Pricing and Marketing
It's been said before: don't set your prices too low. November 26, 2007
Question
I'm at my wit's end. I have advertised in two local papers and a home decor magazine. I've even had 2 editorials done on me. I keep attracting the wrong clients. I refinish furniture and kitchens. My average kitchen refinishing job is about $2000 for a 20 door kitchen, which I am told is low. How on earth can I increase my sales if I can't get clients to pay? I am not unhappy with the money I make, but I know I can be making more. Is there something I am not seeing?
Forum Responses
(Business and Management Forum)
From contributor S:
Put one more zero at the end.
From contributor G:
Tell the wrong clients, no! Why advertise? I would think in the refinishing you say you do, you could charge what you like... Seek out clients that don't read the local paper.
From contributor B:
You charge too low and attract the people who are barely scraping by. Those same people would not have given you a second thought if you were charging $4000 for the same job. The people that can say yes to $4000 will most likely have better means; plus if they only pay half of what they owe, you come out okay!
From contributor W:
It's all about marketing and positioning. What do your ads say? If they portray something about saving money, then you will attract people who want to save money. If they portray something about restoring period pieces, you will attract people who want quality above price.
From contributor M:
I might be wrong, but I think the percentage of people who will decide to refinish over replacing doors is very small. If you go to a higher price, you might be even closer to the difference between the two. A lot of customers are looking for a new look, so would rather replace doors and redo the face frames. When I have gone to a customer's house to talk about their kitchen, I have never had someone say they were thinking of refinishing. Maybe you should offer a service to other shops to do the finishing for them. I would gladly hand that over to someone else.
From the original questioner:
Great info! Thanks! I agree that local papers get me cheaper jobs, but I have not managed to get many jobs from magazines (although the few I got were really good). So if not magazines or local papers, how else would I go about getting new business?
From contributor O:
Maybe it's not so much your customers as what you are selling. If you are selling a low end product, chances are, you get low end clients. I'm not trying to imply that you do shoddy work; it is just an observation about the re-facing business in general.
From contributor L:
You have got to, got to raise your prices. It attracts the clients you want and they refer you to others. Don't let fear of not working control you. If you charged 4500.00 for the same work you charged 2000.00 for, you still save the customer thousands.
From the original questioner:
Very true. It just ticks me off when I did a kitchen for someone last month for $4500 and this month the same size kitchen I'm doing for half! I see now that I should've said no.
I also do refacing. I'm a one man shop and do about 30 refinished kitchens per year at 2,500-5000 each. The thing is that it takes me exactly 5 days to refinish a 30 door face frame kitchen, so I am not complaining about the profit margin by any means. It's just the price fluctuation that I am confused about. I don't mind doing a kitchen at 2,000 every week - it leaves me with a pretty good income at the end of the year. I just don't know how my competition is charging double and still getting jobs.
From contributor A:
I don't understand your reply, "I should have said no." You set the prices, not the customer. Another thing about life, weakness attracts predators.
From the original questioner:
What I mean by, "I should have said no," is that I do not like it when people try to cut my price. I explain to them cutting the price means sacrifice of craftsmanship and quality. They still don't care. I basically need to make $100 per hour in order to make a salary and pay my expenses. So if I say the job is $2000, there is a 10% negotiation limit, otherwise I walk.
From contributor C:
First, forget about the 10% negotiating limit. Your price is your price. When people ask you to lower the price, do not talk about sacrificing craftsmanship and quality. (Do you really do a lower quality job when you drop your price 10%?) Simply ask them what they would like to modify or eliminate from the project. Then stop and wait for an answer. After a few minutes (not seconds) of no response, continue on as if the question of price was no longer an issue. If they do answer about what they would be willing to give up or modify, then you can modify the price accordingly to meet their budget needs based on the new job specifications.
Second, reread the other posts and raise your prices by a modest amount. You might try 5-10% at first. Then see how things go. Also, remember your cost of doing business has probably increased by more than this in the last few years. Think about cost of fuel, insurance, phone, vehicle maintenance, tools, materials, etc. If you have not raised your prices to reflect your increased costs, you are actually taking a pay cut each time you do a job.
From contributor L:
Raise your prices. There is no reason not to build your checking account and have cash in it. You are solving a problem and what they are truly after is your experience and knowledge to solve their problem - they need to pay for it.
From contributor N:
Remember, rich people give you money and headache, but poor people give you headache only.
From the original questioner:
The trick is trying to get your foot into the rich man's house. I have advertised in upscale magazines and found that they have helped tremendously. Those clients simply don't bargain with you. They hire you, pay you what you want, and if they like your work, you become "their craftsman." If they don't like you, they'll trash your name to make sure that you don't get any repeat business. At least that's how it works in my area.
From contributor O:
The biggest business dilemma for small shops is pricing. We all have our own methods of doing it. Some shops scrape by year after year. I used to be one of those shops. I was constantly behind schedule, short of money, and working myself to death. The remedy was not a single thing, but the biggest thing was to adjust our pricing (upward) to reflect what our product was worth and what the market would bear. What we found was that we were getting every job that we bid on because our prices were too low. We were not pursuing new customers that would pay more because we were too busy. On the jobs that we bid out now, about 40% we do not get. The 60% of jobs that we do get is at a higher rate so our revenue has remained the same and profit has increased. You need to get over the fear of not getting a job. If you price one out and the customer walks, then move on to the next one. Don't drop your prices to get work; sell harder.
