*PRICING PRICING Long-Lasting Decor PRICING HELIUM BALLOONS PRICING ARCHES HOLIDAY PRICING PRICE SETTING STRATEGY THEY'LL PAY FOR GREAT WORK WHAT IS YOUR TIME WORTH? WEEKEND RATES COMMUNITY SIZE AND PRICINGNote:
*PRICING We're not supposed to discuss prices because that is price fixing and it's against the law. However, we can discuss pricing.
The cost of those weekly visits are included in my original quote and are specified in my contract (i.e. a nearby client may get charged 10 C-shells per week to check the design and a client 30 miles away will get charged 50 C-shells per week).
Within the contract we note that repair costs of over 5 C-shells will be billed to the client as they occur. We give them credit against future decorating work if they call us and let us know everything is OK - which is usually the case. It hammers home the fact that our structures look good a long time and that we do a good job.
I do NOT however, charge my customers for minor repairs. I plan well, using lots of white balloons (they fade less), under inflated 16-inch balloons, and keep the balloons out of reach as much as possible. I do tell them that I will replace balloons that deflate or even a balloon or two popped by a visitor.
I say, 'if someone walks off with a major part of the sculpture, or goes crazy and pops lots of them, treat them like you do anybody else that destroys mall property. I will, of course, need to bill you to recreate the missing or destroyed parts.'
One customer liked what I did for a weekend event, then asked what it would cost to keep it up for a week, then another week, then another. It started looking ratty. I have learned to tell certain customers that 'because I only want to provide balloons that reflect well on you (the client) and on me (the decorator) I will be back on _____ to remove the decor.' I make it clear they DO NOT have the option to leave the balloons up indefinitely without paying me to keep them looking good.
Price outdoor jobs higher than indoor jobs. You may need more people on site, you may need someone to remain in the area if it's a really important job (whether client requests it or not), it's going to be hot and uncomfortable and your staff is accustomed to working in an air conditioned shop. Access to the area is likely to be difficult and cumbersome. Bring additional balloons, helium, cords, and weights.
PRICING HELIUM BALLOONS How to charge for He filled balloons Since an 11" helium balloon holds .5 cubic foot of helium, take the cost of your helium tank (include the rental and portage charges, too) and divide that cost by the cubic feet that it holds (there are many different sizes - so ask your supplier how much yours holds). Then divide that number by two and you have your cost per balloon. Ex: 30 C-shells (cost of tank) divided by 200 cu ft. = 0.15 C-shells per cu. foot. Divide by 2 to get cost for 0.5 cu ft. = 0.075 C-shells per 11" balloon. Keep in mind that you will pop some balloons and lose helium, so be sure to add a little to the final price to cover that cost. Then 1) include the cost of the Hazardous Materials Charge. 2) include the cost of delivery if any. PRICING ARCHES We price both the Packed Arch and String of Pearls by the foot. How we arrived at the pricing was to calculate the price of a arch, say a 75 foot packed arch. Use can use the QBN cost sheet or your own accounting cost formula (most accountants can provide one). One caveat. These are examples and are not the prices we use. I am Just trying to show how to establish a price. So let's say you determine that a 75 foot packed arch would need to be priced at 500 C-shells for a proper profit margin. Divide the 500 C-shells by the 75 (feet) and you get 6.67 C-shells per foot. I would suggest rounding this up 7.00 C-shells. Now make this you price for a Helium Packed Arch. Now do same the same for an 75 foot "Air" Packed garland. Let's say that comes out to 450 C-shells. That would equate to 6.00 C-shells per foot (450 divided by 75). Now do it for a 75 foot string of pearls (11" balloons). Let's say it comes to 150 C-shells. That would equate to 2.00 C-shells per foot. So now you have started a pricing sheet. Helium Packed arches 7.00 C-shells per foot Air Packed Arches/Garlands 6.00 C-shells per foot String of pearls (11") 2.00 C-shells per foot Also , we do not price a 3, 4 or 5 balloon packed arch differently. I would base the calculation on the 5 pack and use it for all three. One could do calculations for all three, but I personally think it would create confusion. It is simpler to keep one price in your mind, so you can always give a price quickly off the top of your head to the customer. Q. I did a 23 linear foot arch 8'hi X8feet long... but I'm having trouble pricing it HERE ARE my questions: What S*H*O*U*L*D a 8'X8' arch take to make ?? (how many hours??