-
If you have a spare 25mins, watch this video about pricing!
I’ve always believed pricing is unique to each company, sure it doesn’t hurt knowing what others are charging, but it’s more important to know your own costs.
It’s too easy to get bogged down with how much the competition is charge compete on price, or work a price out and think it sounds expensive.
I had a conversation with a member of the boards a few weeks ago, which resulted in my getting my head out my backside, and back where it needed to be.
By chance, I stumbled on this video whilst browsing another forum, thought it would come in handy for the members. Whilst it’s based on woodworking, the principle is the same.
-
12 Replies
-
Jesus I would like to know where he is based with those running costs, insurance £150? Equipment £1,000. But do agree I spent 10 years being s busy fool to i started a new accounts man & we started looking at costs & overheads. It’s worth taking a day out with an accountants trained person to do.
-
That’s for a woodworking company, but does seem low.
No need for an accounts person. Spreadsheet and a couple of hours with your invoices or accounts programme… make sure you are sat down though 😆
-
Excellent video and quite inspirational. I think it would be very hard to run a business single handed and with premises. Maybe a 500ft workshop is do-able but anything bigger needs at least two people for the sums to work. He touched on this at the end when he suggested that the 2,500ft workshop would almost certainly need to include employees or the hourly rate would be through the roof.
I think the main reason why many businesses fail is as a result of undercharging. They blame it on "cashflow" but in reality it’s a lack of cashflow.. :awkward: .
-
The overheads and wages are the biggest thing.
No use thinking the vinyl only cost £25, and your making £75 if you did the job for a £100.
Our cashflow is OK, we just need more cash.
I’d split the overheads between the two of us, which is great if we’re both busy on different jobs, doesn’t happen like that.
Since I updated our software, we’re making a lower, more realistic margin, and prices have increased, but not alarmingly.
-
Good find David.
Accurate or not, I think the calculation exercise is the important thing which really is the guys objective in pointing out that is, when everything is taking into consideration properly, most are not charging enough! -
great video, David and I discussed this a couple of years back at sign uk and there-after, knowing your costs is everything.
We base our productive hours at 25hrs a week.. the rest of the time is quoting etc.etc.. nobody can be productive all the time if you’re on your own or just a couple of people!
-
I’ve not had a chance to watch it yet as ever time I open it at home a child suddenly required my attention again (rolls eyes) and I don’t think I can hide in the bog at work for 25 minutes.
But in terms of improving cash flow one thing I have found that has really helped us is a 3% discount (take that as you will) for large jobs that are pro-forma. Normally anything over a £1,000 for us. Maybe had one customer that didn’t bother. Rest have all gone for it. So one am not chasing and two there is more urgency for the customer to pay as they love a “discount”. Think record is about 20 minutes from the quote.
Anyway working for us at the moment.
I think once you have an hourly rate you need to start playing the game of how fast can you do jobs. Granted post heating is post heating, but is this really the quickest way to weed this? I’ve given up with small text now. Weed out the centres and fire it on the van or sign. Possibly saving myself 15mins + sometimes. All adds up.
-
Once you know your costs, you can determine a day rate, half day rate, hourly rate. Provided you can accurately estimate the time required for a job, you can get an accurate cost & quote accordingly.
We know which jobs to refuse from the off, and which jobs to target.
Every job is pro forma with a minimum 50% upfront with us, except those few credit accounts we service.
-
Wasn’t so meaning the estimate of time and more expanding the time.
Granted if your at a restaurants with a customer that has 25 windows to be stripped and you’ve given him a price per hour that’s has to be what it is.But if I had a small van and told the customer it would take an hour to strip, can I get it down in half and hour using certain tools and techniques and then move onto two pop banners in that spare half hour. As then am doubling my hourly rate. Am always looking at things like this.
For example It’s an hour quicker to press all the fronts of 100 t-shirts then all the backs than doing front then back then front then back etc..
Personally for me productivity, even sometimes at a slightly higher cost, is just as important as the hourly rate. Providing your not effecting quality.
-
I think the key point here is that it’s essential to know what your hourly rate needs to be in order to sustain a viable and profitable business. Once this rate has been established in your mind you need to ensure you never drop below this. It’s all well and good to be able to increase productivity by being more efficient to further enhance profits but this is missing the key point – which is to never work for less than the hourly rate your business needs to survive and thrive
-
It certainly sounds appealing to operate from the Northeast, the running costs seem exceptionally low, mine are sadly much higher but the principal is as Phill says, to know your bottom line. It really doesn’t matter what the guy down the road is charging, costs should be based on what it costs you & what you want as a salary. I use a simple excel spreadsheet to work out prices & so far it’s been a bit of an eye opener when you see how a ballpark guess compares to an honest to god calculation.
If I’d used it from the start, I’d have made enough to buy a workshop let alone rent one. -
Our overheads are ‘reasonable’ considering our location and what we’ve got, but when you add it all up :yikes:
That’s the point of the video, it’s no use being really efficient with your time, if you’re not charging enough for your time to start with.
I know there are companies who make their money on certain jobs & customers, and do jobs for next to nothing just to give staff something to do.
Log in to reply.