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How to deal with increasing prices.

Posted by Linda Chambers on Tue, Feb 08, 2022 @ 12:20 PM

Rising CostsPrice Increase Ahead

Everyone is aware that over the last two years with the Pandemic the cost of everything has gone up. And the costs to the small business pressure washer is no different. The cost for fuel, chemicals, parts, supplies, repairs, new equipment have all gone up. So how do you make sure that what you are charging is fair to you so you can stay in business? And what can you do when the customer doesn’t want to hear that you are raising your service prices too? You need to first examine your current costs, figure in more increases that are still coming down the pike, have monthly percentage increases already in place, and then have a plan to explain your prices to your customers. No one likes to pay more for something then they use to, but if you have not increased your prices at all in the last two years your profit margin may have decreased by 75%.

Do a complete cost analysis of what it costs today to run your business for a day, a week an entire month. Every job price must cover all your costs. Not just the cost of the soap, water and gas to get you there but also some of the cost to purchase equipment, operate and maintain it, along with all your bookkeeping and other costs it takes to get and process the job. Every business needs to know its basic hourly overhead for a whole month even if you do not do a single bit of work that month. You need to know your fixed expenses: rent, insurance, taxes, labor, phone, for your base cost and then you can figure your flexible costs that change with the work: chemicals, supplies, fuel. Calculate what you need to make an hour to earn enough to pay your bills, make your profit, and pay yourself.

Know the difference between markup and margin. Markup is based on your costs and Margin is based on the price. If you price a service with a 20% mark up on the cost of the products you use for the job and then offer your customer even a 10% discount on the total service you may end up with not making the margin you need to make for that work.

You do not have to use the same margin for every type of work. No one says you must make the same % of profit for everything you do. You may need to decrease the margin on less time-consuming work, and increase the margin on the infrequent or costlier jobs. You can afford a smaller margin on the higher sales volume of the quicker jobs. Say the fast concrete driveway cleaning at the front of a house vs. a time consuming complete strip, stain and reseal job for a 3000 square foot deck at the back.

Now that you know your costs and what you need to make for each job how do you break the news to the customer?

Best is just to explain to them why. Make it clear that you're not raising the prices just to make more money but to maintain the quality of your service and to match higher operating costs. You should explain what caused the price increase. For instance, as some raw materials become increasingly scarce and expensive, due to the supply chain issues, companies like your chemical manufacture that utilize these materials are forced to increase the prices for products that use them. You do not want to buy less expensive inferior chemicals because you want your customers to be happy with the results and to maintain your quality of service. Laying that out to customers will prove your willingness to be transparent. Show them in writing, in percentages only, how much your costs have increased. They do not need to know the 5-gallon pail of chemical cost you $95 and that the price use to be $50 but that the cost has increased 90%. That gas use to run $2.50 / gal now it is $3.20, an increase of 35%. Then when you tell them you are having to increase their job price by 30%, to cover these cost increases, it feels better to the customer.

If you have repeat customers that have scheduled work that are not already grandfathered into a price with a contract, contact them as soon as possible with the news of your increases. Yes you may lose a few customers that are sensitive to any price change but most when they start shopping around will find out that everyone has had to raise prices and that what you are asking is reasonable. You might also explain that doing a job now may in fact save them money by locking in today’s price that may have to be higher next month.

If you still have long time clients that are pushing back to the price increase you might want to throw in a value-added service. DO NOT give a Discount. Once you give a discount, that discount price is the one they will remember, not the increased price and they will want that same lower amount again. With a one-time value-added service, you show them you appreciate their business, without compromising yours or your new prices. Things like a free outdoor furniture cleaning with their patio or deck cleaning, a free 50 feet of sidewalk cleaned with their driveway cleaning, an air-conditioner or heat pump cleaning with their house wash, etc. Plus with discounts it takes much more work to make up that lose. Remember: a discount offered to a customer is not a discount on the full price. It’s a discount on your profit.

Also this is a good time to remind them of your referral program where they can earn money back through gift cards, or whatever your incentive is. Reducing their cost of the current service you are providing.

Here is to a very good new year and one we wish will be profitable, too.

Tags: New Pricing, pricing

Current Soap Warehouse Catalog

Posted by Linda Chambers on Fri, Jul 05, 2013 @ 11:20 AM

Our newest catalog is out and you can see it here:

docs/2013 PRODUCT BROCHURE.doc

It also encludes a current price list at the end. We have new products and some that we have had but have not been listed before in our print catalog.

To learn how to place and order on line please view the short 1 minute video here:

How to use the Soap Warehouse web site.

Or just feel free to call us at 1-800-762-7911. You can leave us your order as a message after hours, or call during business hours, 8:30 -5:00 M-F EST, to speak directly with us to place your order. If you leave a message we will be sure to call you back with a complete total including what the least expensive shipping cost will be for your order.