--- It took me (1st time, by myself about 6-7 hrs altogether..) Next question...What is a AVERAGE selling price for said 8X8' Arch? I ask (laughingly!) because my first set of calculations came out with a loaded overhead cost of 75% leaving my cost at a grand total of 700 C-shells. Now that sounds great, but I have a SNEAKY SNEAKY feeling it's A LOT more than the market would bear. I'm guessing that around 300- 400 would be a fairer price.. Could some people give me a sanity check on the pricing?? A. Well, if you are doing a 4-balloon garland cluster using 11" helium balloons sized to approx 10.5 inches wrapped onto 50lb monofilament, and you do a 23' linear strand, you'll use about a gross of balloons, with maybe a few left over, and you'll use about 70 cu. ft. of helium and about 10 yds. of monofilament. figure your costs for materials from that. An experienced balloon artist should be able to inflate, tie and wrap clusters of 4 onto a line at a rate of 150 to 300 balloons per hour, depending on skill level and environment - it takes longer outdoors, or in a cramped or busy area. figure your costs for labor from that. your material costs are probably, as described above, less than 50 C-shells. Your labor, if you can do it yourself in about an hour, is whatever you pay yourself per hour. 10 C-shells? 25 C-shells? 50 C-shells? 100 C-shells? Let's say 50 C-shells, so your total cost is 100 C-shells. Travel time? Part of a big package, or are you selling just the arch? How hungry are you, and will your competition get the job if you bid too high? Can your competition do the job, or are you the only game in town? If your monthly rent/utilities/phone bill etc. totals 1000 C-shells, and this is the only job that's going to generate any money this month, then your overhead is 1000 C-shells, so your cost is now 1100 C-shells for that arch. Don't quit your day job. If you can do 5 arches a month, then your overhead is only 200 C-shells, so the cost is now 300 C-shells. Realize that you've still only managed to earn 250 C-shells this month if you pay yourself 50 C-shells/hr and only crank out 5 arches. On the other hand, you're only working 5 hours a month! Well, anyway once you've figured your cost plus overhead, add a profit margin. If you've figured a cost of 300 C-shells for that arch in cost plus overhead, and you add a profit margin of say 1/3, then your price is 400 C-shells for that arch. You've really got to analyze a lot of factors which you haven't mentioned. The task of pricing a job is covered in lots of business books and courses. The QBN curriculum covers it quite well, especially from a balloon point of view. HOLIDAY PRICING What is acceptable for holiday fees for both decorating jobs and balloon deliveries. Should the fee be the same as any other day or should there be some sort of service charge for early morning, late evening, holiday or Sunday work? I think it is ok to charge a extra charge for those times. You might have to pay extra for your employees if you have to bring them in earlier or later for a special job. Sometimes customers want us to deliver with a 1 hour time window, we charge extra. We make the order a priority and bring in an employee just for that job. UPS and messenger services charge more to get it there faster, why can't we. The messenger service charges an arm and a leg to deliver on the weekend. PRICE SETTING STRATEGY balloons cost less than a quarter each, so what you're really charging for is your time. Compare what you're pulling in per hour vs. all of your costs (gas, balloons, printing, "office" tasks, etc.). Balloons are the cheapest part of the equation, almost a non-issue. The ultimate value of a balloon creation isn't reflected by an 11-inch piece of latex but in the art and showmanship you express in its use. When Hollywood makes a feature film on 35mm stock, they're using the same 35mm film that you would use in your camera, but it comes on larger rolls. It costs the same or more as the film you buy, and they use 24 exposures per *second*. A huge proportion of it is thrown out at the end of production. Still, when all is said and done, the *cheapest* thing about making a movie is the cost of the film. We won't allow our customers or our competitors to dictate our prices. The industry will never be able to command "the right price" as long as we put "cheap" product and/or labor into our creations, in order to get the job. How long before someone is putting sewing cotton on a balloon because it's cheaper than a ribbon? By all means, work to your customer's budget. But when they want 12 