raising prices- is it worth it?

[Joel Ifill]

Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

You charge 18 and tell them you gave them a price break.

There's some free online classes on pricing strategy that should help. A good rule of thumb is that you need to be making at least 60-85/hr as a "consultant" to make enough money to be worthwhile, not all business hours are billable and there's always overhead. I personally charge around 60/hr but I charge for my setup and design time not material or laser-on time. It works for my jobs as they are all about the same run time so I'm not getting orders that take multiple hours to to run. I also don't do this fultime as my other business paid for the laser so I just do it for pocket money. I would rather charge higher and get more professional clients then come on the low side and get all the finnicky people who want something cheap and fast.

[Mike Lassiter]

Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

IMHO - you prepared the price quote knowing they were in a rush. You came up with the price you would be happy with under the circumstances involved. So afterwards you find out they where prepared to spend $20 each. I don't see that making any difference. If this was me, I would give them the price I had planned to quote them and they can feel good that they got someone to do them for much less than they thought they would have to pay. You will make the money you wanted to and they will come in under budget. Win for everyone. I think to raise the price after learning they were willing to pay more would be greedy and taking advantage of them.
Interested in others responses.

[Scott Shepherd]

IMHO - you prepared the price quote knowing they were in a rush. You came up with the price you would be happy with under the circumstances involved. So afterwards you find out they where prepared to spend $20 each. I don't see that making any difference. If this was me, I would give them the price I had planned to quote them and they can feel good that they got someone to do them for much less than they thought they would have to pay. You will make the money you wanted to and they will come in under budget. Win for everyone. I think to raise the price after learning they were willing to pay more would be greedy and taking advantage of them.
Interested in others responses.

Interesting take on that Mike. I was told years ago to always ask for what their budget was. It took me several years before I felt comfortable doing it. Now I don't mind asking at all. It helps a lot. If someone calls and wants to talk about a project, we tell them we are capable of doing the work they want, and then it requires a lot of time to get all the quote worked out, materials, outside services, etc, and we're not on the same page up front, then we've just wasted a lot of time quoting something that we can't do. For instance, here's a real life example. Got a call about 2 years ago, customer in a panic, needed the glass that candles are in "Laser engraved". Their words, not mine. They needed them in 3 weeks. How many? 10,000. Got them to email me the design. They wanted samples done by the next day and were getting ready to get in the car and bring me samples to engrave. The design wrapped all the way around the entire glass, like vines. I called them back, told them a couple things, one, laser engraving is the wrong way to do 10,000 of them, and then I asked what their budget was. They said these went into Wal-Mart. I asked their budget and they said .60 cents each. Had I not asked that, I would have wasted the time of having them bring glasses in, me setting up the files, engraving them, and then telling them they were $8 each, only to have them leave in disgust and having wasted more of their time.

It stopped all of that up front in literally less than 15 minutes time, total.

I haven't quoted our customer anything on the job I posted, but what it did do was allow me to come up with a higher end option for them. One piece will be in the $12-13 range, and one will be in the $19.00 range. I'll present both and they can make up their own mind. Without knowing they had a $20 budget, I wouldn't have stayed late tonight and worked on a higher end sample for them. In the end, I didn't take advantage of them, I provided them options and they can make the call.

[Gary Hair]

Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

I would charge the price I feel comfortable with regardless of what they have in their budget.

[Mike Chance in Iowa]

I haven't quoted our customer anything on the job I posted, but what it did do was allow me to come up with a higher end option for them. One piece will be in the $12-13 range, and one will be in the $19.00 range. I'll present both and they can make up their own mind. Without knowing they had a $20 budget, I wouldn't have stayed late tonight and worked on a higher end sample for them. In the end, I didn't take advantage of them, I provided them options and they can make the call.

This is how I would have approached it too. It's something I hope would happen to me when I'm looking to make a purchase and didn't necessarily know I had other options available.

[Keith Winter]

Haha this sounds very much like the how would you price it long discussion a few months back I agree, always ask budget first, it just makes sense. Saves you both from wasting time.

Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

[Kev Williams]

As for my being okay on $40 an hour jobs, I should clarify: NOT if they're "babysit" jobs. What I'm talking about are the "load-the-machine-and-come-back-in-an-hour-when-they're-done" jobs. For most people this could be a killer, waiting around for the machine to get done making $40. But that's exactly why I have so many machines (4 lasers and 10 tool engravers). While one machine (or several) is running a bigger job, that leaves me free to fire up a couple more machines, or at least get them ready. Currently I have 3 tool machines diamond etching a 700 count platter job. And this isn't a $40 an hour job, it's closer to $75 an hour, and that's per each running machine. Each tray takes a few minutes, so one person- my BIL- can keep all 3 running machines easily. And I'm free to do other stuff...

But it's not all gravy, some days are spent doing nothing but paying bills, ordering stuff, going thru emails, and trying to organize the work. It's like swimming in mud. But the heavy machinery days make up for the heavy office equipment (non-paying) days. For some reason, I prefer the heavy machinery days!

