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Hi,

I am a regular poster over on the LBYM board, but I have a question I think is more suited to this board. If this has already been discussed, I apologize; however, a quick search didn't yield up a thread on this. :-)

I clean houses on the side, during the summer months when they are rented out. My price is not set - it varies on the size of the house, the frequency of the cleaning, etc. However, I have had a few people that will try to lowball me on the price. I am still enough of a novice at setting my own prices that it rattles me. I am looking for some advice on how to handle that.

How did/do you all determine how much you will charge for your goods or services?
Do you start higher than what you'd really like to charge?
Do you have set point beyond which you will not go below?
Have you lost a deal because you would not accept the price they were offering?

I felt a little guilty when the most recent client said, "I can't believe I'm going to pay you this much, I was told it would be much cheaper," etc. (FWIW, my price was the going rate, maybe even slightly less than what others would charge. At the time, I was very polite, but stood firm, saying that my price was about what everyone would charge, but she was certainly welcome to try to find someone to do it for cheaper. Afterwards, though, I started to question myself.)

I am looking forward to any and all feedback; I think that whatever business I'm in, this question will pop up. Thanks!

-Molly
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Let the other guy (gal) do the cheap cleaning-be sure you make enough to live and enjoy life. If you take on a job too cheap you will end up hating it.
I read an article many years ago that suggested that each person should double their charges. Even if they lost half their business they would still make the same but have more free time - I never had nerve to try it, but I know a couple who did and I was jealous.
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Dear Bookie,

That's very true (about hating it if you know you aren't going to make any money on it). I took this one job for maybe a bit less than the standard charge, but still, it was good money. The lady was originally saying that she'd pay me about half of what the going price was. Heh. She also swore up and down that she'd be surprised if it took me more than 90 minutes to clean the whole house from stem to stern. It took me, with no breaks, 3 hours and 45 minutes. I was very glad that I hadn't come down to her original price - otherwise I would have been fuming.

Thanks for the input.

-Molly
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Molly,

When I started my shop, I had the prices of many competitors readily at hand. I knew that my services were easily shopped around, so I priced myself in the lower-middle range. This way, if someone was value searching, they'd see I was in the 'value' category, and at the same time I don't fall into the 'discount' shop region-- and dismissed by those who believe "you get what you pay for."

Quality is important. For example, there are a lot of watch manufacturers, and each has a niche market. Some people, like me, are not willing to pay more than $30 for a watch. Others love to spend into the thousands of dollars for a time piece. The difference is the quality of workmanship (not necessarily of the clock mechanism, but the case and band). In my case, none of my prospective customers knew what quality of work I did, and I had no prior customers to vouch for my work. This was another reason to quote low-mid range-- to pique interest. Once my customers see the work I do, they're more than satisfied.
*If you do a better job than your competitors-- and your customers are willing to say so,-- I think you might be justified in charging more for your services. Sometimes, those people who believe "you get what you pay for" will spend a lot more than you'd expect.
[having said that... if you have a hundred competitors charging the same price, and you're more expensive, you might not get much business. Know your market]

I also calculated what my expenses would be, and was able to establish my pricing needs based on my expenses and desired profit. Luckily for me, my expenses made it possible to have started at the lowest end of the price range of my competitors. By remaining in the middle range, I am simply taking in more money. Such a cushion is helpful in times when expenses unexpectedly increase-- in my case, my raw materials cost have increased by 30% in the past year or so.
*You really need to make sure you have your income needs firmly established. If you don't, and you estimate too low, then you will not be making any money on your work. And that IS the point of being in business-- making money.

After all that, I think it might be much simpler. Ask your prospective customers what they'd be willing to spend. Some will want to lowball you, others won't. As long as you're covering expenses and making money for yourself, you're doing well.


I hope this helps a little.

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Dear Clairence,

Yes, it helped a lot, thanks! My expenses are ridiculously low, but the labor is onerous. Fortunately, that works in my favor - it's hard to get someone who will reliably show up and do dirty, sweaty, hard work on a beautiful Saturday at the beach. I am that person. :-)

I would someday like to have my own business. I am sort of viewing this as a little "starter-business." I have already had someone screw me out of money, so that's one lesson. And I had someone have unrealistically high expectations, so that was another. (who knew someone would complain about dust on top of a closet door?!?! In a summer cottage!?!?) I think the guilt trips and haggling over prices is the next one. (but then again I'm Catholic so it's very easy to make me feel guilty :-)

Thanks again, your reply was very helpful and informative.

-Molly
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Molly.....before you nickel and dime yourself, get a hold of the book "Nickel and Dimed" by a woman called Barbara Ehrenreich. It was on the book list for one of my daughter's college courses last year. It's an eye opener.

When I first opened my dental practice I decided that the Other Guy's fee schedules were of no interest to me. I was going to set my fees with a true regard to MY costs of doing business, without exploiting the needs of the "customer" but, at the same time, providing me with compensation that allowed me to work without resentment.