centrepieces, and they (say) they only have enough money for 10 or 11.... you become the loser either way. 99 out of 100 times they'll "find" the extra budget if your work and reputation is what they want. THAT is the secret! Get them to want YOUR balloon work.... not a price. Lindy Bell taught me a valuable lesson in one of her classes a few years ago. It's called the "R.I.P. Pricing Exercise". Basically, it's an exercise in recognizing the beneficial difference between turnover $ and net profit. I urge all to attend the Bell's education classes and seminars. Like the Bells, Dolly and I have survived and grown stronger by being stubborn and uncompromising when it comes to pricing. Even if we could make a $6 centerpiece we wouldn't! It would lower the value of our average sale.... affect our targeted turnover projections.... probably cut our net profit margin..... and attract the customers at the bottom end of the marketplace (who are not our target market). I know it's hard to resist the lure. She's a regular....... it's a good cause....... we don't have any other work.... something is better than nothing.... we are just starting out and need the recognition.... She's the sister of.... Heard 'em all. Been there, done that! Trust me..... the only price is the right price! And I bet you'll still be on the BHQ mail list a year from now. Each job should be individually priced according to the Job Cost Forms, unless you have standard packages you can offer them to choose from. Pricing should be based on your costs, expenses, labor costs, etc., and can vary from one area of the country to the other. There is an outstanding article in the January/February 1997 edition of Images called "Love to Make Money". It has a sample Job Cost Form, all kinds of nifty formulas, and enough information for someone to even consider attempting decorating for real, honest to goodness money. If a few (popped) balloons make a difference in your profits, you might rethink your pricing structure. After all, the balloons are the smallest part of the costs. Possibly you are not charging enough for your work in the first place. Use the QBN formula. It works for us too, and I teach all delegates to my classes to follow the formula. SELLING PRICE = MATERIALS + LABOR + EXPENSES (divided by) 1 - (overhead % + profit %) Example: SP = $47 + $42 + $11 (divided by) 1 - (30% + 25%) = $100 (divided by) 1 - (.3 + .25) = $100 (divided by) 1 - 0.55 Selling Price = $222.22 Remember: Your salary as the owner/manager is part of your OVERHEAD. If you do the work making the decor, this is ALSO LABOR. Use this formula, and you will always have PROFIT. (which is the difference between drawing a wage... and success in business!) First, when is it appropriate to do work at reduced prices and second, how do we maintain the integrity of our prices? As to lower prices, it depends on the situation. I can think of several reasons to offer a discount. One thing we do is to give prospective customers at Bridal Fairs a coupon that entitles them to a free item if they book their wedding with us within a certain time (for example, a free three foot heart if they buy a minimum package within thirty days of the Fair). I agree with most people that doing balloons for the "exposure" is usually not worth the effort, but even there, I can think of a few legitimate reasons to do so. If there is a particular venue that I haven't decorated, it's worth something to me to get a job there just so that I can have pictures of my decorations in that location. My photo album is a powerful selling tool and when I compare the cost of a newspaper ad or two to the cost of doing a job at a reduced rate to get a good set of photos, I can at least make an intelligent decision based on some real numbers and not just a gut feeling. It's worth actual money to me to have a great answer to the question, "Have you ever decorated at the .....?" As to maintaining the integrity of your prices, be sure that your customer knows the full retail value of the work you are doing and also the amount of the discount. You can come up with some reason for the discount ("Book with us early..." - "Congratulations, you won second prize in our drawing..." - "It's our National Potao Week Sale..." - or whatever) but be sure to show the full amount on the invoice and you at least will have some ammunition when other people want the same discount ("Sorry, Potato Week was last month") Ultimately, there are too many variables to make a simple answer to the original question. Use the pricing form to figure out your costs and determine what the discount would actually cost you and do your best to determine the return value of the discount. Make your own decision, but make it