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How do I come up with a selling price?


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Originally posted by TopSarge

How do I set my fees. I could call my competition, but I've heard that that's not the best way to set one's fees. Can you give me a couple of ideas?

Chris

Hi Chris,

Oh, good for you for NOT just charging what others charge. How do you know that they are making any money? You don't want to blindly follow anyone's lead. Figure out what YOU need to charge based on what YOU want to MAKE $. [^]

It’s easy to make money. All you need to do is charge more than it costs. Sales minus expenses equals profits.

Simply put, the formula for creating your selling price is this: Put a Budget together with sales greater than expenses. Divide your sales Goal by the number of widgets you can sell. That’s your selling price per widget. For service work, divide your sales Goal by the number of hours, or days, you can sell. That’s your selling price per hour, or per day, of service time.

Find ways to differentiate your products. Sometimes I pay more for convenience. I KNOW milk costs more at the Gas Station but I am right there…so I justify it. People will pay more for service, for additional information, for human contact. If you are selling the EXACT same product that someone else is selling, ask yourself…

Can I differentiate this service by adding more value? If not, ask… Why am I doing this?

The tough question is always…how do I create enough value that my customers are delighted to buy from me at prices that allow me to make a living? Until the value is established the price is always too high.

First, crunch the numbers and break through your denial. Then, become a MARKETER! Even on-line, you can create a BUZZZ about your site. Be unique in a way that adds value for your customers.

Keep me posted of your successes!

Love, peace and $$$,

Ellen

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Originally posted by Ellen Rohr

Put a Budget together with sales greater than expenses. Divide your sales Goal by the number of widgets you can sell. That’s your selling price per widget. For service work, divide your sales Goal by the number of hours, or days, you can sell. That’s your selling price per hour, or per day, of service time.

Ookay,

Not sure I understand. So the sales goal is going to be my gross sales target for the day, week, month, year divided by the number of home inspections I think I can do in that same period?

I guess that ought to make sense to me, and on paper looks pretty good, but with the travel time to and from site, plus the fact that no two inspection times ever seem to be the same, or the time it takes to write up the report, plus the time stuck in traffic, etc., I think I'm missing something, because some months there's barely enough left to buy oatmeal after the bills are paid. I love doing what I'm doing, but obviously I'm not doing something right.

Find ways to differentiate your products. Sometimes I pay more for convenience. I KNOW milk costs more at the Gas Station but I am right there…so I justify it. People will pay more for service, for additional information, for human contact. If you are selling the EXACT same product that someone else is selling, ask yourself…

Can I differentiate this service by adding more value? If not, ask… Why am I doing this?

The tough question is always…how do I create enough value that my customers are delighted to buy from me at prices that allow me to make a living? Until the value is established the price is always too high.

Well, the value is there, but I'm competing with a guy down the street that does inspections for $100 less per inspection than I do and we essentially do the same thing. The only difference is that I've been in the business longer. Since I'm not really making any money, I can't figure out how he's making money. How can I raise my prices? We both sell a service. From all accounts I've heard, he does a decent job - he just costs less.

Do I just grin and bear it, raise my prices anyway and hope that I can still attract enough referrals to pay the bills?

First, crunch the numbers and break through your denial. Then, become a MARKETER! Even on-line, you can create a BUZZZ about your site. Be unique in a way that adds value for your customers.
Well, I think I'm over the denial part. I figured out long ago that at this rate I'll be working right up until the day I keel over and get planted. Trouble is in this business there's almost no way I can market to the real client, the buyers. It's a referral business and most referrals are word of mouth from old customers or from the real estate people and the real estate people pretty much decide who's going to survive in this business.

Becoming unique in this business is doing a really good job - going carefully over the home and making sure you inspect carefully and write up everything you find. The trouble with that is, If you do too good a job, many of the real estate people won't refer you and they tell others you are a deal killer. If you do a bad job, the client won't refer you and you put yourself in danger of a lawsuit.

Somewhere in the middle of all that, I'm trying to figure out how to price my services where I'm charging a fair price without everyone going with Johnny-come-lately down the street, and still be able to have enough to go on vacation once in a while. (Im not even hoping to be able to save enough to retire on at this point.)

Chris.

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