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Kev Williams
12-06-2015, 6:19 PM
The last thing I've ever been accused of (a few cheapskates notwithstanding ;) ) is overcharging for my work. Many of my cold-call customers pay me more than I charge, and most of my business customers tell me I should raise my prices, and have been telling me for years. I always tell them the reason I don't is because, if I do, you'll start shopping around.... always good for a chuckle.

Was just going thru my some of my email folders, and was moving a customer's files. Then I noticed something: This customer (of over 25 years) averages 4 to 6 orders per month. I went back awhile, and the lowest orders in one month for the past couple of years is 2, and that was one month.

Last month I told the guy I deal with was going to raise their prices, which have been the same for 12 years or more. "Great, you should, it's about time!"...

Since then, crickets. Haven't seen an order from them in 4 weeks. I think the last time that happened was '08. Coincidence, or are they shopping around? So much for fair warning... ;)

Scott Shepherd
12-06-2015, 7:22 PM
I, personally, think it's worth it. I have no desire to be the cheapest guy in town. I probably was for a while. Not now. What I found was that it weeded out a lot of the things we didn't actually make money on, like those jobs where you think it's going to take 15 minutes and 6 hours later you're still working on it for some reason. I call it "noise" and it wiped out a lot of the "noise" and I believe it made us more profitable. I have a terrible fault, and that's trying to help everyone with everything. I've been slow to realize that I can't be that person. While I think it's nobel to want to help everyone, it's more often at my expense.

In this case, I'd give the guy a call and ask him. I suspect there's just some bump in the road that caused him not to come in. I had a repeat customer recently that disappeared. Finally showed up about a month later with a cane. He had his knee replaced and was out and no one else handled his work when he was out. You just never know what's going on.

Kev Williams
12-06-2015, 7:51 PM
For sure it could just be coincidence, this time of year some businesses are more concerned with arranging the xmas party than working. I probably will call him and just ask him what's up, I've known him long enough I believe he'll be honest with me.

But the shopping around has happened before, several times. But sooner or later, they almost always come back! :)

Ross Moshinsky
12-06-2015, 8:43 PM
My guess is they'll call next week and they don't really care about the price increase. My bet is while you've been charging the same price for 12 years, they've been bumping the price to the end user and happily pocketing the extra cash you're saving them.

1. Don't draw attention to price increases. Charge it and deal with the fallout afterwards. You obviously shouldn't do this if there is a major increase, but if you're bumping just to keep up with general inflation, then you don't need to let them know you're bumping their price by 3-6%. Also it's best to increase the price on a small project, not the big one. That way it's not some big surprise when they give you a larger order.

2. You should never go 12 years without adjusting your prices. I can't think of a circumstance where your prices should be that fixed. If you told me because of changing materials and process you've been able to keep the price down, I could buy into that. I know by switching materials and pushing jobs from the rotary engraver to the laser, I'm able to keep prices down but that doesn't mean I haven't increased prices during that period. You should adjust prices yearly. Maybe not every job but some jobs. If you have a job you do out of Romark, I gaurantee prices have gone up during that period. Even if it's a straight engraving job, I bet your cost of living has increased over the last 12 years. Why shouldn't your prices reflect that?

Keith Winter
12-06-2015, 8:58 PM
I also think raising prices is worth it. The headache people who you barely make anything on go away to the cheapest guy and you have more time to focus on those customers that bring in more money. By more money, I mean more money per hour. Let's say a guy brings in $500 of business a month to you, that's $6000 a year and a heck of client. However if you have to spend 25 hours a month servicing him that really isn't a good use of your time. If that guy takes only 5 hours then you can spend the other 20 servicing other clients or playing with your kids, seeing your spouse, going on trips, etc. To me it's not worth it to do jobs that don't pay enough to make it worth my time. And keep in mind all of your expenses go up over time too, if you haven't raised him in 12 years you're probably about 9 years over due. :)

paul cottingham
12-06-2015, 10:12 PM
Look at it this way. My company charged $35.00 an hour for a long time. We decided that had to change, and doubled our rate (we were undercharging.) not only did our business double (yes, you read that right) we did not lose any customers and even our most persnickity clients stayed, and the major whiners stopped being whiners. It was interesting.

also look at it this way: at $60 an hour we had to work 8 hours to earn $480. At $80/hr we only had to work 6 to earn the same amount. Scaling this up shows us even more how smart it is.