wisely. I also will give a reduced rate if it is a longer term contract and I feel I can receive other benefits such as advertising etc. THEY'LL PAY FOR GREAT WORK We always felt that we got the customers that 'couldn't pay' for a great job but wanted the room to look like a miilion bucks. A few months ago we started working with a great artist who makes spectacular centerpieces. She does the work I do not have the talent to do. As a result I am getting much higher prices for the same balloon work. The customers will pay when they see what they like. Don't be afraid to work with someone who has a talent that enhances your business. We now have more than doubled our business, are making more per job, and working less with A LOT less headaches. WHAT IS YOUR TIME WORTH? How do you decide how much to charge for "your time"? How do you figure out what your time is worth? 1. Determine the number of hours, allowing for holidays that you spend at work per year. E.g. You work 280 days per year x 8 hours per day = 2240 hrs per year. 2. Reduce this figure by the unproductive time, to arrive at the number of productive labour (chargeable) hours available. Answering the phone, preparing accounts, talking to customers, doing bookwork, banking, and other administrative tasks (quoting!!) these are all non chargeable hours. It is crucial to determine how much of your time is not directly chargeable to customers. Failure to account for this unproductive time is a main cause of business failure in the service industry. E.g. say your productive hours is now 1400 hours. (just a figure I plucked out of the air for this example!) Realistically, I know every week is different, but you just work on average hours that you directly spend on decorating or selling. 3. Work out what your indirect costs are. These would be overhead expenses such as rent, electricity,interest on a business loan, insurances, advertising etc ( Those type of expenses that are not directly charged to the customer. ) (Your accountant should tell you what your indirect costs are). Every business is run differently, so this figure should be different from business to business. Even one that is exactly the same as yours in your area. Let's say in this example it is $20,000 4. Work out your direct labour costs. As you are the owner, this would be your desired income for the year. This part is difficult if you are not an established business, but let say your business is generating enough income to ( say) pay you $28,000 per annum. (if only!) Take note though, if you have a business loan to pay off, then the principal repayment amount for the year must be added to your desired income. And if you could be so lucky, add some amount as a return on your investment (ROI). So, you end up like this: Indirect Costs $20,000 Desired Income $28,000 Loan repayts $ 5,000 ROI $ 1,000 Giving you a total of $54,000. 5. Divide the total amount to be recouped, by the number of productive labour hours available, to arrive at an hourly chargeout rate. E.g. $54,000 divide by 1,400 hours = $38.57 per hour If you find that whatever hourly rate you arrive at is too high, then either (1) get more chargeable hours (2) reduce overheads (3) reduce your desired income. 6. When quoting for a job, take into account the materials to be used on the job and then add to it your chargeable rate e.g. Materials cost = $40.00 Labour 2 hrs @ 38/hr = $76.00 Quote for job =$116.00 If you were to keep records of what hours you charged per week, per year, then you could adjust your calculations accordingly. WEEKEND RATES Should we charge different hourly rates for different days and after office hours? It's a very personal question in that one's local market and the amount of competition could influence each of us as managers of our small business in deciding on a policy here. This is how we approached it. To begin with; As a consumer I am cautious of sales people in a service industry who give me a price and then say, "extra for heavy duty, or after hours, or certain colours, or ....." JUST GIVE ME THE PRICE OF WHAT I ASKED FOR! I am also annoyed at them if they give me a price, and then immediately try to justify it by saying, "It's costing more because you want this done on a Sunday." I would hate to walk into a balloon shop and have the person behind the counter say, "jeweltone balloons are 5 cents each extra!" The words I LIKE to hear as a consumer are, "No sir, we don't charge extra for weekends" or ......." you can have pearltone decor at no extra charge!" If you addopt the pricing formula promoted in the QBN program, then you charge according to your actual COST .... and therefore your charge out rates will vary accordingly if you pay staff different