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Pricing – Reality Check – Wake Up Call?
Posted by Martin Lemiesz on 21 March 2017 at 13:49My business is almost 2 years old now – we have achieved some fantastic things over that time and completed a lot of jobs but still can’t see much money in the bank – theory was to start with reasonable but low prices for the first year to gain some clients – I have been slowly increasing prices in year 2. The feedback we get + some research tells me that we are still 20% -30% cheaper than other local companies but more often these days we get clients who say we are too expensive…#confused – shall I share some prices per m2 with you to see where I’m going wrong?
Martin Lemiesz replied 8 years, 5 months ago 5 Members · 40 Replies -
40 Replies
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Try posting this in the members section as I think most people are wary of posting prices publicly..
Hugh -
quote Martin Lemiesz:My business is almost 2 years old now – we have achieved some fantastic things over that time and completed a lot of jobs but still can’t see much money in the bank – theory was to start with reasonable but low prices for the first year to gain some clients – I have been slowly increasing prices in year 2. The feedback we get + some research tells me that we are still 20% -30% cheaper than other local companies but more often these days we get clients who say we are too expensive…#confused – shall I share some prices per m2 with you to see where I’m going wrong?
My opinion is that your turnover isnt high enough for the margins you are selling at. Either move up price points or turnover (with minimal added cost). Preferably do both. Profit percentages etc dont mean much unless they are attached to a figure.
Also if you can shave off some more cost WITHOUT compromising on quality then, as the saying goes, a penny saved is a penny earnt.
Steff
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20-30% cheaper… that’s £20-£30 you’re loosing on every £100.
Add 25% to your prices, and make more money, with the same overheads. The extra will cover those jobs you loose.
4 jobs @ £125 or 5 jobs @ £100. I know what I’do prefer.
I’ve been doing this 6 years, and was guessing prices on vans, trouble was we were seriously under charging.
You’re always going to find a customer who wants it cheaper, and a supplier who will do it cheaper.
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I’m assuming you have a pretty full workload and there isn’t much spare time for taking on even more work to increase your profits? If so there is a simple solution to your dilemma. Do exactly as David suggests and put your prices up 30%. Not only will you make a lot more profit, you’ll reduce your workload slightly and encourage a better class of customer. Let the price shoppers go elsewhere while you enjoy a better work life / home life balance. And next Christmas and New year take a few days off instead of working all the hours god sends 😉
On the other hand, if you’re not making enough profit simply because you aren’t fully occupied – then you need to attract more customers.
But I suspect that if you really are 20-30% lower than your competitors, then you are most certainly underpricing your work and those that say you are too expensive are talking rubbish..
Probably best if you post some honest example prices here for some constructive feedback from others. It’s in a hidden forum now so only fully paid up members will be able to see it
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Or you could double your prices and maybe only work 2 days a week…… I am being flippant, but only to emphasise a different point of view
This is only my humble opinion…..
Keep growing your turnover , if that means long hours, if it means sacrificing some margin… well thats the cost of building a business. When your business is producing good positive cash flow, and you are building up capital reserves then move your prices up.
It does however depend on what impact your currently pricing policy has on your ability to remain in business and pay your bills.
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quote David Hammond:20-30% cheaper… that’s £20-£30 you’re loosing on every £100.
Add 25% to your prices, and make more money, with the same overheads. The extra will cover those jobs you loose.
4 jobs @ £125 or 5 jobs @ £100. I know what I’do prefer.
I’ve been doing this 6 years, and was guessing prices on vans, trouble was we were seriously under charging.
You’re always going to find a customer who wants it cheaper, and a supplier who will do it cheaper.
#Plan – Thanks
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quote Steff Davison:quote Martin Lemiesz:My business is almost 2 years old now – we have achieved some fantastic things over that time and completed a lot of jobs but still can’t see much money in the bank – theory was to start with reasonable but low prices for the first year to gain some clients – I have been slowly increasing prices in year 2. The feedback we get + some research tells me that we are still 20% -30% cheaper than other local companies but more often these days we get clients who say we are too expensive…#confused – shall I share some prices per m2 with you to see where I’m going wrong?
My opinion is that your turnover isnt high enough for the margins you are selling at. Either move up price points or turnover (with minimal added cost). Preferably do both. Profit percentages etc dont mean much unless they are attached to a figure.