In the beginning, I couldn't tell if I'd got it right as I wasn't busy for a long time. Once I started to have days that were as busy as I could handle, I realised I'd miscalculated. I ate crow and purchased a fee profile for my area. These are compiled from the same set of figures that insurance companies use to set their Usual, Customary and Reasonable reimbursement fees and reflect the range of fees for my area. I was shocked to see that my careful calculations had set my fees at the 25th percentile......unrealistically low for the quality and service I provide.

I increased them gradually and am now at the 50-60th percentile....a change that none of my patients even noticed. I have "lost" business of the bargain hunting variety....and that's the sort of business ANYONE can do without, as bargain hunters...

....are never happy with any fee, however low.

....are always disappointed with the quality that their bargain hunting has purchased

....are just as likely to stiff you over "bargain" fees as any other

....will badmouth you in the community to excuse their deadbeat behaviour

....will refer others like themselves (the worst characteristic of all, as far as I'm concerned)

As my Lori informs complainers and price hagglers "Dr. N has lost a few patients who were looking for a better price. She's NEVER had a patient look elsewhere for better quality" And that's the truth!!

As a contributor to the LBYM board you're well aware of the willingness of cheapskates to try to pick someone else's pocket in order to LBTM......more fool the person who lets them, I say!

Vivienne
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Molly

I think you should charge an hourly rate until you determine what the customer wants and how long it takes you to do your task. I have a cleaner who comes in once a week. She makes a fast pass through the house and nothing more. If I want her to change bedding, shampoo carpets and dust all of the knick knacks in the cupboard it takes a lot longer and she charges accordingly.

Are you doing this as a stop gap measure or is this your lifetime work? If it's your "real" job you need to think about taxes and who is going to pay them. If the client/employer will not pay then you should make more money.

Cheap people and bargain hunters abound. In my business I probably have been told a hundred times "It's the most I ever paid". Baloney. My charges are in line with or slightly more than my competitors. I have found the people who are very unhappy about price are unhappy about most things and tend to be nit-pickers. So I do not justify my price. I send crabby people to my competitors.

Good luck in building your client base.

broadinthemarket
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Dear Vivienne,

Yes, you're very right. The woman that stiffed me on the money also lowballed me on the price. I think that should have been my first clue.

I have read that book. It was very interesting; in fact, it was all I could talk about for a few weeks. Really makes you think twice about the whole minimum wage thing. It made me feel lucky that I was able to work as a waitress and make good money; on the other hand, I hustled.

This cleaning thing sort of fell into my lap, but I am trying to also use it to learn as much of the pitfalls and problems of owning my own business as possible.

Thanks again. I appreciate all the replies I've received.

-Molly
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Dear Broad,

No, this is only something I do in the summertime, on my own. It's not my full-time job.

Again, I agree with you - it seems like the people who complain about the price (rightly or wrongly) are usually unhappy about the service. I also found that to be true when I was a waitress. I used to long to tell people that I didn't set the prices or make the food. :-)

Thanks for your input.

-Molly
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<<I think the guilt trips and haggling over prices is the next one.>>

Guilt trip??? For what???

You're doing back breaking chores for someone able bodied who has the discretionary income to rent a summer cottage.

For the service you're providing, charge what the market will stand.....which is probably 20% above what you imagine it to be.

Vivienne

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Molly,

It all depends on your clients. Know your clients and you'll know how much you can charge. My wife and I used to work 6 days a week at our business (our child changed that for the better) and we paid handsomely to avoid doing cleaning on our day off.

We even paid extra to have her do a few loads of laundry while she worked (that eventually backfired when she laundered my wife's suits...oops, and fired).

If you are competent, fast, and can do some "extras" (properly - unlike our woman) you'll get the job and many referrals. However, because of our bad experience we've now had to drop back to Molly Maid because they bond and insure their people. We pay even more than before but the ease of mind is nice.

So again, know your clients and their expectations. Then you can charge whatever they will bear.

Simon
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<<I felt a little guilty when the most recent client said, "I can't believe I'm going to pay you this much, I was told it would be much cheaper," etc. (FWIW, my price was the going rate, maybe even slightly less than what others would charge. At the time, I was very polite, but stood firm, saying that my price was about what everyone would charge, but she was certainly welcome to try to find someone to do it for cheaper. Afterwards, though, I started to question myself.)
>>


This is just your inexperience, and perhaps lack of confidence. It sounds like you know what a competetive price for your service is. If you have confidence in that, then the comments of customers who DON'T know wont rattle you.


Personally, I always tell my customers what the minimum charge for my service will be. I know that most people are interested in that, and most people are a little too bashful to ask directly, so I volunteer the information they usually want to know. That way, they know what the deal is and agree to it if they want my help.




Seattle Pioneer
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Dear Seattle,

I was hoping you would write in. :-) So...you don't get nervous saying, "I will charge X. Period."? Yes, I guess it is my inexperience in negotiating prices. But I think if I can learn how, it will stand me in good stead.

I get paid a little more than your average cleaning lady, and I don't have to put things away (turnover cleanings take place after a tenant has left). However, as I said, it's sometimes hard to find someone who will reliably show up and do a good job, especially as the summer wears on and it's hot and very tempting to sit on the beach for the afternoon, rather than look at it while you wring out a mop.

I think once I have a little more experience I know that I can quote a price and not be upset if someone walks away. But I imagine that comes with time.