And we took a lot less crap from our clients as well.

Robert . Payne
12-07-2015, 12:03 AM
My fiance runs most of our design/laser business but coming from the software development world myself I helped apply a few things to pricing:

– Big companies actually don't normally sign first time deals that seem 'too good to be true'. My experience in the software world has been that if you come off as far too cheap you look unreliable, unprofessional and quite frankly like you have no idea what you're doing.

– Because we do a lot of design + laser jobs the cheaper the client the more work it is to even make the sale. They typically ask for additional quotes/sizes/materials because the first quote is too expensive. When we know we're dealing with someone that just wants a bargain and not the quality we offer we normally budge very little on prices through the quotes because we know they are just going to be a total pain asking for the most changes etc… through the entire project.

So far this has served us really well, and we keep our prices quite high and we've even had competitor's customers come to us because the quality is what matters to them.

Gary Hair
12-07-2015, 12:10 AM
The business coach I had taught me quite a bit, but one of the most important bits of info was this - the fastest, easiest way to increase your profit is to raise your prices. Cutting cost, changing processes, etc., all take time and may not work, but raising your price is instant, and works. There is always going to be fallout but if you analyze those that fallout, you'll probably find that they weren't your best customers anyway, and you will also realize that they have freed you up to better serving your good customers as well as giving you time to work on getting more of the customers you really want to have. I have adjusted my prices almost every year and this year is going to be a pretty large adjustment!

Scott Shepherd
12-07-2015, 8:14 AM
We had a customer that we "thought" was our best customer. Long time customer of many years. They were a $30,000 + a year customer. They repeatedly got irrational with their contact with us. Forgetting to send the order to us, then blaming us for the items not being there. Nice email trails to back it all up. Finally, we "let them go" as a customer and sent them into the free market. We thought it would be an impact to our business. It was. A positive impact. Turns out with all their demands and trips to locations to survey sites, etc, we weren't actually making our normal margins on their account. We actually were more profitable and had a better year AFTER they were gone.

They came back and we doubled our prices for the aggravation factor of dealing with them, they never blinked once on the pricing at the new prices. We've since refused any work from them because they are so difficult to work with.

Chris Edens
12-08-2015, 1:38 AM
Whats that saying? "Anyone can give it away"

Kev Williams
12-08-2015, 2:08 PM
Thanks all, for the feedback!

Since I started this, I've been watching the clock while running jobs...

Some jobs I barely make $20 an hour, some work out to over $300 an hour. Setup time is usually the reason for the low rates--

The company in question, I'm at about $35-$40 an hour right now. I'll take $40 an hour for 1000+ part jobs, but for 2-10 part jobs, nah... ;)

Ross Moshinsky
12-08-2015, 2:36 PM
Thanks all, for the feedback!

Since I started this, I've been watching the clock while running jobs...

Some jobs I barely make $20 an hour, some work out to over $300 an hour. Setup time is usually the reason for the low rates--

The company in question, I'm at about $35-$40 an hour right now. I'll take $40 an hour for 1000+ part jobs, but for 2-10 part jobs, nah... ;)

Anyone that does engraving will understand that some jobs are stinkers and some jobs are very profitable. There is a certain percentage of our business that we don't really make money on. Most businesses have that. For example: we can't make money on a couple of trophy plates. Even if we charge a $15 minimum and consider the material scrap, the time with the customer, setting up, and running the job makes it unprofitable work. You do it because you almost don't have a choice. It's like when a bar sells a $7.50 hamburger. They only make a few bucks on that burger but they do it so they can sell you a $4 beer at a $3.50 profit. It's almost impossible for the local bar to not sell burgers just like it's almost impossible to offer one for $10 and not get dirty looks from patrons.

As for averaging $35-40/hr, I think you're going to get a lot of responses on here from people thinking that's on the low side. I understand you run out of your home which means you have a low overhead, but even so, with your list of equipment and skillset, I wouldn't think you should be under $60/hr on a production run. Most people with overhead would consider that close to giving it away so it still gives you a real advantage in the market.

Prashun Patel
12-08-2015, 2:51 PM
Thanks for reminding me... I need to do this.

Jeff Belany
12-08-2015, 5:28 PM
Keep in mind the sodas (small, medium or large) at the Fast Food place or the Movies -- cost is super low and sell for $3-6. Quite a mark up. I know I need to raise some prices but keep putting it off. Moved my shop earlier this year and business has been so slow I hate to lose any business so I put off raising prices. Right now the only person making any money off my business is my landlord. But, I think the first of the year things are going to go up some. Still hoping to hang in there.