 

Tags: new product, Soap Warehouse, pricing, catalog

Announcements for 2013

Posted by Linda Chambers on Wed, Dec 05, 2012 @ 03:14 PM

First I want to wish each and everyone you a Happy Holiday season for what ever holiday you and your family will be celebrating.

Next I must let you know about a general across the board price increase that will go into effect on Jan 2nd, 2013.

As many of you know we try very hard to not make product price changes unless absolutely necessary. And most times it is only for certain items as they are effected by specific ingredient price changes. But once every 3-5 years we do have to make an all over adjustment to counter the everyday, always increasing, small price changes that we as a business face each and every day for office supplies, insurance, postage, packaging, product cost and delivery rates of the inventory items we take in and use.

So because of these we are having to make an average 3% price increase for all products. For small items it will be as little as 50 cents but for a some of our very popular kit items most will see an average $10 increase per ordered item. The complete new price list will be available on our web site very soon but those that would like one now, please e-mail me at info@soapwarehouse.biz Subject Line: Price List and I will send a copy by reply e-mail.

Now for some good news! We have a few items that you can buy and use that will save you money when buying from Soap Warehouse through out the year.

First is a handy Soap Warehouse calendar mouse pad for your desk. Order this from our Zazzle store and you will get $10 off your first order in 2013. A single mouse pad runs $12.50.

Order Mouse Pad 2013calendarMousepad resized 600

For even more savings each and every month order our 2013 Product Savings Wall Calendar. With this purchase from our Zazzle store you will get a $20 rebate credit on your account to use during the year, plus you can use the posted savings for products featured for that month in the calendar for the discount mentioned. You can only use the calendar discount for the specific product(s) and not inconjuention with your $20 rebate credit. Order Calendar

2013ZazzleCalendar resized 600Jan2013calendarpage

 

 

Tags: calendar, Business, pricing

How to avoid pricing mistakes.

Posted by Linda Chambers on Wed, Jul 01, 2009 @ 09:00 AM

Pricing is a big issue right now for us and for many others. We just finished an in depth mid year review and have found that the overhead costs that have been sneaking up on us over the last year or so have really affected our bottom line. So like so many others we are going to have to adjust our pricing upwards to keep things moving. No we are not in trouble or anything, we are in no danger of having to close like so many others, including some of our own customers this last year, but we realized that in some cases we were giving away the farm and not leaving anything for the company. Every business needs to at least keep up with the cost of living and doing business, and so far this year we have been going in the other direction. Very soon you will be seeing an across the board price increase. While we are cutting and trimming costs in areas that we can you should be pricing your products and services avoiding these mistakes to be sure you keep your business healthy too.

All that pricing is, is a risk. The risk of setting a price you and your customers can both live with and continue to do business. But most risk can be managed with good information.

1. Low ball pricing and undercutting your competition. For some businesses this is a strategy, but not a very good one for long. Pricing yourself and your services too low all the time may bring in great sales numbers but not the bottom line profit to stay in business. You do not have to get all of the price conscious customers that are out there. Know what your service costs you to offer them and price accordingly.

2. Using the same margin for everything. No one says you must make the same % of profit for everything you do. You may need to decrease the margin on less time consuming work, and increase the margin on the infrequent or costlier jobs. You can afford a smaller margin on the higher sales volume of the quicker jobs. Say a complete strip, stain and reseal job for a 3000 square foot deck at the back of the house vs. the quick concrete driveway cleaning at the front.

3. Knowing the difference between markup and margin. Markup is based on your costs and Margin is based on the price. If you price a service with a 20% mark up on the cost of the products you use for the job and then offer your customer even a 10% discount on the total service you may end up with not making the margin you need to run the business.

4. Not taking all costs into account. Every job price must cover all your costs. Not just the cost of the soap, water and gas to get you there but also some of the cost to purchase equipment, operate and maintain it, along with all your bookkeeping and other costs it takes to get and process the job. Every business needs to know its basic hourly overhead for a whole month even if you do not do a single bit of work for that month.

5. You need to know what the competition is charging for the same work. That does not mean you follow the price they charge but you need to find out what value they give vs. what you offer and price accordingly. If you use a better machine, better soap and give superior service include those costs in your price and be able to defend those prices by showing and explaining to the customer why you cost more.

6. Discounting instead of giving added value. Every 10% discount you give means you have to do 50% more work to make the same profit if you had not given the discount. You can discount yourself out of business. So make your discounts mean something when you give them, use them sparingly and try and give your customer added value instead. Give the customer an added service for free as an incentive instead of a discount. Clean the gutters with every roof cleaning, clean windows with a house wash etc. Most of the time you would be right there doing the first job anyway so the base cost is very low, the material cost could also be next to nothing so why not put a price value on the extra service and give that to the customer instead of a cash discount.

I hope this helps you price your work to your customers to keep you running a healthy business and that you understand when we have to reprice our products to keep our business healthy too.

Tags: added value service, business plan, pricing

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