were working with.
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  10. #85
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    Steve, you keep referencing that the "price is set by the market" and that we should "set our price to the market"......can you explain that better? And in this example with the cutting boards, what is the market price and how did you calculate it?
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  11. #86
    Neil

    I am a one man home based shop. In the past 12 months I have spent over $7500 in maintenance and repairs and replacement of equipment. In your plan have you accrued that much to cover those expenses? Mine is a business, not a hobby so I have to plan such things.
    Mike Null

    St. Louis Laser, Inc.

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  12. #87
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    The two most common ways of determining market price for a good are:

    1) Determine all of your input costs x your profit multiplier = price you charge. This is the most simplistic model, and probably the most commonly used because it is fairly easy to figure. However it only works if you factor all your costs. Aka your time cannot be figured at $0 cost, and your machine cost cannot be figured at $0. Everything that goes into your end product must be figured from start to finish. Additionally you should factor for some percentage of errors in your formula. The mistake many businesses make is they always factor for best case, and when things don't go 100% perfect, they go out of business.
    2) Look at all the businesses around you and/or you are competing with. Look at the lowest and the highest priced. Are they offering the exact same services as you? Or are they offering more/less services? Aim for your price to be somewhere in the middle to high end if you offer the same or better service, in the low to mid end of that scale if you offer worse service or less features. Then adjust over time, if you find you are getting a lot of jobs try moving your rate up 10%, not enough down 10%, etc. until you find the proper "market rate" for your service/product.


    Quote Originally Posted by Steve Clarkson View Post
    Steve, you keep referencing that the "price is set by the market" and that we should "set our price to the market"......can you explain that better? And in this example with the cutting boards, what is the market price and how did you calculate it?
    Last edited by Keith Winter; 07-06-2015 at 7:51 PM.
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  13. #88
    Just a quick real life, example here. We hadn't done many banners. It's not something we wanted to do, or had much interest in, but we'd get asked from time to time if we made banners. Not too long ago, we had a request for 1/2 a dozen banners that were 4' x 8' (32 sq. ft.). Since we hadn't done many, and those that we had done were more for playing around with the printer or doing something for our better customers as a favor, we picked the phone up and called something that rhymes with MastSigns. "How much would (6) 4' x 8' banners be with us supplying the proper artwork, ready for print?".

    $320 per banner ($10 per sq. ft.).

    Okay, there's one data point on the market. If a nationwide company is charging $10 a sq. ft., and the ink is costing us .25 cents/sq.ft, and the material is .14 cents/sq. ft, I've got .39 cents plus my time to setup the print job and put a hem and some grommets in place. What would my strategy be? Sell them for $2 per sq.ft? Why? Why in the world would I charge someone $2 sq. ft. when if they go to my competitor, they'll be paying $10 sq. ft? That's just not smart business. You don't have to be at $9.89, but there's certainly a lot of room for profit there. Charge $8 and roll on. You'd still come in $64 cheaper per banner than a national chain and a lot of people want to support local businesses. We did just that, charged $8 per and got the job, made really good money, they were happy and said they'd be back next time they needed them because of our pricing.

    That was a $1,536 job that we could have charged $2 sq ft on if we wanted to lowball, and gotten $384. Which check do you want to deposit in your company bank account, the $1,536 or the $384?
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  14. #89
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    A banner example is way too easy.....how about an engraving example? There are significantly more variables in engraving than there are in printing a banner. Again, what's the market value of the cutting board example? Can you give me a price for what a "nationwide engraving company" would charge?
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    If you have an apple and I have an apple and we exchange apples then you and I will still each have one apple. But if you have an idea and I have one idea and we exchange these ideas, then each of us will have two ideas... George B. Shaw

  15. #90
    Quote Originally Posted by Steve Clarkson View Post
    A banner example is way too easy.....how about an engraving example? There are significantly more variables in engraving than there are in printing a banner. Again, what's the market value of the cutting board example? Can you give me a price for what a "nationwide engraving company" would charge?
    Pick the phone up and call them. There are plenty of nationwide companies that offer laser engraving. It doesn't have to be a nationwide company, I used that as an example because it's recent in my mind, but the same rules apply. Call around, get pricing, do the calculations Keith talked about.

    It's clear that many in this thread don't wish to go that route, and are happy at the lower end of the market. I'm just not one of them.
    Last edited by Scott Shepherd; 07-06-2015 at 8:48 PM.
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    Real name Steve but that name was taken on the forum. Used Middle name. Call me Steve or Scott, doesn't matter.

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