Originally Posted by jmacd
Never feel bad charging what you feel is necessary price to make a profit. The market will determine if your pricing is to high anyways.
Pricing is more of an art than a science, takes a lot of experience to get a feel for what everything is worth and every situation is different.
I picked up a book called "thou shall prosper" by Rabbi Daniel Lapin that is about the Jewish business acumen and history of profit making and why it's not bad to be reimbursed for your time, efforts, and talents. It's a tough read but has a lot of good moral advice.
It's hard to make a living if you give away your time and talents or don't charge enough when your underlying costs are already approaching $75/hour before you leave the yard. Even for someone with the heart of a helper, your skills are worth something but you have to know where to start and that starts with knowing your costs.
It took me a long, long time to get a handle on costs. Some of it was guess work, some of it was the stark reality of the end of the year report and some of it was costs divided by time. As a small company with a lot of different services and several different types of machines, it can be a challenge to set prices. I hated accounting in college and utilize a good accountant for the hard stuff but he doesn't help me figure out what I need to charge. That takes practice and I'm still learning after almost 20 years.
What I settled on for the most part is tiered pricing. Having three tiers (general dirt work/clearing, high flow attachments, road work) is simpler to me than having prices for everything little thing I do. My customers don't always get to know what my pricing schedule is, though, because I do "by the job" work but it helps me figure out what I need to make on each of those bids and if there was a question, I can quickly show a discerning client how I arrived at the number.
Experience helps make me a little more accurate than I used to be but we all know that it's easy to under bid a large job or a difficult job. Having a handle on costs helps. You replace enough couplers and hoses and you can start to anticipate extra costs and you can build that into your cost of ownership and start to build your own price schedule. Like I said, it takes awhile to get it right and I still don't feel like I am making a good living when things are slow and repair bills are high.
For those young guys who are struggling to price work and still feed their families, take note on what we've been talking about here and know your costs of operating. A shiny new machine with a shiny new payment is the industry standard these days but that payment is only the tip of a very big iceberg and if you aren't careful, it will sink you... forgive my Titanic reference and long post!