Jeff in northern Wisconsin

Scott Shepherd
12-08-2015, 6:20 PM
I'll take $40 an hour for 1000+ part jobs, but for 2-10 part jobs, nah... ;)

Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

Joel Ifill
12-08-2015, 7:10 PM
Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

You charge 18 and tell them you gave them a price break.

There's some free online classes on pricing strategy that should help. A good rule of thumb is that you need to be making at least 60-85/hr as a "consultant" to make enough money to be worthwhile, not all business hours are billable and there's always overhead. I personally charge around 60/hr but I charge for my setup and design time not material or laser-on time. It works for my jobs as they are all about the same run time so I'm not getting orders that take multiple hours to to run. I also don't do this fultime as my other business paid for the laser so I just do it for pocket money. I would rather charge higher and get more professional clients then come on the low side and get all the finnicky people who want something cheap and fast.

Mike Lassiter
12-08-2015, 7:19 PM
Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

IMHO - you prepared the price quote knowing they were in a rush. You came up with the price you would be happy with under the circumstances involved. So afterwards you find out they where prepared to spend $20 each. I don't see that making any difference. If this was me, I would give them the price I had planned to quote them and they can feel good that they got someone to do them for much less than they thought they would have to pay. You will make the money you wanted to and they will come in under budget. Win for everyone. I think to raise the price after learning they were willing to pay more would be greedy and taking advantage of them.
Interested in others responses.

Scott Shepherd
12-08-2015, 7:48 PM
IMHO - you prepared the price quote knowing they were in a rush. You came up with the price you would be happy with under the circumstances involved. So afterwards you find out they where prepared to spend $20 each. I don't see that making any difference. If this was me, I would give them the price I had planned to quote them and they can feel good that they got someone to do them for much less than they thought they would have to pay. You will make the money you wanted to and they will come in under budget. Win for everyone. I think to raise the price after learning they were willing to pay more would be greedy and taking advantage of them.
Interested in others responses.

Interesting take on that Mike. I was told years ago to always ask for what their budget was. It took me several years before I felt comfortable doing it. Now I don't mind asking at all. It helps a lot. If someone calls and wants to talk about a project, we tell them we are capable of doing the work they want, and then it requires a lot of time to get all the quote worked out, materials, outside services, etc, and we're not on the same page up front, then we've just wasted a lot of time quoting something that we can't do. For instance, here's a real life example. Got a call about 2 years ago, customer in a panic, needed the glass that candles are in "Laser engraved". Their words, not mine. They needed them in 3 weeks. How many? 10,000. Got them to email me the design. They wanted samples done by the next day and were getting ready to get in the car and bring me samples to engrave. The design wrapped all the way around the entire glass, like vines. I called them back, told them a couple things, one, laser engraving is the wrong way to do 10,000 of them, and then I asked what their budget was. They said these went into Wal-Mart. I asked their budget and they said .60 cents each. Had I not asked that, I would have wasted the time of having them bring glasses in, me setting up the files, engraving them, and then telling them they were $8 each, only to have them leave in disgust and having wasted more of their time.

It stopped all of that up front in literally less than 15 minutes time, total.

I haven't quoted our customer anything on the job I posted, but what it did do was allow me to come up with a higher end option for them. One piece will be in the $12-13 range, and one will be in the $19.00 range. I'll present both and they can make up their own mind. Without knowing they had a $20 budget, I wouldn't have stayed late tonight and worked on a higher end sample for them. In the end, I didn't take advantage of them, I provided them options and they can make the call.

Gary Hair
12-08-2015, 7:57 PM
Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

I would charge the price I feel comfortable with regardless of what they have in their budget.

Mike Chance in Iowa
12-08-2015, 8:44 PM
I haven't quoted our customer anything on the job I posted, but what it did do was allow me to come up with a higher end option for them. One piece will be in the $12-13 range, and one will be in the $19.00 range. I'll present both and they can make up their own mind. Without knowing they had a $20 budget, I wouldn't have stayed late tonight and worked on a higher end sample for them. In the end, I didn't take advantage of them, I provided them options and they can make the call.

This is how I would have approached it too. It's something I hope would happen to me when I'm looking to make a purchase and didn't necessarily know I had other options available.

