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FREQUENTLY ASKED QUESTIONS
Q - What is the average company size in the Real Prices Confidential (RPC) database?
ANSWER: Our Real Prices Confidential (RPC)) database contains prices for different size companies -- from
freelancers to small one- or two-person shops, to four-person design boutiques, to 12-person
prepress shops, all the way up to service companies with over 200 employees. (Overall, the
average number of employees is about 1.8.) This is why we are now collecting the start date,
type of business, and number of employees for each of the price points that we add to the RPC
database. And as we update and re-validate prices that we collected earlier, we are adding even more
information on these companies as it becomes available.
Q - How do I know which of your books is the right one for me?
ANSWER: If you want to learn how to set rates, buy a copy of Small Business Guide to Pricing.
If you want to read about pricing strategies and tactics, these same books are for you.
If you want to know what others are charging, get one of the regional Pricing Tables, one of our Hourly
Rates books, or subscribe to the Real Prices Confidential (RPC), online searchable database of prices.
If you want to know how long a task or job will take, get the Desktop Production Time Standards
book. Besides listing the statistical average times for simple, typical and complex jobs, this
reference shows you how productivity affects performance time and how to determine where on the learning curve your staff currently operates.
Q - I want to do some special pricing analysis based on a collection of small cities and
towns near me. Which of your products will show prices in these locations?
ANSWER: The Hourly Rates books and the Real Prices Confidential (RPC) database both list prices by city.
Q - How do I come up with a price to charge?
ANSWER: First you need to clearly understand your cost associated with providing a service.
Then you integrate your productivity and performance time into a formula that
budgets costs to the task level. The Small Business Guide to Pricing shows you how. After you ad
in profit and a return on any investment that you may have made to offer this
service, you can calculate a baseline price. This price is based on costs,
productivity and return. Next find out what your competition charges for this same service. The
regional Pricing Tables and Hourly Rates and RPC references will help. The prices
charged by your competitors and your baseline price enable you to define a
range within which you can set your advertised rates. The key here is that you're setting
your price based on sound business decisions and not just picking a price out
of the air. You also clearly know your break-even and how much is available to give
up during project negotiations while still making a fair profit.
Q - Why is price so important?
ANSWER: Contrary to what many marketing pundits preach, price is paramount in
the mind of every buyer. There are three things that you can offer a customer:
price, quality and response time. They can choose any two. Yet, even when they
choose high quality and response in a short time, they still want the lowest price
possible. Like buying a car, it still comes down to price. You may get 100
jobs a month at $40 an hour, and only 50 jobs at $80 an hour, but which
strategy returns the most profit? At $40 an hour and a cost of service at $30,
$10 of each hour of work goes towards gross profit. At $80 and the same $30 an hour cost, $50 goes
toward gross profit. In the first case you get $1,000 gross profit ($10 x 100
jobs). In the latter you get $2,500 toward gross profit ($50 x 50 jobs). This
is the kind of discussion found in Small Business Guide to Pricing.
Q - Why should I care about costs?
ANSWER: Cost in important because costs determine break-even (that point beyond which profits
occur). Costs help you identify margin, and costs enable you to select those
services that are the most profitable. These are why Small Business Guide to Pricing stresses
a clear understanding of costs before you set price.
Q - How can I use the Pricing Tables or RPC database to set price?
ANSWER: These statistical pricing tables provide a wealth of valuable
information. First, you can use the range and average hourly rate
information to establish the price boundaries within which you plan to set
your own prices. Price distribution charts show how billing rates are distributed.
Even though there may be many higher prices, these charts help you identify
what "most" shops charge. With your baseline prices known (established using
the Small Business Guide to Pricing and Desktop Production Time Standards) you can use these
tables to evaluate
the high-low prices and average prices in your market to decide where you
want to set your own counter prices. Second, the Pricing Tables and RPC online database provide
unit prices (per page, per sheet, per site, etc.) that give you a clearer picture
on what your competitors charge for each unit of work output. Third, these
tables also provide information on typical job prices so you can see what dollar value others
are actually getting for similar jobs. All of these statistics can be used to make
intelligent business decisions about which services to provide and what
prices are working for others.
Q - What are some popular pricing models?
ANSWER: Cost plus pricing, straddle pricing, "in the zone" pricing, and value
pricing. These are discussed in detail in Small Business Guide to Pricing.
Q - What is a "pricing grid?"
ANSWER: A pricing matrix that is used for volume sales. It helps make your
pricing competitive on large jobs. You can also use it to fine tune your
pricing tactics so you win more "sweet spot" jobs.
Q - What are some ways to effectively cut my prices?
ANSWER: Volume discounts, special discounts, coupons (including dollars-off
checks), rebates, and precision price cuts. Small Business Guide to Pricing describes each
technique in detail.
Q - Why should I consider raising prices?
ANSWER: Because a small increase in your billing rates can generate a much larger increase
in profit. Small Business Guide to Pricing shows you how.
Q - How can I effectively raise prices?
ANSWER: As described in Small Business Guide to Pricing, you can stop discounting, unbundle
your services, reduce your credit terms, and add a surcharge for rush jobs or
extended performance time. Each of these will act to increase your profit on
every job.
Q - How much can I raise my price?
ANSWER: It depends on the price sensitivity of your market. Businesses are accustomed to
seeing price increases. Individuals typically accept small
percent increases. Just don't raise prices too often. Small Business Guide to Pricing explains
how to announce a price increase and how often you can raise your rates.
Q - What should I keep in mind regarding price objections?
ANSWER: That there are NO price objections — only value questions.
Q - What are the 7 parts of value?
ANSWER: Price, quality, response time, guarantee, expertise of staff, services
offered, and perceived level of service.
Q - How can I deal with cutthroat competition?
ANSWER: As described in Small Business Guide to Pricing you compete by creating more value.
Aggressively address your costs and stick to your core strengths. Strive to be the best in your field.
Q - How can I deal with "bottom fishers" looking for the lowest price?
ANSWER: Don't fall into the trap of lowering your price to meet their demands.
Send these "cheapies" to cutthroat competitors. Let these "customers"
drain the financial life out of your competitors while you focus on "sweet
spot" jobs with plenty of rich profit margin.
Q - When should I consider turning down work?
ANSWER: Here are some instances: (1)When you're tempted by the amount of money involved. (2) When accepting
the job cuts into your ability to market other work. (3) When the last job for
them was a pain.
Q - What's the bottom line when it comes to pricing?
ANSWER: Make pricing a pro-active event, not a reactive twitch.
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