Now, as for raising a would-be quote based on someone's budget, that all depends, but I don't think it's "bad". Last week a lady needed a rush job that another shop didn't deliver in time. A few 2 x 3" lasered trophy plates. My normal price is around $9 each if they're easy. When she asked how much I said "less than they charged you--" and she showed me the other shops quote sheet- just under $19 each. There were 3 plates, I told her $40 total... I made an extra $13, she saved $16, win win!

[Glen Monaghan]

Now, as for raising a would-be quote based on someone's budget, that all depends, but I don't think it's "bad". Last week a lady needed a rush job that another shop didn't deliver in time. A few 2 x 3" lasered trophy plates. My normal price is around $9 each if they're easy. When she asked how much I said "less than they charged you--" and she showed me the other shops quote sheet- just under $19 each. There were 3 plates, I told her $40 total... I made an extra $13, she saved $16, win win!

Reading this thread, I was suddenly struck with the thought that I've heard about, and experienced the effects of, "racing to the bottom" wherein competing businesses keep undercutting market rates to draw business, but I've never heard of anyone "racing to the top"... Guess it's a little bit like the prisoner's dilemma.

[Mike Lassiter]

Interesting take on that Mike. I was told years ago to always ask for what their budget was. It took me several years before I felt comfortable doing it. Now I don't mind asking at all. It helps a lot. If someone calls and wants to talk about a project, we tell them we are capable of doing the work they want, and then it requires a lot of time to get all the quote worked out, materials, outside services, etc, and we're not on the same page up front, then we've just wasted a lot of time quoting something that we can't do. For instance, here's a real life example. Got a call about 2 years ago, customer in a panic, needed the glass that candles are in "Laser engraved". Their words, not mine. They needed them in 3 weeks. How many? 10,000. Got them to email me the design. They wanted samples done by the next day and were getting ready to get in the car and bring me samples to engrave. The design wrapped all the way around the entire glass, like vines. I called them back, told them a couple things, one, laser engraving is the wrong way to do 10,000 of them, and then I asked what their budget was. They said these went into Wal-Mart. I asked their budget and they said .60 cents each. Had I not asked that, I would have wasted the time of having them bring glasses in, me setting up the files, engraving them, and then telling them they were $8 each, only to have them leave in disgust and having wasted more of their time.

It stopped all of that up front in literally less than 15 minutes time, total.

I haven't quoted our customer anything on the job I posted, but what it did do was allow me to come up with a higher end option for them. One piece will be in the $12-13 range, and one will be in the $19.00 range. I'll present both and they can make up their own mind. Without knowing they had a $20 budget, I wouldn't have stayed late tonight and worked on a higher end sample for them. In the end, I didn't take advantage of them, I provided them options and they can make the call.

and that's allowing them to get more than they thought for a little more if they want it. I agree with you. You aren't attempting to take advantage of them, and giving them a chance to upgrade I bet will give you much more business as they will see you are trying to provide them great service for a fair price.

[Mike Lassiter]

I would charge the price I feel comfortable with regardless of what they have in their budget.

sort of how I view it too. "my price" doesn't depend on their budget, but I also agree with Scott that knowing what they have in mind spending allows one the provide options that could allow the customer to upsell themselves on getting more since they know what they can send and decide for themselves.

[Robert . Payne]

Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

When a client obviously states their budget is above what you were going to charge I always go slightly lower than their quote. In this case probably $18-$19. And due to the extra profit I'll likely try to accelerate when their project gets done so they are even more pleased with the price they paid ( which is less than what they offered as a budget line ).

[Prashun Patel]

Charge what the customer is willing to pay. And give them the best support and service for that price.

[Mike Clarke]

Reading this thread, I was suddenly struck with the thought that I've heard about, and experienced the effects of, "racing to the bottom" wherein competing businesses keep undercutting market rates to draw business, but I've never heard of anyone "racing to the top"... Guess it's a little bit like the prisoner's dilemma.

That is what always struck me as well. A person gets into a business due to the profit potential. Then the plan is to cut the profit out to get more business. So cut profit to make profit is the business model.

Are you guys talking gross, net or profit on the $/hour?
I have had jobs in the $350- $700 range (at the spindle) but that does not account for cost. When I say 'at the spindle' that denotes the time it took for engraving. It does not factor in all the time on a job such as applying adhesive. I just look at the job and if all operations are similar I treat them as a linear relationship to the engraving production rate. It is just a quick way to look at a job and see if I am having higher output.
Increasing production rate is the only way to gain a higher profit after a price is settled on. In one case I was able to go from 4 signs an hour to 7 signs an hour. I never could get 8 an hour. That was dramatic. Even more dramatic was having one job I did end up taking 1/3 the time after making some changes in the production process. That can only happen if I get repeat jobs where it is worth analyzing and developing a better process.

The bottom line for me is the more money I can get the easier it is to make a profit. Reducing cost can only go so far. I have to do both to get the most out of every job. Some jobs just need to have a higher price to be even worth doing as there is no way to increase production on them. Certain cost are fixed. Like some of you we are a full time business, this is our day job. I have no plan B other than to make it with plan A.

[Scott Shepherd]

For what it's worth, our customer came in today to pick up the samples. They didn't even want to see the lower end sample. They wanted 200 pieces, saw it, immediately asked if they could increase the quantity to 250. So 250 at $18 each.

[Tony Lenkic]

Good for you Steve,