Thanks, Molly
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<<Let the other guy (gal) do the cheap cleaning-be sure you make enough to live and enjoy life. If you take on a job too cheap you will end up hating it.
I read an article many years ago that suggested that each person should double their charges. Even if they lost half their business they would still make the same but have more free time - I never had nerve to try it, but I know a couple who did and I was jealous. >>


There are a certain number of people who frankly don't care what the price is, in my experience. They want the job done right and done when it is convenient for them. Everything else is secondary.

If I can identify such people, I will look for ways to accomodate their desires and I may charge them a premium for special schduling services or such.


But special services aside, I don't gouge people by charging them unreasonable prices. I take a certain measure of pride in treating people reasonably and decently, and that means not gouging people even when you could take advantage of them.


There might be occasions when I'll charge high prices ---if someone calls me in the middle of the night for service, or in extremely cold weather when my furnace repair service is swamped. But I'll quote my high price up front to people, and they can decide whether it's worthwhile to them.

There is an argument for offering high prices for such services. The person who just got out of the hospital only to discover their house is cold because the furnace isn't working might find it worthwhile to pay $200 to get someone to show up right away. Or ---why should someone who has $100 million have to wait until the next day for service if he's glad to pay some blue collar enough to come out in the middle of the night to fix his furnace?


The person who is willing to pay a premium deserves to be able to get what he's willing to pay for. The person who is shopping for an ordinary kind of service shouldn't be charged a premium or exploited just because he hasn't shopped fifty different outfits to find out what a market rate may be.


Those are my practices, anyway.




Seattle Pioneer
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<<I increased them gradually and am now at the 50-60th percentile....a change that none of my patients even noticed. I have "lost" business of the bargain hunting variety....and that's the sort of business ANYONE can do without, as bargain hunters...

....are never happy with any fee, however low.

....are always disappointed with the quality that their bargain hunting has purchased

....are just as likely to stiff you over "bargain" fees as any other

....will badmouth you in the community to excuse their deadbeat behaviour

....will refer others like themselves (the worst characteristic of all, as far as I'm concerned)
>>


I happily bargain hunt for merchandise, but not for services.


For services, I'm interested in someone who will treat me honestly and decently, and secondarily someone who is competent.


Somehow, I almost always get treated honestly, decently and competently in return. I use the same insurance agent, dentist, auto mechanic and other service provider for decades on end.


It's a practice that works for me. I'm always amazed that so many people wind up with unhappy experiences. Maybe I've just been lucky, but when you have a long business relationship or professional relationship with someone, I think you can trust them and they can trust you.




Seattle Pioneer
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<<For the service you're providing, charge what the market will stand.....which is probably 20% above what you imagine it to be.

Vivienne
>>


Heh, heh! I think this is my boat mechanics business plan. He's in there sweating over repairing your boat and then he gets to do more of it tomorrow while you're out boating! It's hard to whine for a cheap price when you're buying a luxury.

So I pay with a laugh! And I'm planning on going cruising in the San Juan Islands tomorrow or Wednesday until I get tired of it.




Seattle Pioneer
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<<I get paid a little more than your average cleaning lady, and I don't have to put things away (turnover cleanings take place after a tenant has left). However, as I said, it's sometimes hard to find someone who will reliably show up and do a good job, especially as the summer wears on and it's hot and very tempting to sit on the beach for the afternoon, rather than look at it while you wring out a mop.
>>


Absolutely! Having someone who will come when I need help is worth a substantial premium. And having someone I can trust to do a good job is worth money too.


<<I think once I have a little more experience I know that I can quote a price and not be upset if someone walks away. But I imagine that comes with time.

Thanks, Molly >>


Heck, I turn down half the people who call me for service on their appliances, usually because they live an inconvenient distance away but also commonly because they want to schedule work when I'm not interested in working. During the winter when demand is high, I'll turn down significantly more than half.



Seattle Pioneer


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<My expenses are ridiculously low, but the labor is onerous. Fortunately, that works in my favor - it's hard to get someone who will reliably show up and do dirty, sweaty, hard work on a beautiful Saturday at the beach. I am that person. :-)>

I think you need to keep focusing on this. I run what is at present (because of an expansion move)a very cash strapped business but if I can get someone to do a job and someone recommends them as reliable and good, then despite my very difficult financial situation, I never argue re: price. I just pay what they quote. It is so very, very difficult to get people who do things well, make no fuss about it and are reliable. You can get anything done cheap if you put up with the mess and them not turning up and breaking things and moving the dirt around rather than getting rid of it and whatever. The classic with people who do cleaning is to use your vacuum cleaner but never, ever to empty it. So they work really hard at pushing a non-sucking cleaner around the house, and then you have to have the cleaner repaired because it is so choked up with dust. Someone who is willing to clean and does it well is priceless! Lynn
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<are always disappointed with the quality that their bargain hunting has purchased>

And in addition, of course, people who seriously care whether you dust the top of the cupboard door, really should be enjoying doing the cleaning themselves! As a smile though I'll just relate that many years ago when I was doing a lot of work for my professional association as well as a rather demanding professional job, I did employ a cleaner for a while. She was as obsessive as your over demanding client and devoted almost all of her time to climbing up ladders to dust things out of reach and out of sight and doing so every week. She cleaned things it had never ever occurred to me to clean, but alas was so exhausted by the effort of this heroic work that everything else (i.e. everything I wanted done, was sketchily dabbed at in the last half hour). When she took to bringing her husband around to mend things which I didn't want mending and even to alter things to suit her taste rather than mine, I had to decide that my own occasional attempts at housework were preferable! Lynn
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So...you don't get nervous saying, "I will charge X. Period."?