Also if you can shave off some more cost WITHOUT compromising on quality then, as the saying goes, a penny saved is a penny earnt.
Staff – from my understanding we need to do both – steady ‘grow’ our prices but also sell more increasing turnover – and this is where the problems start as we can’t afford more staff at the moment to cope with more work…our main clients buy much less this year hence the struggle…
Steff -
quote Steff Davison:Or you could double your prices and maybe only work 2 days a week…… I am being flippant, but only to emphasise a different point of view
This is only my humble opinion…..
Keep growing your turnover , if that means long hours, if it means sacrificing some margin… well thats the cost of building a business. When your business is producing good positive cash flow, and you are building up capital reserves then move your prices up.
It does however depend on what impact your currently pricing policy has on your ability to remain in business and pay your bills.
Steff – all taken on board – I’m already working 16h per day and getting to a point where I can’t do more…at this moment in time I’m trying to find ways out of this circle – we now have part time sales person to hopefully bring more work in but we are understaffed to cope with much more (Myself, Apprentice + Part Time Person)… :bangshead:
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I will post some prices/recent quotes later on (how do I insert images please?) I will add that where we are the market is saturated with sign makers (Derby) but we have some unique products no one else offers and I suppose I need to start specializing rather than keep on trying to do everything – or perhaps consider becoming a trade supplier…I am still learning how to be a businessman I’m afraid…
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You’re working 16hr days, and making no money?
If you’ve enough work to fill a 16hr day, I would suspect your not charging enough.
I’ve had many discussions about this (Steff will agree 😆 😆 ) In my opinion work out your overheads and go from there.
How many hours a day can you actually charge a customer for, unfortunately things like chasing debts, doing the accounts, meeting suppliers, are part of running a business, but can’t be invoiced to a customer. You might be in work 16hours, but only able to bill the customer for 10?
I’ve attached a spreadsheet that should help workout how much it costs you per hour/day/month to keep the doors open, how much each member of staff needs to bring in per hour. It doesn’t account for Holidays though, where you’re still paying them, not to be there.
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quote David Hammond:You’re working 16hr days, and making no money?
If you’ve enough work to fill a 16hr day, I would suspect your not charging enough.
I’ve had many discussions about this (Steff will agree 😆 😆 ) In my opinion work out your overheads and go from there.
Or your production processes might not be efficient enough. Your machinery may be too slow, you may have too much waste, jobs messing up etc
If your current staff could send out an extra 20% in volume of goods in the same amount of time (still charging the same per order) what difference would that make to your profitability?
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quote Steff Davison:quote David Hammond:You’re working 16hr days, and making no money?
If you’ve enough work to fill a 16hr day, I would suspect your not charging enough.
I’ve had many discussions about this (Steff will agree 😆 😆 ) In my opinion work out your overheads and go from there.
Or your production processes might not be efficient enough. Your machinery may be too slow, you may have too much waste, jobs messing up etc
If your current staff could send out an extra 20% in volume of goods in the same amount of time (still charging the same per order) what difference would that make to your profitability?
Steff – we have all the machinery we need and this is not what slows us down – we don’t tend to mess up things it’s the fact that I have to be involved in everything so it gets done right as one of my staff is learning the trade and the other has way too many years of experience
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Why not let the person with ‘way too many years of experience’ train up the trainee?
You spend your time running the business?
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quote David Hammond:You’re working 16hr days, and making no money?
If you’ve enough work to fill a 16hr day, I would suspect your not charging enough.
I’ve had many discussions about this (Steff will agree 😆 😆 ) In my opinion work out your overheads and go from there.
How many hours a day can you actually charge a customer for, unfortunately things like chasing debts, doing the accounts, meeting suppliers, are part of running a business, but can’t be invoiced to a customer. You might be in work 16hours, but only able to bill the customer for 10?
I’ve attached a spreadsheet that should help workout how much it costs you per hour/day/month to keep the doors open, how much each member of staff needs to bring in per hour. It doesn’t account for Holidays though, where you’re still paying them, not to be there.
