Pricing your Service

[baileyuph]

As your skills, knowledge, technologies improve the overall business performance and profits grow, do these factors make you think your prices should be lower?  Do you ever feel guilty by your shop rates?

Don't consumers think they pay too much?

Or is the rule, if you can get it, go for it?

What is your feeling about all this?

Doyle

[sofadoc]

True, we find faster, more efficient ways to produce the finished product. But as the cost of living rises, the two seem to offset each other.

Don't consumers think they pay too much?

I'm sure they do. I suspect that customers of ANY trade or profession think they pay too much.

Or is the rule, if you can get it, go for it?

Whether we want to admit it to ourselves or not.......yes, I believe that IS the rule.

I firmly believe that the cost of ANYTHING is based solely on what the consumer is willing to pay.

[mike802]

I firmly believe that the cost of ANYTHING is based solely on what the consumer is willing to pay.

So true, a free market will always control the prices of good and services.  That being said I have found in "my area" that it is nearly imposable for upholsters to charge rates consistent to what a plumber, mechanic, or an electrician can charge.  In my area people spend their money on necessity items and upholstery is considered a luxury.

My shop rate is based on my overhead plus a % markup for making a profit, so no I do not feel guilty, I would classify my feelings more like frustration. >:(  Frustrated because people come to me complaining about the cheap junk furniture they bought thinking I can work mearicals for them for less they they payed for it in the first place.  Or I tell them I can build them a new chair that will last for 100 years, they like that until they hear the price.  Many end up just replacing the junk with more junk, a never ending cycle.  They never stop to think that it cost less over the long term to buy quality.

So many people talk about bringing manufacturing back to this country, buying local and supporting the local economy, and that is all good, until it comes to putting their money where their mouth is.  

[Rich]

Doyle,
In this business, there are so many factors that contribute to making small profits or just losing it altogether, I see few times when a business owner should feel guilty about his pricing. I think if you're doing the right job, not shortchanging the customer and generally being fair, there's no reason to feel guilty about making a decent profit when the job allows.
As far as how to charge as skills and knowledge increase, I think customer's see the lack of those things as reasons to pay less, so why shouldn't the price go up as the level of expertise goes up?
At any rate, I've always taken the position that the customers will ultimately determine the price, so on those occasions when you have been able to convince them that your price is justified and they are happy with  he results, everyone should be happy!
BTW, the words I don't like to hear are "Oh, that's all?"

[Mojo]

I have struggled with a guilty conscience since I began specializing in canvas work. I set my prices by calling around and checking my competitors prices ( mainly the big canvas makers ). I set my price below that by about $ 150 for a quad slide order.

It worked out good as I was slow at making them in the beginning. But then I found alot of  techniques that shaved huge amounts of time off my production clock. I now am at approximately $ 135 per hour which I consider to high. But then on complex awnings I am down around $ 75 per order. These numbers are all profit numbers as I calculate my labor after all materials and overhead is taken into account.

I have though about dropping my prices as I feel like I am gouging people. Then again I deliver one of the very best products in its class and my competitors have yet to match my warranty or quality. So should buying the best equate to paying more ? I know that as a consumer I am always willing to spend more to get the best. many of my customers are finding this out as I am doing fabric replacements for people who bought my competitors replacements and now after they have failed are back once again after 2 years buying more. ( My warranty is for 3 years).

Still what I try and do is offset my profit margins with pro bono work now and then. Maybe its a feel good thing for me. But I still feel that a successful person should give back to their community and if this means making dog beds for the local ASPCA shelters so be it. I also donate money to the Leukemia society and Bone Marrow foundation. I am a firm believer in giving back.

Still I have days I struggle with what I earn. But my wife likes to remind me that I do not set my prices, the market sets them for me.

Chris

[Mike]

I get the occasional call from the young guy who may think he can get a full cover on his boat for $400. and they ask a  ballpark  price over the phone and that's it.  I will lower my labor rate if its a easy job id like to do ,but if im busy I usually dont

[JDUpholstery]

My rates have gone up as I gained more confidence in my skills, the only time I really get any complaint about my rates is when people bring in small jobs and I tell them up front I have a 1 hour minimum (45 bucks) and the job only takes me 15 minutes or so.....I have learned from experience to tell the customer to drop it off and come back tomorrow for it...because if they cant see me do it that fast, its not as bad!

I have had some furniture customers try and bring me a cheap couch, like a long sectional with chase lounge on one end, they said they got it for 200 bucks and wanted to get it recovered, I told them the price and they almost screamed

[baileyuph]

Interesting reading, easy to relate to all input.

I stay busy in the business, no question and over time, I do pick up significant efficiencies that sometimes even doubles profits.  

There are a lot of comments around, we see, hear them from everywhere regarding greed, especially in the social sector of our world.  The younger consumers, who work every angle to buy cheap, usually think my prices reflect greed.  I often think it is; because they can't buy the service right off the internet; hence I am an overpriced greedy business owner.  Truthfully, I don't think they understand all that is involved in upholstering and how scarce quality skill is in most cases.

So, like most of you, I work long hours, get my price, and beieve me - pay the taxes at all levels, in the end.  The emphasis, going forward, is to continue doing it better but faster without sensivitiviy to profits being too high.  Isn't it interesting when a business loses money, it usually can't expect any sympathy support.   ;) I think it is usually thought of as a loser instead and a dummy doesn't deserve consideration.

I think it is safe to assume the younger market is more skeptical of business people.  Wonder why that is?

Doyle

[gene]

Not to beat a dead horse, although when I was a kid... Well, never mind, that's another story for another time.  :o

I think we are changing to a  s o c i a l i s t  society where the government provides everything for the people, or "the peoples" as Zorro the Gay Blade would say.