I went through this a bit. I purchased a tax practice two seasons ago. For the first season, I went though the fees the seller had charged and worked up a fee schedule that was basically what he was charging. It was reasonably similar to what I had in mind, so I felt pretty good about it.

This last year, I raised my fee 10%. I lost a few clients - but as far as I know none of them were over fees. I'm certain that none were over the fee increase. I didn't get any calls from those folks asking what this year's fee would be.

I ended up doing about 10% fewer returns this year. But my gross billings were UP 10% over the prior year. The higher fee clients that liked my service referred in more high fee clients. The higher fee clients got more complex, so their fee went up even more. All around, a very good result.

I gotta tell you, I was very nervous about telling these folks that I was increasing my fees. But now that it's done, I plan on doing it again next season. That will get me to about the 50th percentile on fees in my area, which is about where I'd like to be.

I think once I have a little more experience I know that I can quote a price and not be upset if someone walks away. But I imagine that comes with time.

You're right - that's hard to do at first. But every time you say it, it gets easier. It was hard for me, too. But there was nothing like discussing fees dozens of times over 10 weeks to get me over that.

Remember that you're trading your valuable time for cash. If you're getting less than what you're time is worth, you'll be sorely tempted to do less than your best work. That'll get you an unhappy client to go with an unhappy Molly. Better to spend a bit of time on the beach than to feel like you're getting taken.

--Peter
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<<I'm always amazed that so many people wind up with unhappy experiences. Maybe I've just been lucky, but when you have a long business relationship or professional relationship with someone, I think you can trust them and they can trust you.>>

There's "luck" and "luck", I guess.

I've lost count of the number of visitors to my practice who rant about all the poor quality work they've had done by other dentists, about their slovenly offices, overcrowded waiting rooms etc. When asked why they kept returning to such dreadful places, turns out they'd shopped price alone.....and when my price wasn't right, they seemed more than happy to return to those dentists from Hell.....moaning about how "unlucky" they were in their search for a good dentist.

Things don't happen to you without having something to do with you, I say. I'm not suggesting for one second that a high price guarantees good quality, but there's a price below which NO talented, hardworking individual who takes pride in a job well done is prepared to work for with enthusiasm.

Vivienne




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Here's a way you can put some actual numbers on your situation.

Let's assume you were going to do this full-time. 8 hours a day, 5 days a week and 50 weeks a year (2 weeks for vacation, illnesses, etc.) you are either going to be cleaning, traveling to or from a cleaning job, providing estimates, doing the paperwork, etc. 8 x 5 x 50 = 2000 hours total.

Now decide how much you would want to earn in gross income for this full-time endeavor. Remember that your taxes are higher as a self-employed person, you have to pay your own expenses, etc. - so your "take home" pay amount will be less than if you worked for an employer.

Next, based on your part-time experience, how much time do you spend on travel, administrative tasks, providing estimates, etc. (non-billable time) for every hour you spend actually cleaning (billable time)?

You simply divide the amount you want to earn by the number of billable hours to determine your hourly rate.

Here's an example. Let's suppose you would want to gross $75,000 if you worked at this full-time as I described above.

Let's further assume that for every hour of non-billable time, you have an hour of billable time. Therefore, since you have 2,000 hours available (see above), you have 1,000 billable hours and 1,000 non-billable hours.

Then you take the $75,000 and divide by 1,000 (billable hours) and that equals $75/hour. So, to make $75,000 a year gross, you need to be charging $75 per hour for your cleaning services.

As another example, if you instead have just 1/2 hour non-billable time for every hour of billable time, you would divide $75,000 by 1,333 billable hours and learn you would need to charge $56/hour for your cleaning services.

Whatever hourly rate you come up with, use that even for your part-time work and you'll know you are earning the equivalent of a $75,000 a year full-time job (assuming $75,000 would be your target amount)

One common mistake of a self-employed person is to forget about or to underestimate those non-billable hours.

Scheduling your jobs to minimize travel time would seem to be very important for your business.

Hope this makes sense and helps.


ShelbyBoy
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I don't deal with people who want me to lower my price beyond a certaint price. My time and services are valuable and I've found that people who want to have too low a price from the start will never be happy and I will pass on their business or refer them to someone else. Sometimes they came back and wnat things done right, orthertimes I never hear from them which is fine with me.
Price is a part of your business strategy and what you sell. The greater a diffrence between your service and others the great a diffrence in price you an have. Quality products demand premium prices. Pricing is a strategic concern of your business. Price times volume minus costs is your profit. YOu can increase profits by changing any of thsoe numbers.
I have a price, it never changes for anyone. I will discount that price, but my client will recieve a bill for the FULL amount less a discount. I want them to know what my price is (and what I think my services are worth) and what the discount is. My contract also says that any discounts only apply if I am PAID on TIME. If I give someone a "deal" I want them to know it, and anyone who looks at their bill.
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So...you don't get nervous saying, "I will charge X. Period."?