Keith Winter
12-08-2015, 9:46 PM
Haha this sounds very much like the how would you price it long discussion a few months back :) I agree, always ask budget first, it just makes sense. Saves you both from wasting time.


Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

Kev Williams
12-08-2015, 10:27 PM
As for my being okay on $40 an hour jobs, I should clarify: NOT if they're "babysit" jobs. What I'm talking about are the "load-the-machine-and-come-back-in-an-hour-when-they're-done" jobs. For most people this could be a killer, waiting around for the machine to get done making $40. But that's exactly why I have so many machines (4 lasers and 10 tool engravers). While one machine (or several) is running a bigger job, that leaves me free to fire up a couple more machines, or at least get them ready. Currently I have 3 tool machines diamond etching a 700 count platter job. And this isn't a $40 an hour job, it's closer to $75 an hour, and that's per each running machine. Each tray takes a few minutes, so one person- my BIL- can keep all 3 running machines easily. And I'm free to do other stuff... :)

But it's not all gravy, some days are spent doing nothing but paying bills, ordering stuff, going thru emails, and trying to organize the work. It's like swimming in mud. But the heavy machinery days make up for the heavy office equipment (non-paying) days. For some reason, I prefer the heavy machinery days! ;)

Now, as for raising a would-be quote based on someone's budget, that all depends, but I don't think it's "bad". Last week a lady needed a rush job that another shop didn't deliver in time. A few 2 x 3" lasered trophy plates. My normal price is around $9 each if they're easy. When she asked how much I said "less than they charged you--" and she showed me the other shops quote sheet- just under $19 each. There were 3 plates, I told her $40 total... I made an extra $13, she saved $16, win win!

Glen Monaghan
12-08-2015, 11:03 PM
Now, as for raising a would-be quote based on someone's budget, that all depends, but I don't think it's "bad". Last week a lady needed a rush job that another shop didn't deliver in time. A few 2 x 3" lasered trophy plates. My normal price is around $9 each if they're easy. When she asked how much I said "less than they charged you--" and she showed me the other shops quote sheet- just under $19 each. There were 3 plates, I told her $40 total... I made an extra $13, she saved $16, win win!

Reading this thread, I was suddenly struck with the thought that I've heard about, and experienced the effects of, "racing to the bottom" wherein competing businesses keep undercutting market rates to draw business, but I've never heard of anyone "racing to the top"... Guess it's a little bit like the prisoner's dilemma.

Mike Lassiter
12-08-2015, 11:12 PM
Interesting take on that Mike. I was told years ago to always ask for what their budget was. It took me several years before I felt comfortable doing it. Now I don't mind asking at all. It helps a lot. If someone calls and wants to talk about a project, we tell them we are capable of doing the work they want, and then it requires a lot of time to get all the quote worked out, materials, outside services, etc, and we're not on the same page up front, then we've just wasted a lot of time quoting something that we can't do. For instance, here's a real life example. Got a call about 2 years ago, customer in a panic, needed the glass that candles are in "Laser engraved". Their words, not mine. They needed them in 3 weeks. How many? 10,000. Got them to email me the design. They wanted samples done by the next day and were getting ready to get in the car and bring me samples to engrave. The design wrapped all the way around the entire glass, like vines. I called them back, told them a couple things, one, laser engraving is the wrong way to do 10,000 of them, and then I asked what their budget was. They said these went into Wal-Mart. I asked their budget and they said .60 cents each. Had I not asked that, I would have wasted the time of having them bring glasses in, me setting up the files, engraving them, and then telling them they were $8 each, only to have them leave in disgust and having wasted more of their time.

It stopped all of that up front in literally less than 15 minutes time, total.

I haven't quoted our customer anything on the job I posted, but what it did do was allow me to come up with a higher end option for them. One piece will be in the $12-13 range, and one will be in the $19.00 range. I'll present both and they can make up their own mind. Without knowing they had a $20 budget, I wouldn't have stayed late tonight and worked on a higher end sample for them. In the end, I didn't take advantage of them, I provided them options and they can make the call.

;) and that's allowing them to get more than they thought for a little more if they want it. I agree with you. You aren't attempting to take advantage of them, and giving them a chance to upgrade I bet will give you much more business as they will see you are trying to provide them great service for a fair price.

