Starting your own small business? Here are some of our thoughts on the difficult subject of pricing.
AGREE THE PRICE
Always agree the price before you start a job, this will prevent any shocks or arguments later. Lay out in an estimate the exact specification of what you are making and what the cost will be. This will save you no end of problems later on.
Take a deposit if necessary. On larger jobs it would be prudent ask for at least the cost of the fabric and materials that you need to purchase, that way you only lose your labour costs and profit should there be a problem with payment later.
RESEARCH THE MARKET
The easiest way to research the market is the internet. Find companies online and check out their prices. (you can easily strip out the fabric cost and see how much they are charging for making). A few examples
If your products are as good if not better quality than the internet suppliers you look at, then these are good prices to form a baseline for your pricing. Remember you are also measuring, giving design advice to the customer, helping with fabric choices etc. So why should you be cheaper? You should be charging extra for the fitting.
Don't underestimate the time you will spend searching for fabrics, measuring, driving, doing paperwork and ordering, as well as the actual making. You will also occasionally have to pay for remakes due to fabric defects, you'll make mistakes where you end up buying the fabric again out of your own pocket. This is why you need a profit margin.
Ultimately the market will decide what price someone will pay. You just need to find the right market.
Do your research work out your costs and pricing structure. Stick to it!
DON'T BE A BOTTOM FEEDER
People often attribute how valuable something is with how much it costs. If you price too low, people may think your product or service is of lower quality.
If you go down the route of trying to be the cheapest be prepared for the predictable outcomes of - low margins, lack of money, bad debts and having to deal with large volumes of work to make a living. (Read our previous Blog about being too cheap)
PRICE WITHOUT EMOTION
Well at least try to price without emotion.
Meeting people in their homes, helping them choose fabrics and design schemes is one of the great pleasures of the job. You inevitably build a relationship with your customer that can lead to you wanting them to be able to afford you. Because you like them and are passionate about helping them, be aware that compassion can bring emotion into your pricing.
When you work out the quote:
- You may think you need to reduce it because you dont want to offend them.
- Discount so they can afford you.
- Be worried the high price will put them off.
Again work out your pricing structure and stick to it! If they can't afford it they can't afford it.
As you may have read in our previous blog, it is very likely you will have started out by giving mates rates and friends and family discounts. That is not sustainable in the long run though for you to earn a living. So you need to stop!!
CUSTOMERS SUPPLYING THEIR OWN FABRIC
As your business grows you may decide to supply fabric as well as make. It can be very disheartening when you have spent a great deal of time with a customer, sourcing fabric choices, developing a scheme and supplying them with a price, for them to turn around and say "I can get the fabric cheaper online".
A way to avoid this scenario is make it very clear in the terms of your estimate that labour and lining rates are dependent on the fabric being purchased from you. State that if the customer supplies their own fabric, labour and lining rates are 40% higher. Also if you are going to discount anything in the initial estimate, discount the fabric. That way you are closing the gap with the internet and still maintaining the right labour and lining price should the customer supply their own fabric.
Or just give one total price for the job, rather than breaking it down. If the customer wants to supply their own fabric re-price with the higher lining and labour rates. Remember it is easy to find cheap fabric online, it is not easy to find a quality maker that you trust will do a great job.
Finally once you have carefully selected your price believe in it. Stick to it, if you are asked to discount, reduce the specification. Ultimately don't be so afraid to lose a job that you end up doing it for nothing. If the potential customer is quibbling over a fair price for a high quality product and service, do you really want to work with them?
Next Small Business Post - Our thoughts on Supplying Fabric.