It sounds like most of the people giving advice here have an established business. I'm not hearing too much from people just starting out(Like Molly....and myself). The truth of the matter is that when you are a newcomer to a particular market and you want to eat, you're gonna have to offer some convincing reasons(like price) to make them go with you. What else, besides price, is going to make a young and inexperienced business stand out from it's competitors?

Mr. Div
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Thanks to everyone for their advice. Mr. Div has a good point. I am in the fortunate position that this is a part-time, summer thing. I am just trying to learn all I can from it, so that if one day I am supporting myself through my own business, I will know some of the pitfalls ahead of time.

Again, I greatly appreciate everyone's input. Thanks.

-Molly
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What else, besides price, is going to make a young and inexperienced business stand out from it's competitors? Mr.Div.

An important point Mr. Div. and bet each and everyone of us long term business owners can give you an immediate answer. Let me put the question back to you. Why should I go to you for your product rather than to your competitor? What do you offer that's better than your competitor? Is it just that the market is so big and there are so few competitors that you can get in fast and pick up lots of customers? Or do you offer something much better so you can appeal to a certain segment of the population?

Take Molly's case. She is trying to segment her market by telling us/customers that she will clean a house instead of going to the beach. She will do a good job. She will be reliable and be there when she's supposed to.

She has a Crabby Customer. (As I said in a previous post, I send my Crabbies to my competition and I think you will find that many of the established businesses do the same. This may be why Molly's particular Crabby is out there.) If Molly wants to show other potential clients that she is reliable and good she has to start somewhere and it may be with the crabby one.

And what is "reliable" in Molly's case? She says she won't go off to the beach. But for the customer reliable may mean something entirely different. The customer may want a long term cleaner who they call up in May and who then cleans for the season. So reliable may mean being available not just this summer but every summer until eternity.

Molly, or you Mr Div, need to promote and advertise your strengths, making sure you and the customer have a clear idea of what they are.

In my case, I have a great location for my RV park and advertise accordingly. One competitor is a mile from town and advertises a swimming pool and large spaces. Another competitor who is off the beaten path promotes serenity and quiet. We draw from the same population of RVers but each of us has tried to appeal to a different
segment.

Good luck,

bitm
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Molly

Have the following statement printed on the bottom of your quote sheets.

We have two prices for the services quoted above, the regular price and the economy price. The regular prices are listed above. To determine the economy price, double the regular price and then divide by two.

You'll be getting your point across in a humorous manner so no one will be offended.

Or, you could use my wife's method. Whenever someone tries to get her to lower a price here in the store she snarls: "We have to eat too!"

It works.


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Hey Mr. Div,

It sounds like most of the people giving advice here have an established business. I'm not hearing too much from people just starting out(Like Molly....and myself).

Ok, here goes. I get nervous about it too, but I know I have to charge the going rate if I want quality customers. I have given discounts to a certain few who I know will recommend me to others, but I always include my full rate and then give the discount so they know what my charges are and that I value them as a customer.

It ain't easy, that's for sure! ;-)

ßillƒ
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Dear Broad,

Excellent, excellent ideas, thanks. You've given me much to think about! :-)

-Molly
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<<I felt a little guilty when the most recent client said, "I can't believe I'm going to pay you this much, I was told it would be much cheaper," etc.

I asked my contractor if he loses much business to people who undercut him, and he said, "Nah, those guys know what they're worth."
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What else, besides price, is going to make a young and inexperienced business stand out from it's competitors?

How about flexibility, cooperative attitude, good service from the very first phone call?

A cleaning service in town has a set minimum number of hours, set hours they work, and you pretty much have to fit your needs to their schedule.

A co-worker just started cleaning on the side. Since she's new, she's willing to work around her customer's schedule, gives her customers all numbers where she can be reached, and will spend some time figuring out the best way to do your cleaning, what she'd charge for extra services, etc. If she has to be late, she calls as soon as she knows this.

Both are good resources. But people are responding to her attitude of responsibility and willingness to work with the customer. In time, she may have enough of a client base to be more selective about when she can be contacted, etc. But for right now, it's getting her bookings.

Kathryn
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Price shioppers at my office usually call first to "get a quote" and speak to Lori.

In all fairness, some folk just don't know WHAT to ask when calling a dental office for the first time so, instead of asking if I'm any good/amount of experience/do I sterilize my instruments etc. the odd one or two will ask "How much does.....cost" and, by virtue of excellent communication skills, Lori has converted this small number into genuine patients who always turn up with some payment device about their person and who end up as ambassadors for the practice.

The overwhelming majority will ask price, however, because they want to know if they're getting the lowest price they possibly can. They can be recognised after a few pertinent questions. Lori always quotes the higher end of the fee scale (the fee we charge to those who piss us off) and if they claim to have gotten a lower "quote", she congratulates them on their successful search for a bargain and urges them to take the offer....QUICK.

