How to price our service comes up here now and then, so I thought this might be helpful for those who aren't content with using "pricing by the hour" as a formula for profitability.
https://www.linkedin.com/pulse/state-advertising-rebelling-against-billable-hour-tim-williams?trk=eml-mktg-inf-m-my-industry-0315-cta-p4
Rich
I hate charging by the hour. You give the customer the price then start adding on for things like, do the springs need to be tied? Does the foam needs to be replaced? Are we putting the brass tacks back on? PU/delivery, etc. And then we start talking fabric. By the time I'm done the customers eyes are glazed over and their thinking maybe I'll just buy new.
Then you get the piece to the shop and start working on it, always keeping an eye on the clock trying to make your $/hr. And if one little thing comes up, like frame repair, you ask your self should I charge extra or just do it. Of course most of the time you just do it but that cuts into your per hour rate so now you scrambling to catch up or working overtime to make up for lost time.
The thing is how else do you come up with an accurate estimate.
Some one posted a while back about Value Added Pricing. I love this method. And for some jobs like repairs it works good. I can come up with a number in my head for a repair lets say $150. But I know the customer will joyfully pay $180 and be just as happy. So I charge the larger amount and everybody is happy. But for a recover job I can't do this. I would be charging $2500 to recover a sofa. That would make me happy but the customer would tell me to get lost.
I don't know a better way but one thing's for sure, estimates are one of the hardest parts of owning a business.
Good question and very important: This isn't a theory but just size up what the market will bear and go for it.
This and related business to what most here do is a dying breed, the market is finding out that there is someone always easily available and that makes a difference in what they will pay.
In a quick review, my mind remembers a couple jobs this week that came and pretty fast I saw that it wasn't going to be easy to get someone to do it because of the actual skills involved. So, by taking the job on the basis of it will "cost" got them to do. One, a lady, gave me a hug when done and said; "thanks you are the only one who even would touch the job". I figured as much. The customer made the decision and in a practical manner this is what the market is all about.
On an item that anyone can and will do - call it cheaply, if there is a backlog, why bother because it will end up costing the shop owner to even do it.
Marketing is as important as anything in what a business does.
Doyle
I was going to reply, but I notice that every time I type in the word S-P-E-C-I-A-L-I-S-T, it automatically changes to spet (see there, it just did it again).
The online dictionary defines spet as a small barracuda.
Why can't I type the word spet (s-p-e-c-i-a-l-i-s-t)?
You just did-twice.
Anyway, I wouldn't worry about it. :)
Rich
The article talks about procurement spets. My daughter is one. (I'm trying to type the word for someone who specializes in something, and it keeps changing it to "spet"). So I guess I'm forced to refer to her as a procurement spet. Or procurement s-p-e-c-i-a-l-i-s-t.
She works for a large aerospace company. Basically, she procures parts for planes.
Vendors try to wine and dine her. They fly in from all over the country just to meet her. All in an attempt to gain favor in her eyes when she's ready to order parts.
What they obviously don't understand, is that she has a company database of approved vendors. She goes right down the line searching for the lowest price on parts that meet the required specifications. All the ass-kissing in the world isn't going to help them sell more parts. And she has absolutely no influence as to who becomes an approved vendor.
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As for the re-upholstery business, I think perception of value is largely predetermined by the retailer who originally set the price on the piece when it was new.
I think (spet) business to business salespeople are funny. They act like my cats just before feeding time-suddenly, they're your best friends. When I go to the dental conferences and walk around the exhibition hall to see the new dental chairs, (spet) they flash a big smile as I walk by and say "Good afternoon doctor, enjoying the show?", I just smile, say "yes" and keep walking.
Rich
P.S. I didn't have a problem (spet)
What the...?
spet ha ha me too.
Interesting read... thanks for the information. As what I would call a hobbyist upholster (I do marine re-upholstery on the side), I always struggle with pricing and estimating. I will say that I generally make descent money on my jobs, but like earlier mentioned, Im always looking at the clock and if I mess up and have to redo something, Im recalculating in my mind my new hourly rate...
I try to bid what is fair in my mind, but always wonder if I left money on the table. Especially when the customer snatches the bid with out a blink of an eye!!
The other problem is I am a bit of a perfectionist...I will redo things if they are not perfect in my mind. I struggle with the difference between painting the Sistine Chapel and what is acceptable quality work.
In my shop, I am meticulous about time. It's all I have to sell because I am a one man shop. Not that we're not selling time in a shop with employees, but the efficiency factor goes up when more than two hands are busy. At least it should, if not, something else is wrong. SSo, my time has to accounted for, but that's for me to know, it's how I gauge my effectiveness. But I don't use it to price except as a baseline. I know I can't go under the amount I have to get for my time, but pricing to a customer I do by a different yardstick. That is where I go more closely to the article by pricing by what my experience tells me the customer will consider to be a fair price. Many factors come into the mix, but I look at it this way. Delays, do-overs and the unforeseen happen and I have to eat them when they're no fault of the customer. If all I did was charger for my time spent, I'd certainly lose in the end.
Fair pricing also goes for jobs I can't get much for because the customer won't pay it. If I need to do the job in a slow period, or I just can't pass up the challenge, I will have to price at a lower rate per hour because that is what the customer percieves the cost to be, but I try to not make that a regular practice for the reason mentioned above, I can't stay in business that way.
In the long run, those who don't mind paying more, make it possible to stay busy. Many businesses operate this way and that's why so many businesses offer discounts. It's advantageous to them to offer them.
Rich