In two previous articles we covered the Manufacturer's Pricing Technique and how to determine what you need to make per hour based on overhead, salary and profit; and doing a time study to learn just how long making each treatment takes. (See D&WC May 2000 and June 2000. )
This month we conclude this series with a discussion on handling two difficult situations: pricing for a never-done-before treatment and what to do if you discover you're losing money on certain treatments.
If all of my prices are based on how long it takes me to make a treatment, how can I price a one-of-a-kind treatment that I've never made before? That's one of the toughest challenges we face!
First, I would very carefully analyze exactly how the treatment had to be created. Then I would visualize the fabrication step by step, making the treatment in my mind. While seeing myself perform the steps, I would keep track mentally of how long it would take me to do it. I would add up the time, making my best estimation of how long it would take to create. Then I would double my estimate and base my quote on that time.
I would double the time estimate because no matter how carefully and thoroughly I plan the fabrication, it always seems to take me about twice as long as I had estimated. If the job went faster than I guessed, I would just make a little extra profit on that treatment. There always have been jobs that I'd lose money on, so it all evens out. However, if by the time I finished a job I ever felt I had over-estimated, I could certainly reduce the price.
Another suggestion would be to ask other professionals if they have made that particular treatment—or one similar—and if they would share with you how they established their pricing.
What if, while analyzing the results of my time study, I discover that I am not making money on certain treatments? Several different solutions exist to handle this situation.
1. Raise your price on that treatment. Obviously, if you're not making money on a treatment, you could raise the price of that treatment. But, what if you don't think the market will bear a higher price? Then:
2. Produce it faster. Sometimes a simple little tool or piece of equipment can increase your production so that you are not losing money making it. Sometimes it's simply a matter of learning a faster method through continued education.
3. Contract it out. Often a workroom that specializes in a particular type of treatment can make it much faster and cheaper than a workroom that only makes it once in a while. Besides, you can make money creating a different treatment while at the same time make money on the treatment you've contracted out. It's a win/win situation.
I know of quite a few small, in-home workrooms that just don't have enough room for a nice, big 12-foot table. Creating large pleated panels would be very difficult for them. They still sell the draperies, they just contract someone else to actually make them.
4. Stop offering it. You could decide to stop selling that particular treatment altogether. Although most workrooms find that they must be full service and offer a wide variety of styles, a few workrooms specialize in one particular style or a limited number of styles.
5. Keep making it at a loss. Why would we still want to make a treatment that we are losing money on? For two reasons. First, we could use it as a loss leader. Grocery stores use this tactic all of the time to get buyers in the door. They know that once there, the shopper will not pick up just that one item that's on sale, they'll at least leave with a basketful, if not a shopping cart full, of other items. Your customers could do the same.
Second, you could continue making the treatment for the purpose of providing good service. If you sew for decorators and designers, they do not want to travel all over the place to get their work done. If you are profitable on everything else they bring you, you might gladly make the treatments they need along with all the rest of their orders to accommodate a good customer. Besides, do you really want them taking any work to another workroom if you can help it? They might be so happy with your competition's service that you lose them as a customer. Ouch!
As you can see, determining the perfect pricing for your business does take a little effort, but it's not very difficult. Try the Manufacturers' Pricing Technique we've explained over the last couple of articles and let me know what you think!
Cheryl Strickland is owner of Professional Drapery School, Swannanoa, NC, and is an internationally acclaimed speaker with 20 years experience in the window coverings industry. She is the publisher and editor of Sew WHAT?, an international monthly newsletter for professional drapery workrooms. Strickland also is the author of A Practical Guide to Soft Window Coverings and the Designer's Sketch Pad, which are available through Draperies & Window Coverings magazine.