For a "service" related product....one that's based on skill, care and judgement in addition to time and raw materials.....most folk don't know what the price "ought" to be, anyway. The genuine enquirers can usually appreciate the "value" of the service they receive, if indeed it has value for them but the rest wouldn't feel they'd got a bargain if if I quoted a fee for, say, crownwork that was 1/4 of my customary fee.

Just a week or two back had a "casual" in the office who called first thing in the morning, been up all night with pain from an infected wisdom tooth wanting a "price". Lori quoted my usual fee for routine extraction, reminding the patient that if this turned out to be something tricky and beyond the scope of the practice he needn't worry, we had an excellent practice of oral surgeons we could refer him to. He informed us the fee was too high and he was going to call around for a "better" price. Called back about 20 minutes later wanting the appointment as "no-on could see him"....or, more likely, improve on my price.

As it turned out, the tooth was tricky......however I'm slicker than most general dentists when it comes to extractions (my NHS experience here, Lynn) and dispatched the bugger in about 30 seconds flat. Patient finally, goes to the front desk where Lori, fully expecting him to be astounded by my skill and expertise in manging such a slick, pain-free maneuver and the concerned attention he received, had him hand over the fee with bad grace and a complaint about being "ripped off" by such a charge for something so easy. To demonstrate how welcome his custom would be in the future, Lori asked him if he would've felt he'd got better value for money if it'd taken me half and hour of struggling and hurt like crazy all the while!!

Vivienne
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DesertDave said:

Or, you could use my wife's method. Whenever someone tries to get her to lower a price here in the store she snarls: "We have to eat too!"

We use:

"If you can convince our landlord, our employees, and our other suppliers to lower their prices to us we'll give you a discount."

That usually gets them thinking.

Simon
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Another thought on setting your prices on the high side, you don't want to be tempted to take on "marginable" work that ties you up so you can't do the "fun stuff".
We do a fair amount of free (or near free work), BUT I'm adament that we are the ones to chose this work, so we are very agressivce in collecting our billings.
For you folks just starting out, talk to your competitors, I learned more that way than almost any class I went to. Several competitors even gave me work because they had conflicts or too much to do. Some won't talk to you, but others will give you a tremendous amount of info.
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<It sounds like most of the people giving advice here have an established business. I'm not hearing too much from people just starting out(Like Molly....and myself). The truth of the matter is that when you are a newcomer to a particular market and you want to eat, you're gonna have to offer some convincing reasons(like price) to make them go with you. What else, besides price, is going to make a young and inexperienced business stand out from it's competitors?>

You're right of course, in some respects but there are other aspects to this. One is that new 'young' businesses often do stand out just because they are new and their ideas are new too and their enthusiasm is fresh. You might say well cleaning is cleaning - there is nothing new. But perhaps there is. A different attitude or a different way of tackling things or just a willingness to be there on the day the job needs doing. Once a business is established and successful some owners at least will use the success to start working only when it suits them (and this is perfectly valid if they can make it work)whereas in contrast a 'young' business will probably put much more emphasis on working when it suits the client - and this may well be more important than price and particularly in certain lines of business such as the cleaning out of holiday homes. The other aspect to take into consideration is that raising prices by quite a bit (rather than nudging them up over time) may be very difficult once you've got people used to a lower price.) I know I made this mistake when starting off in my business. Fear of charging too much plus a real enthusiasm for offering a good service produced a situation where clients saw quite modest increases (which still left them with a remarkably good deal)as very big increases. The problem with comparisons is that only a proportion of customers do price comparisons - many just don't want to spend their time that way - so the most obvious comparison to them is between what you charged before and what you charge now.

Lynn
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<I send my Crabbies to my competition and I think you will find that many of the established businesses do the same.>

One of the pleasures of getting more established is simply that of saying no to some people. You can often do work for and get paid for that work three or four people in the amount of time you can do the work for and get paid for one crabby person! Some of these awkward folk have redeeming features and you put up with their idiosyncracies because they not only pay their bills but bring you new custom too, or do other things which make them valuable (and this may not only be financially but in appreciation for your work even though they are ultra demanding). But some people take up time which is out of all proportion to the payment you might receive from them and are also too draining emotionally for yourself and for others if you also have staff. One of the big dangers of business is that you spend so much time pacifying and running around after difficult folk that you don't spend enough time on publicity and seeking new business generally. The time you spend on really difficult people often has no outcome but the same time spent on even, say, door to door leafleting or doing a mailing might well have pulled in significant new custom, Lynn
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<For a "service" related product....one that's based on skill, care and judgement in addition to time and raw materials.....most folk don't know what the price "ought" to be, anyway. The genuine enquirers can usually appreciate the "value" of the service they receive, if indeed it has value for them but the rest wouldn't feel they'd got a bargain if if I quoted a fee for, say, crownwork that was 1/4 of my customary fee.>

Very true but it doesn't only apply to service related products. In my fair trade shop we sell a particular line of silver jewellery. As silver is pretty cheap the value obviously lies in the workmanship rather than in the metal itself (though using silver rather than, say, just silver plated does add to the cost). The skill in this line of jewellery is particularly high. I own and wear some of the designs and get constant comments on how attractive they are. Now these items are actually rather keenly priced. Why? Well not because we are selling on a narrow margin, and not because the producer was ripped off, actually as it is 'fair trade' the producer got a particularly good deal on price plus immediate payment at the point of delivery. But the importer wholesaler runs a simple and pretty low tech operation. There's not even as much as a catalogue, instead they send us batches of sale or return stuff at intervals and at intervals we do a stocktake and pay them for what we've sold. It might not be a good model for trade in general but it works in the relationship between this type of importer and the sort of outlets through which they sell. Sounds great? Especially as it is really high quality stuff? So what's the catch?