Thanks David – yes I’m in at least from 7 until 7 sometimes longer – but only about half of that time is actual production related rest is the paperwork, quoting, bookkeeping and similar – I am now trying to push away some of those tasks (bookkeeping is now outsourced)…
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quote David Hammond:Why not let the person with ‘way too many years of experience’ train up the trainee?
You spend your time running the business?
In principle, this is the solution but he’s in only 4h per day and he’s methods are rather inefficient/old 🙁
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David – as per your spreadsheet my daily costs are only about £125 – there for I think we either sell to cheap or too little or most likely both
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quote Martin Lemiesz:In principle, this is the solution but he’s in only 4h per day and he’s methods are rather inefficient/old 🙁
IMO theres your problem, inefficient production, if you are doing your job right, even at 25-30% behind your local market you should be able to accumulate cash, how much would depend on how low your local market rate is, and your level of turnover.
Sounds as though the tail is wagging the dog.
Make more things for the same cost.
If your turnover hadnt suffered with your recent price increases then looking at increasing prices would be the obvious course of action, but I would be cautious at this stage of giving away turnover and cash flow.
Unless you are in the S**T!! and haemorrhaging money
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Probably best to list some actual examples of what you are charging to get some constructive feedback about whether or not you should be raising your prices. Without knowing this we have no way of knowing if your business is simply inefficent as Steff suggests, or underpricing as others have suggested?
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How do we insert pictures please – I will post some recent quotes.
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We also sell very little of PVC banners which I think are rather cheap – we do them on 500-550gsm front lit full color at £75+VAT normally and at £60 on offer (8×4) this doesn’t include artwork prep unless it’s only couple lines of text
I buy mostly from Amari plastics and digital those who use them will have an idea of the cost of their stuff – otherwise, I’m happy to show how I come up with those figures…
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Out on an install today, but will reply later. I notice your using clarity but not the calc wizzards.
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quote Martin Lemiesz:One from today for a new client – price includes install on panels provided
B&D seem quite low – certainly think you can add 30% to these prices wheras A&C seem abnormally high in comparison
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quote Martin Lemiesz:Van quote from today
Seems quite low – I did something very similar back in 2011 and charged £600 + VAT which even then seemed cheap at the timwe
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quote Martin Lemiesz:Foamex Panel for industrial unit – supply only simple layout included
Seems about right – a good price
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I do think you have scope to increase your prices – maybe not across the board entirely, but certainly in most cases.
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Thanks, Phil – this is what I though – if I was to be able to combine it with increased sales I could be in a happier place by the end of the year…
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You have said you are taking on a sales person shortly, that will add cost and more pressure on getting more work out. Which may eat into most of your planned price increases. I know you work hard, but working hard isnt the same as working efficiently.
If you are not careful you will be a busier company in the same position as you are in now.
Good luck
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Are you using the CalcWizards, or jus the assembly/pricing wizards?
The foamex sign, works out at £45 a Sq/m… you could be charging that just for the vinyl.
I also would charge installation separately, otherwise you may end up installing only half the signs, and loosing cash there.
I’ve left the laptop at home, but I’ll take a screen grab of how we price a van now in clarity.
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Here’s a screen shot of the assembly wizard we recently set up for van signs.
I’ve manually overridden the price on the vinyl to £45.00 SQ/M, enter each printed part (this one is two logo’s on side, and a rear window on a car) enter the number of meters of vinyl to do the job, 3 hours to fit. Design was literally 10mins as it’s same design onto a new car.
We do the same for signs where it’s built with multiple components. If it’s just a flat panel we’ll just run it through the calc wizard.
I’m getting your 2900x700mm foamex board @ £208.93 +VAT.
The A3 Foamex print, clarity is throwing a wobbly and recons it will cost £18 to produce, that’s not charging for waste as I’d probably use an off cut (that’s probably already being paid for anyway!). Assuming it’s a single job. There’s 15mins to load the printer, load the file, RIP the file, Printer does it’s clean, and the print it. 20mins laminating, includes the laminate, time to laminate the print, then mount it to the board. Ignoring the price clarity is saying, and it’d probably be a minimum of £25 for a one off.
As for trade customers, we’ve set up customer discount, and they get a set % off retail prices.
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David – it looks like you might have some aditional modules…?
On a seperate note I have started analizing my costs and realized that what I buy from amari is well overpiced :shake: time for a change I think…
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