Mike Lassiter
12-08-2015, 11:15 PM
I would charge the price I feel comfortable with regardless of what they have in their budget.

sort of how I view it too. "my price" doesn't depend on their budget, but I also agree with Scott that knowing what they have in mind spending allows one the provide options that could allow the customer to upsell themselves on getting more since they know what they can send and decide for themselves.

Robert . Payne
12-09-2015, 4:59 AM
Serious question here, what if the market value for that 1000 piece job let you make $400 per hour on a 1000 piece job?

Had a case just yesterday/today. Customer showed up in a frenzy, needs stuff before Christmas. We told them we'd work up a quote. They called today to see if the quote was ready. We had just about finished it. We were in the $12-13 each range for the items. We asked "Do you have a budget for this item" and they very quickly said "$20 each".

So should we charge $12 each? Or $19.50 each?

When a client obviously states their budget is above what you were going to charge I always go slightly lower than their quote. In this case probably $18-$19. And due to the extra profit I'll likely try to accelerate when their project gets done so they are even more pleased with the price they paid ( which is less than what they offered as a budget line ).

Prashun Patel
12-09-2015, 7:05 AM
Charge what the customer is willing to pay. And give them the best support and service for that price.

Mike Clarke
12-09-2015, 8:33 AM
Reading this thread, I was suddenly struck with the thought that I've heard about, and experienced the effects of, "racing to the bottom" wherein competing businesses keep undercutting market rates to draw business, but I've never heard of anyone "racing to the top"... Guess it's a little bit like the prisoner's dilemma.

That is what always struck me as well. A person gets into a business due to the profit potential. Then the plan is to cut the profit out to get more business. So cut profit to make profit is the business model.

Are you guys talking gross, net or profit on the $/hour?
I have had jobs in the $350- $700 range (at the spindle) but that does not account for cost. When I say 'at the spindle' that denotes the time it took for engraving. It does not factor in all the time on a job such as applying adhesive. I just look at the job and if all operations are similar I treat them as a linear relationship to the engraving production rate. It is just a quick way to look at a job and see if I am having higher output.
Increasing production rate is the only way to gain a higher profit after a price is settled on. In one case I was able to go from 4 signs an hour to 7 signs an hour. I never could get 8 an hour. That was dramatic. Even more dramatic was having one job I did end up taking 1/3 the time after making some changes in the production process. That can only happen if I get repeat jobs where it is worth analyzing and developing a better process.

The bottom line for me is the more money I can get the easier it is to make a profit. Reducing cost can only go so far. I have to do both to get the most out of every job. Some jobs just need to have a higher price to be even worth doing as there is no way to increase production on them. Certain cost are fixed. Like some of you we are a full time business, this is our day job. I have no plan B other than to make it with plan A.

Scott Shepherd
12-09-2015, 1:03 PM
For what it's worth, our customer came in today to pick up the samples. They didn't even want to see the lower end sample. They wanted 200 pieces, saw it, immediately asked if they could increase the quantity to 250. So 250 at $18 each.

Tony Lenkic
12-09-2015, 1:07 PM
Good for you Steve,

Gary Hair
12-09-2015, 1:37 PM
For what it's worth, our customer came in today to pick up the samples. They didn't even want to see the lower end sample. They wanted 200 pieces, saw it, immediately asked if they could increase the quantity to 250. So 250 at $18 each.

That's a great win for you and your customer! They are getting a better product at a better price than they planned, and you have a bigger order - much better this way than simply raising the price of a $12 item to match their budget. Imagine how they would feel if they somehow found out that you had charged them $19.50 for a $12 item? Remember, this forum is viewable to the public and a simple search could find this thread...

John K Jordan
12-09-2015, 1:57 PM
I make very few things for sale but I recently went up from $75 to $300 for one of the things I do sell. I have had no complaints, however these are things that don't usually go to repeat customers. I'm afraid I trained earlier customers into thinking these weren't worth much.

Most people have already judged the value in their mind by the time they decide they are interested. They will gladly pay less but have no problem with paying more. Note that the quality and uniqueness of the piece makes all the difference, exquisite goes a long way.

Reminds me of the time I was asked to do some 3D modeling for an architecture firm. After looking at the requirements I was prepared to do it for $1000 when I asked if they had a budget in mind. "We can't pay more than $8000 for this." Yikes.

JKJ

Walt Langhans
12-10-2015, 12:22 PM
I call it "noise" and it wiped out a lot of the "noise" and I believe it made us more profitable.

Yup... ^That. 100% solid advice.