Q:
I'm interested in starting a new business and would like any
input you have. My idea is a pretty new one as far as I know:
picking up dog-doo from owners' yards either on a weekly basis
or on a schedule set by the customer. Any information you have on
how to price my services would be greatly appreciated.
A: One
of the hardest things for any businessperson to determine is how to
price products or services. In addition to your costs of doing
business, you have to put a price on what you're worth.
Let's start with some basics:
What are others charging for this same type of business? If
you know anyone else doing this type of service, you could call and
ask what they're charging. Some people will share information
with a competitor, some won't. Search the Internet to see if
anyone else is doing this somewhere in the country.
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Whether or not you have competition, the next step is to
know what it'll cost you to do business. You have both direct
and indirect costs. The direct costs are what it will cost you to
do this particular client's job. In your case, how many dogs
will you have to clean up after? How often? Will you work holidays
and weekends? Will you charge more for "pick-ups" on
weekends and holidays? How will you dispose of the "poop"
you pick up? Will there be any costs involved in the disposal?
Indirect costs include your overhead to maintain a home
office-telephone, computer and printer (for invoicing,
recordkeeping and marketing), office supplies and so on. One caveat
here-don't discount your services just because you're
homebased. You may even hear from a client that your prices should
charge less because you don't have the same overhead as a
commercial-based business. My response has always been,
"You're not paying for my location, you're paying for
my expertise." The cost of doing business is just one of the
factors in pricing, and if your indirect expenses are less, you can
take that into consideration when setting your prices.
Once you've established your direct and indirect costs,
you can begin to break out your pricing by job or customer. How
many yards can you clean in a day? Bigger yards will take longer
than smaller ones. Bigger dogs may take longer to pick up after
than smaller ones. Some yards may be farther away than others, so
you have to take into consideration gas and wear and tear on your
vehicle.
When you determine all these factors, you're ready to set
your price. Once you have a preliminary figure, you might want to
test it with some potential customers to see if there's really
a viable market for this service.
Something else to consider is a written contract or agreement
with your customers. When things are spelled out for both parties
involved, there's less chance of a disagreement or
misunderstanding later. Make sure you set up a regular schedule and
time to do your invoicing and provide invoices that clearly spell
out your payment policies such as discounts for prompt payment and
penalties for late payments. Will you accept checks or credit
cards? There are costs involved in being able to accept credit
cards, so make sure you know what those are and include them when
determining what you'll charge.
Beverley Williams is the founder and president of the
American Association of Home-Based Businesses Inc. (AAHBB) and was
the SBA's 2002 Home Business Advocate of the Year.
The opinions expressed in this column are those
of the author, not of Entrepreneur.com. All answers are intended to
be general in nature, without regard to specific geographical areas
or circumstances, and should only be relied upon after consulting
an appropriate expert, such as an attorney or
accountant.