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shane@detailedreflections

By request...pricing for service and how it’s established

Question

I have some time this morning before the day starts and last night @falcaineer expressed an interest in a write up on how we establish pricing. 

 

Pricing has a ton of variables to it. Your local market will have a large influence on how much you can charge for your service. But outside of that, it should also be a calculated number. 

 

Before we get too far into the numbers though, you have to decide if you’re just detailing for some cash on the side or detailing for business. Both involve taking dollars for a service, but one has far more flexibility to it. 

 

When simply detailing for some cash, it’s more of a friendly arrangement. Maybe you’re covering some product you ordered or used?  Maybe you want some beers for later?  Maybe you just want to help a friend?  If this is the case, it’s a straight equation. The cost of materials plus whatever you want to be compensated for your time. And there you have the simplest pricing structure. 

 

If you’re detailing for business, you are into a far more complex set of calculations. You have some overhead (or a lot). I work out of my personal garages, but that doesn’t mean we don’t have considerable expenses. We have equipment tha we’ve invested in (and expect a return on), electricity, labor, product, etc. 

 

One thing to consider is recurring costs. These are for maintenance items. Towels wear out, wash mitts, disposable towels for coatings, etc. We assume a certain amount of “waste” on every job we do. This covers consumable products...chemicals and such. We tried tracking product used each job and it’s a logistical nightmare full of estimations and errors. We just assume a set amount based on the job. We could share the numbers, but it’s a mute point since the number varies based on the job and what products you individually like to use. That’s part one of the calculation. 

 

Up next are your labor costs. How much do you want to get paid per hour?  Don’t think in terms of how much the business is making for this. It’s a straight hourly rate for yourself and anyone working for you. I know how much my guys cost me, and I know what I’d like to make. Keep in mind that the guys ALWAYS get paid...I don’t. I often choose to reinvest what I would get paid back in the business. If a job takes longer than anticipated, the guys still get paid their full rate for however many hours they work. It’s not variable and not optional.

 

You should have a good estimate for how long a job will take. Sometimes they’ll go quicker, sometimes longer. But I know we shoot for about three hours with two guys on a “one step” job. So the rate is calculated as (employee A + employee) x three. And there you have your labor costs. That’s part two. 

 

Next up is how much do you want the business itself to make?  The business alone is an interested party to all transactions. The business needs to retain earnings for growth, expansion and other overhead (product orders and such). You can calculate this as an hourly need or a percentage of each job. The two should be close either way. That’s part C. 

 

Now add up part A, B and C and you’ve arrived at the minimum required rate per hour to be viable. You will not always hit the rate. Accept that. Things will come up. And some jobs you’ll make more than the rate. It should average out over time and jobs. 

 

So now you do the math and realize that your hourly rate is too high and you’ll never get that in your area with your experience. What do you do?  How can you impact your numbers?

 

You can raise prices a little bit and see if you have resistance from clients. More importantly though you can do something that won’t impact your clients. Look at your purchasing and see if you can buy smarter. Buying in bulk usually offers discounts. Negotiate with your vendors for better pricing. This will lower your costs and give you more profit without impacting your clients. We still do this constantly without even looking to avoid a price increase. Better buying means more money for the business. As a business owner you owe it to yourself, your clients, employees and business to buy smart and maximize your profit dollars to ensure success. 

 

You should also also research what other detailers in your area are offering for services and pricing. We don’t let them dictate our pricing, but we do want to know so we can expand on what makes us different. Things like equipment, exclusive products, training, services, etc. 

 

We have an internal policy that we don’t get into pricing wars and drive the price of our service down. We offer a fair service at a fair price. If we let clients dictate our pricing, we give them total control and train them that they can tell us how much something costs without them knowing the background information. If we don’t value our time, who will?  

 

Which brings up the last point...there’s a difference between a customer and a client. A customer is someone passing through. They’ll use you one time and then they’re off into the sunset. They won’t promote your business for you and won’t maintain a long relationship. A client will sing your praises, recruit other customers and clients and constantly be a stream of revenue for your business. Customers and clients both have a place in your business model. 

 

And that’s the long-ish version of calculating pricing...

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Well written and thoughtful as usual!! Definatley gonna be useful article for our members.   

 I give professional detailers credit...you guys must be wiped, i detailed my two cars in one day and I could barely lift my arms!!

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1 minute ago, tlbullet said:

Well written and thoughtful as usual!! Definatley gonna be useful article for our members.   

 I give professional detailers credit...you guys must be wiped, i detailed my two cars in one day and I could barely lift my arms!!

 

Thank you!  Some days are long, and others not so much. We have a system down and we usually tag team work to make it go quicker. It’s all about balance and the type of work we book. The worst was trying to ceramic coat three cars in just over two days and the coating required four layers each. You manage and push through it!

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Well written Shane def a great long look at it. 

 

So semi loaded question with pricing. So you explained how you set your pricing and how you calculate it, but one thing I dont see is how do you know if your pricing is accurate for the area? I dont mean those $99 "Full Detail" places I mean the real places. Obviously its not as simple due to regional pricing and such meaning cost of living say up here in the Boston area is MUCH different than say Farm country mid west, or LA. Did you check around locally to what was advertised and fall into that bracket at first or did you just say to heck with them here is my pricing? 

 

Great comments on Customer VS Client. 

 

For those thinking of hiring help, there are multiple ways to do it, and you should take a look at local laws and regs before hiring anyone. Now hiring folks as contractors is a completely different story with its own mess around it. In other words, be careful, check rules and understand them before you bring in staff. 

 

Also I think you could have an entire book if you put this together......

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@pirahnah3 you ask some good questions. You need to do some market research. I looked at a bunch of websites to see what they offered for services and pricing, made some phone calls to see what my money could get me. 

 

Prices certainly do vary widely by region. They also vary based on what services they can offer. For example being accredited to install a product has a value to it. It shows I’ve taken the time to get the training and invest in ourselves. All of that is worth a few extra dollars in my mind; both as a consumer and a business. 

 

We could still do some more market research, but we have work pretty regularly coming in and we’ve never advertised. That tells me that we are doing something in the right direction. 

 

Oh, and I still have so much more to learn before I could ever entertain the thought of putting something as long as a book together. Most days I feel like I’m fumbling through business ownership. I don’t think that’s a feeling that will ever go away. 

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2 hours ago, shane@detailedreflections said:

... If we don’t value our time, who will?  

 

 

This was the hardest part for me, and it took my clients to make me realize it!

 

Great write-up Shane!

Edited by mc2hill

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@shane@detailedreflections Thank you for the write up and I'll echo what @pirahnah3 stated about Customer vs Client - well done.  I did notice one thing that you left out of the pricing that falls between supplies and employee's, but has to be accounted for.  Every business has paperwork, financials, taxes, human resources if you have employee's, they all add up in time and costs.  If you do not feel comfortable doing the books and such, make sure you hire a reputable company to do it for you.  The government does not care whether or not you are good at tracking things, they will take what they believe you owe.  

 

My wife is an accountant and I can't tell you how many business owners come to her with a box full of stuff that they never had time for or they planned to get to later.  I can tell you it is much more expensive both from a tax liability and accountant aspect to fix things once they have gotten out of hand.  Make sure you are prepared from day one on the books to cover your start up expenses and set your processes.

Edited by RayS

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