Well mainly there isn't one. Many customers love the designs, appreciate the quality and are pleased that the price is not 'cheap' but reasonable especially given that the supplier got a good deal. But for some of the customers we meet offering something good at a 'good' price is just a source of problems. A proportion say it is too expensive by which they mean too expensive for them. Now it is too expensive for other customers too but they choose from cheaper silver plated designs at a 'better' price (and it is nice stuff - I choose to wear some of these designs myself)and maybe boyfriend or girlfriend or spouse or family member will get a strong hint to go buy their Christmas or Birthday present from the more expensive silver jewellery. But for some customers nothing is ever cheap enough. They'd like to buy high quality original designs in silver for what you'd pay for a simple bead bracelet. For other customers nothing reasonably priced can ever be 'good' - the suspicious questions we get about 'is it really proper silver' and why do they ask that (when just looking at the item should tell you)why because it is reasonably priced!

Lynn

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<<One of the pleasures of getting more established is simply that of saying no to some people>>

Not so much a pleasure, Lynn, as a necessity.

As a woman "of a certain age", in a profession with the potential to be monotonous, repetitive and demanding both emotionally and physically I find it something of an imperative these days to have good cause to get up of a morning to go to work.

I'm not so much of a prima donna that I need all my patients to love me and massage my ego. However, I understand enough about myself in my 50th year to know that, if I encounter too much stress and negativity of someone else's making in my day, I stand a better chance of burnout than if I associate with appreciative, civilized, nice folk.

I now have a mental list of 5-star patients (about 10%), regular folk (about 80%) and turkeys (the rest). I work pretty hard for everyone when it's an emergency, but the turkeys need to show their appreciation the most for me to do it electively.

Vivienne
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MrDivdends said,
"The truth of the matter is that when you are a newcomer to a particular market and you want to eat, you're gonna have to offer some convincing reasons(like price) to make them go with you."

YOur right. You NEED a good reason for a customer to work with you. EVERY business needs this regardless of size, age, or success. My business I have made the determination that price isn't something I move on and not something I use as a reason to pick my services. If someone thinks my price is "TOO HIGH" I ask them what I would have to do in their eyes to justify my price, if what they say is reasonable they get it.
Sales has become a science, it isn't a personality thing anymore. How to sell has been studied etc. What I've learned is, when someone says your price to too high their saying the same things as "the value your giving me is to low".
I give people a convincing reason to work with me, but I because of personal beliefs do not want to ever make that reason be price. It is part of the strategy of my business, and core to what I do.
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VeeEnn,

Lori sounds like one of the best sales people I have ever heard of. You understand profesional services very well.
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It made me feel lucky that I was able to work as a waitress and make good money; on the other hand, I hustled. Molly

EXACTLY! After reading that post I went to Amazon.com and reviews of the book. I got mad! This author completely ignores the fact that raising the pay rate raises the cost of the goods and services produced thus raising the prices of such goods and services. Which, of course, leads to the higher paid people getting "cost of living" pay increases which leads to higher prices. And on and on.

When I got out of the Army, the first time, I too worked two min wage jobs. When I got tired of that (it didn't take long) I started looking around for a way out of that hole. It didn't take long, but it wasn't easy.

Ya' want'a get anywhere in this world ya' gott'a HUSTLE!
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significant new custom

Is there some new slang in which "custom" = "customers?"

I had to stare at some of these sentences before I figured out what was being said.
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<< For other customers nothing reasonably priced can ever be 'good' - the suspicious questions we get about 'is it really proper silver' and why do they ask that (when just looking at the item should tell you)why because it is reasonably priced! >>

Back in the early days of my practice, when my fees were stupidly low, I had this sort of experience. Had a patient referred to the office my a satisfied colleague for a "2nd opinion" on crown work her current dentist was proposing. I concurred with him on the need, gave a ball-park figure on the crwonwork, and was just about to explain that I use high noble metals and the value thereof when she interrupted me with "That fee is exactly $250 per crown cheaper than I've been paying.....but my dentist only uses high noble metal" She forced herself to take a chance with me, anyway.

Patient needed one or two other bits of treatment and it became obvious from questions she asked that she was deeply suspicious about the quality of the work she was going to get. I don't like people to have to wonder, so I hit on a nifty idea of getting my lab tech to send the Identalloy sticker along with the finished crwon......the alloys used in dentistry are commercial product and a "gold" crown, of necessity, contains additional metals. These stickers act as an assay, guarantee type thing and list the exact amounts of every ingredient. Anyway, I printed up a little jewellery type certificate, stuck the Identalloy sticker to it and made a presentation of it on the final appointment. Although by then the quality of the product was obvious to the patient, I think she appreciated this.

