So the saga continues on the topic we started in Episode 89, Should You, Would You, Could You Have Flexible Pricing?
Let’s talk about the lesson learned and have some fun at my expense.
Just to get a little overview, lets go back for a moment to get you caught up. I did the episode in response to a Facebook post I saw where some business owners were complaining about being beat on pricing in their area. This got me to thinking about question, “could you have flexible pricing to go into a new area or to go head to head with someone else’s pricing.”
So knowing my numbers and running the numbers, I decided to run an experiment. The funny thing about running the numbers, they may work on paper and in theory it may work, but when you get into the real world and the little nuisances that can go wrong, the equation never adds up the same way.
So off I go to try the experiment, I reduced my price to half price on a roof clean and house wash for a previous customer.
And that day everything went well, I made a decent profit for the day and all was well. And the sun rose and another day was here.
I got a call from the customer and had to go back and make her happy. As most of you know, when you go back to a job, no matter what happens, it’s for longer than you want. So in this case its really 3 hours with 2 men, no, now its 6 man hour,s a vehicle and equipment expense.
So here is one lesson learned, the real expense of what it takes to go back after the job is supposedly done. Let’s run the numbers.
Let’s say you break even is $38.00 per hour, add 45% profit you need to charge $70.00 per hour.
Then you have vehicle expense, let’s say for argument sake its $15.00 per hour. So 2 men and a truck is $155 per hour. Now you add up your 3 hours and the total comes to $465. This is the cost to go back. But in reality that is not a true figure.
The true figure is it actually cost you $930 to go back because you have to figure in lost revenue. Yes, lost revenue because I should have been somewhere else making a profit for the company.
It cost me $930 to go back on a job that was less than a thousand dollars. The irony if I had charged my regular pricing I would have made $130 in profits when the dust settled.
The other lesson learned is don’t mess around with your pricing, it’s that simple… stick to you guns! You can experiment on going up, but never go down. Because when you mess around and go down, Murphy always shows up to screw up your day.
Your number one goal as a business owner is to make a profit for your company, it’s your responsibility.
It’s not your responsibility to be the cheapest, to brag about how busy you are or brag about how much you charge the customer.
It’s your responsibility to make and keep you company profitable. And knowing your numbers and charging accordingly is the start of being a profitable company.
Every day is a learning experience, this is just one of the many lessons I have learned.
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