rates of pay for different days and varying prices for different types of 11" balloons. But, there is no rule to say you can't charge MORE than the formula calculates. So, we simplify things to save us time in pricing and avoid offending customers during the sale proccess. Pearltone balloons cost us the most and the majority of Dolly's decor jobs are done in peartones anyway. So, ALL jobs are calculated on the basis that the balloons will be pearltones. The second rate level for balloons is based on ALL balloons being all around prints. If the majority in that job are prints .... they're ALL prints to us for pricing purposes. We are in the events and celebration business! Most of our decor jobs are required to be done on weekends or in malls at late hours or they want the bouquet delivered after 5pm. To our customers, all decorating and celebrating is outside office hours.So, ALL jobs are priced at the premium labour charge out rates. If we are decorating a job for a Wednesday luncheon with standard red, white and blue ..... we put more money in our pocket. It becomes "cream". Why drop the price? Competition isn't that tough. And the "cream" offsets the occasional oversight on some jobs. It gives your business a "comfort zone". I remember a marketing tip I got years ago; we are not selling "balloons". We sell emotions and/or solutions! Customers are not buying 6 hours of our time plus 698 latex balloons. All customers are only ever buying either a solution to their problem, or ..... a good feeling. It just so happens that we provide what they desire with balloons as the product. The price will become a secondary issue if you focus on "selling" them the "solution to their problem" or .... the "good feeling" they seek. You just use balloons to do it! So, our method is to plug in the highest rate applicable, and go for it! (I said applicable - not possible) Sell emotion, solutions, quality, service, relationships, a piont of difference, charisma ....... never sell just balloons. And never sell balloons at a discount, just to make the sale. PROFIT is the name of the game! Smart businesses only discount to clear unwanted stock. Or, as part of a marketing plan to draw attention to a specific product with high profit potential. Sometimes, you might feel tempted to put balloon decor into this catagory. Think carefully first. Do your homework! Well, that's what we do in Sydney! Circumstances in your city could be totally different to here? I'm sure others on the list will offer some alternatives worthy of serios consideration. Just because this method works for us, it doen't mean it is best for everyone. COMMUNITY SIZE AND PRICING Should the small size of your community dictate the prices you can charge? Please consider this; there are 3 options when offering a price to a customer. 1. The Right Price! - Based on a sure formula to guarantee a minimum acceptable PROFIT margin. 2. Higher than the Right Price.- Targeting the "top end" of the market and charge accordingly. 3. Lower than the Right Price. This happens when you allow outside influences to sway your better business judgement. eg; Competitor's prices, manufacturer's "recommended retail" prices, offering discounts that errode your minimum % to grow. And the other curse of small business is thinking that your customers have a better idea of the value of your work than you do. Try this; Are there enough people in the area you wish to service to support a new car dealership? If so, what brand of cars are they? Made in Asia .... bottom end of your financial demographics. Fords / GM ..... middle America. European Cars ..... top end. If there is no dealership in the area you wish to service, expand your territory - or be happy to sell balloons as a hobby. You won't make a comfortable living from it unless you pursue it as a bonafide business enterprise. Simple! So; when making balloon decor to show and/or sell, don't waste your time making product that is not in keeping with the socioeconomic demographics for your service area unless it's a "one off" by request. Believe me, by taking this approach, eventually the "one offs" begin to grow in regularity as it is human nature for all of us to want each party or event to be better than the last. Being in a small town in fine, but only if they pay the right price or higher than the right price! Anything else spells eventual failure. The future of your small business will NOT be determined by what they want to pay. It will be determined by what you make them pay. The trick is not to make them pay more than they can afford. Don't offer Volvo creations if they are Hyundai buyers. Customize your products to your economic market - and your prices will be right. Get it?