Of course, THEN she wanted to know how come my crowns were so much nicer than the expensive stuff she'd had in the past (which judging from the difficulty I had in cutting off one of them, were not high noble metal)

Here's the point of the post....I've been doing this ever since and, although the community isn't beating a path to my door just for Identalloy stickers, it's one other way to distinguish yourself from the opposition (not one other dentist who uses my ceramics/gold lab does this) Could you do something similar for your stuff?? A little bit about the jewellery designer, say, or something to reinforce the value to the customer of Fair Trade, as in....LOOK it's even CHEAP!!


Vivienne

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Again, thanks everyone for sharing your pov's and strategies. VeeEnn, I actually went to the dentist last night, and before I freaked out about price, I listened to what they were suggesting. The quality of service and care seemed pretty high, so I thought, hm, let me take some advice from my Fool friends and run with this. It's probably worth every penny I pay them.

Oh, BTW, two cavities. :-( Although a diligent flosser, am I not doing it correctly.

Once again, I greatly appreciated everyone that wrote in; this has been a very good learning experience for me.

-Molly
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<<Once again, I greatly appreciated everyone that wrote in; this has been a very good learning experience for me.>>

Thank YOU, Molly.

The reason that threads such as this get such a hefty response isn't just because us experienced ones are desperate to give advice to newbies. We're bouncing yet more ideas off each other.

Small businesses are often as small as one individual, working at the coal face and not much time to interact with others on a person to person level. It can be a bit stultifying if you don't watch out.

I've gotten heaps of Good Ideas from this board.....and it's usually when someone new's asked a question that could easily be dismissed in one or two lines or one or two posts but, before you know it, has become a forum of ideas, tales from the trenches and general chit-chat between partners against the rest of the world and the time clock punchers!!


Vivienne
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One is that new 'young' businesses often do stand out just because they are new and their ideas are new too and their enthusiasm is fresh.... Once a business is established and successful some owners at least will use the success to start working only when it suits them (and this is perfectly valid if they can make it work)whereas in contrast a 'young' business will probably put much more emphasis on working when it suits the client - and this may well be more important than price and particularly in certain lines of business such as the cleaning out of holiday homes.Lynn

So true Lynn. You are certainly describing the new business and then the mature business. We definitely fall into the latter.

After working hard and building our clientele we seem to be getting rid of many of the "extras". We have streamlined our lives. No more T-shirts or other knick knacks that take a customer time to ponder. Now we sell RV supplies only. The customer buys because of his immediate need. No more ice or soda pop. What a mess. We have added also - a rack with USA Today and the local paper and access to the internet for people with laptops. These things, while providing service, don't encroach upon our time.

Our biggest change has been the customer base. We have cultivated nice customers and have a large repeat business. Customers who are noisy or don't watch after their pets and children are not tolerated well. Everyone has a nice time and must be respectful of their neighbors. The weeding out of obstreperous customers has taken many years and there are costs. But the benefit to us and our remaining clientele far exceeds any monetary loss.

We are in the 'mature' stage of business. We have tried just about every form of advertising. We have found what works in dealing with customers and we don't vary the routine. We have given up a few dollars for a hassle free atmosphere. We keep our income stream steady but are not growing the business. We seem to have developed a "been there, done that" attitude.

Our 'young' competition is much more willing to try new things. They are friendly towards us. The former owner would not talk to us because he saw us a his competition. The new people see the value of working together and this is a huge step forward. All of us have been able to lower our advertising costs by going together. We keep our separate customer lists but work together to promote RVing and the town. We want our competition to be successful because we draw some bit off of them just as they draw off of us.

broadinthemarket
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<Could you do something similar for your stuff?? A little bit about the jewellery designer, say, or something to reinforce the value to the customer of Fair Trade, as in....LOOK it's even CHEAP!!>

Yes I think perhaps we might and this is a good idea Vivienne. I have thought of it fleetingly in the past but have been a bit held back by the problem that the more there is around for people to read and absorb the less they do read and absorb (or this applies to many people not all)and you can quickly turn your shop into something with notices and labels all over it rather than a pleasant and interesting place to shop. I think perhaps we (I!) have to grasp the nettle of how we deal with and present such notices. I got a bit put off when staff put up notices in the past and they seemed to clash with the ambience of the shop. But there is a way around every problem if you put your mind to it so maybe we'll put our collective minds to this next time we are all in together, Lynn
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<We want our competition to be successful because we draw some bit off of them just as they draw off of us. >

Yes I think this is an interesting concept. My shop is next door to a pub and across the road from another - both (very different) seem to be thriving. I was chatting to the owner of the one next door and asked him how business was and how he was affected by being almost across the road from another very successful pub. His concept was that there was 'no such thing as competition'. The way he looked at it was that two good pubs down one end of the street actually drew in more people who wanted to go into a pub. He was very pleased when we opened a 'nice' shop next door because he believed it would bring yet more people to that part of the street and a proportion of them would decide to pop into his pub. His takings were 25% up last year so maybe he's got a point...

Lynn
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Interesting. I like that pub owner's attitude (about another pub bringing in more business)

-Molly
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