Young people have grown up with politicians, the main stream news media, and Hollywood saying the corporate world is all about greed and greed is bad.

This, by the way, is not necessarily a criticism, but rather an observation. And I could be wrong.


I learned that there are two ways to price products: The price I want, and the market price that people will pay. I don't see anything wrong or greedy with "the price I want" always being higher than the price that people will pay.

Business is about making profits. Government is about spending. They are two mutually exclusive ways of looking at the world.

Big corporations got into the profits of manufacutres by saying, "Hey, if you make that part year after year, you will experience efficiancies, so we want a 10% lower price next year." The joke was that in 10 years manufacturers would be making the parts for free.

gene

[byhammerandhand]

Still I have days I struggle with what I earn. But my wife likes to remind me that I do not set my prices, the market sets them for me.

That's true:   Set your prices too high and you won't have much business.   Set your prices too low and you'll go unprofitable and out of business.   In my econ classes, this was expressed as price set by marginal revenue = marginal cost.  This is the mathematical balance point of maximizing profit.  Profit is not a dirty word -- without it, we would all eventually go out of business.

Let's say you drop your prices by 50%.  Then what happens?
* You get a lot more work and can't keep up.  Hire employees, train them, they leave, train more, quality goes down, you spend time managing, training, fixing their mistakes or eating time and material costs for failures.

or

* You work twice as many hours and end up making the same take home.

If the market will bear it; it's yours for the picking.   Do you really think a CEO tells his corporate board that he's not really worth $15 million a year?

I have though about dropping my prices as I feel like I am gouging people. Then again I deliver one of the very best products in its class and my competitors have yet to match my warranty or quality. So should buying the best equate to paying more ? I know that as a consumer I am always willing to spend more to get the best. many of my customers are finding this out as I am doing fabric replacements for people who bought my competitors replacements and now after they have failed are back once again after 2 years buying more. ( My warranty is for 3 years).


Still I have days I struggle with what I earn. But my wife likes to remind me that I do not set my prices, the market sets them for me.

Chris

P.S.  My wife (a retired CPA who can't seem to put down the green visor) does all our personal expenses on Quicken.  Our biggest expense last year -- drum roll..... Taxes.   25% of our expenses and that does not include any of the sales taxes we pay on everything except most food from the grocery store.   Second expense - health insurance and healthcare costs (and yes, we're both healthy)

[baileyuph]

Around here there is a variance in just about any market for stuff like we do.  There are some who never ask the price and there are others who seem to ask only the price and probably don't have a dollar in their pocket.

BTW, Hammer, do you build custom wood fruniture or is it more novalty type market (conversation pieces)?  I hear the Amish around us do considerable wood furniture wood building.

Doyle

[byhammerandhand]

I don't custom build furniture, except for myself and family.   Got a bedroom set done for one daughter last year, did two dressers last fall for another, bunch of Christmas presents for kids and grandkids, and ready to start bunk/twin beds for granddaughters.    I try to squeeze this in on weekends and evenings when I'm not otherwise busy :-)

It just doesn't work well to do furniture construction if you don't have longer periods of un-interupted time.  Halfway into a glue up and the phone rings, just get re-oriented on something and you have to leave to do a service call, etc.

There are lots of Amish furnituremakers in Ohio.  Most are north central (between the NE corner of the state and Columbus.  There is a smaller colony about an hour east of here.   I used to go to an annual tool auction at one of the farms there.    Most of the Indiana Amish are across the northern fringe, I think.   We used to travel US 6 and see a bunch of kitchen cabinet factories and RV factories that were staffed by Amish men.

I stopped in to see a friend who's a full time custom woodworker.  He's had a rough few years making a go of it.   He has started making items to speculation (smaller things mostly, bowls, boxes, kitchen and sewing trinkets, cedar chests) rather than waiting for custom orders.

Around here there is a variance in just about any market for stuff like we do.  There are some who never ask the price and there are others who seem to ask only the price and probably don't have a dollar in their pocket.

BTW, Hammer, do you build custom wood fruniture or is it more novalty type market (conversation pieces)?  I hear the Amish around us do considerable wood furniture wood building.

Doyle

[JDUpholstery]

byhammerandhand
"I stopped in to see a friend who's a full time custom woodworker.  He's had a rough few years making a go of it.   He has started making items to speculation (smaller things mostly, bowls, boxes, kitchen and sewing trinkets, cedar chests) rather than waiting for custom orders."

I have a friend with a custom wood shop just down the street from me as well, and he has had a bad year with the start up....it saddens me because he comes in and sits in his shop all day with nothing to do but he knows that he needs to be there in case a customer does show up....I plan to send my pontoon frame rebuilds to him, just so I can help a fella out some

[Mojo]

Our own Mike802 makes some amazing furniture. He is what I call a master craftsman. I love watching his videos and have learned so much from them.

The next time I go to buy new furniture I will order it from him. My Great Grandkids will be using it after I am dead and gone.

Check out some of his work and his videos along with his website. His couches and chairs are amazing and what I call heirloom pieces.

No idea how his business has been. How about it Mike ? You been busy ? Sell any of those firelog carriers ?

Chris

[jojo]

This is an interesting topic. I think the way you price also reflects your confidence in your work.
I tend to undercharge consistently. I just can't get out of the mindset that I my shop is at home, so I don't have lots of overhead, and deep down, maybe I don't feel like I deserve a good price for my work. Despite 90% of my customers being referrals, I always get nervous when it's time to turn over the work to the customer and collect the money.  And just about always, they are more than thrilled with the job. So that's something I have to work on.
I admire you guys who say "my time is worth $x and there's my price." I feel like I have to beat everybody else's price, but in the end, only about 10% of my customers care about the price.
Yeah, I need to get my head right.