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Formula for pricing jobs


mksound

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Hey all,

 

Due to all things economic being as they are, we are currently revaluating our pricing to remain competive and still give our customers the service they require.

I'm just looking for some insight as what kind of formula people are using when quoting jobs.

 

We cover alot of different types of events; theatre shows, variety shows, festivals, one off events and outdoor 100 volt line systems, as well as a small bit of lighting and projector hire.

 

We're lucky enough not to have a huge ammount of competition in the area we cover but some of the larger companies outside of our area are trying to gain access to some of our events and while I'm not interested in starting a pricing war, I don't want us to rest on our laurels and start loosing some of our existing business.

 

We have alwaysbeen complimented on our level of service and the professional way we do things, but compliments don't pay the bills and as new people start taking over committees, price is there utmost concern.

 

Looking forward to your feedback.

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Labour + Gear Hire + Profit Margin + Consumables/Expenses = price charged to client?

 

I really don't know how much people will be able to help with this one...? :unsure:

 

Thanks for the reply David.

 

I know there's no magic equation and what you described is pretty much how we do it just trying to make sure we're on the right track. :rolleyes:

Roughly what percentage do you work off when coming up with a rental cost for your equipment?

I'm pretty sure we won't be going for any of the same gigs so (with me being in Ireland and all) so I don't think this can be regarded as "price fixing"!! :P

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Also - be very wary about reducing costs for regular clients, because you can never get them up again.

 

My own formula is similar to David's, but slightly simpler.

 

What will the job cost me to do, what is reasonable to charge (and what clients will feel happy with). If the margin is sufficient to justify doing it, then I will. The difference is that some jobs will make more money than others - but I'm quite happy with that concept. I tend to think now that some jobs are not worth doing. I had a 'fee' offered for one this week, and the real cost would just be my time and a few consumables, plus 50 miles worth of fuel. However, the fee was around half of what I'd usually charge. I liked the sound of it so said yes. If I didn't fancy it, I'd say no. If I was going to sub it out, nobody would have wanted it.

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I understand Paul we're in the same boat here.

We don't have a problem with our regular clients they know what they're getting and can see the value of it, it's more to do with new business

especially the one off events. I'm just trying to bridge the gap between clients expectations and their budgets.

 

I know sometimes this will never happen, but on the ocassions that we think it can we want to provide the best service we can with a competitive price.

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Well to be honest, I haven't done a lot of quoting, but for one of the guys that I used to work for, I found that the prices that he quoted seemed to end up with him spending anywhere from 50-70% on labour, which I think is far too high a percentage.

 

I tended to use other companies dry hire lists to establish roughly how much a given piece of gear should be going out at, or just a rough estimation- for example, a powered speaker might on its own be $60/ but when it comes to putting 8 of them on a job, $480 is a lot of money.... then add a couple of subs at say $100 each, a console at $120, it starts adding up- $800 for just the gear, then for a full service job add on 2 techs charged out at maybe $200/day, transport, and then try to put some profit margin on that... it seemed to be a huge number! Perhaps going some way towards explaining why he didn't make much on the gear or make much profit..

 

 

I think if you hunt around, there is an old topic or two that discusses rental rates as a percentage of purchase price- off the top of my head it's around 3 or 4 %??

 

Hope that helps somewhat

David

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To put things in perspective, most retail environements aim for 60%-70% gross profit margin and aim for the staffing costs to be between 7% (McDonalds) and 20% (smaller businesses) of their turn over. If event hire companies aimed for those percentages there would be no live events left in the UK with todays economic crisis.

 

I do agree with paulears though, we all know some jobs make you more than others, and some jobs are just a pain in the arse so you feel inclined to charge more. Others are a nice enjoyable job so you're happy to do them at cost.

 

At the end of the day if you and your client are both happy with the price then you are on to a winner. Don't be afraid to negotiate with new business, quote them prices higher than you expect, if they accept you're laughing, if they knock you down they'll be happier and you may still make a fairly decent profit.

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We package a lot of stuff where the price of the components alone would far exceed the price for the package - it is one way of both up-selling, yet still remaining competitive. It is also a way of writing some profit against the items that you might be persuaded to put in for free or omit to fit within budget.

 

For example, (we are in-house suppliers) - if you want to use our FOH system, the FOH package is $1,300, however in the FOH package it's $1,500 and includes the console and digital multi. The $1,500 keeps the bean counters happy because we are not discounting jobs as much and income is constantly being written against these assets.

 

Another example is our vision mixers. Our mixer kits all contain a 19" monitor (for preview of the main outs), our camera kits all contain 8" composite/SDI monitors, our DVD kit also contains 8" composite PVM. Same deal with some of our signal distribution kit. It probably knocks $120 off of the average job, but still lets us account for all the items needed without passing it on to the client.

 

If you are running your own business, probably does not matter that much, but bean-counters appreciate it.

 

Another golden rule our guys live by is to never discount your labor. If you are giving the client a 20% discount tell them you are giving them 20% off of the gear hire charges. Only discount equipment you own too. 20% off the gear means you may not make as much on the gear... woop-de-do. 20% off of labor and x-hires means you could potentially be loosing money.

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Do an occasional detailed check on how much some jobs really cost to do, and how much profit you made on them. See what the clients will pay, and see what the competitors are charging. Somewhere between too much for the client and too little to cover costs is a good price.
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Do an occasional detailed check on how much some jobs really cost to do, and how much profit you made on them. See what the clients will pay, and see what the competitors are charging. Somewhere between too much for the client and too little to cover costs is a good price.

 

It seems like most jobs that are coming lately are ending up like that. :unsure: We get alot of inquiries about talent shows where they want it to look like " The X Factor " for €300!! If we took on jobs like that we'd be charging for the gear or the labour but not both and not even that in alot of cases!! It seems that the inverse square law is starting to apply to production too. :angry:

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my view is that there are generally fairly industry standard prices out there and crew expect paid roughly the same, so its fairly easy to price, but the alternative is to say, if I had to hire it and get crew in, how cheap could it be done? Its assumed that you will get a better deal on sub hire in your area than anyone else and are able to cut a deal with suitable crew. If someone comes in under that fair enough but they certainly wont be making money... if you own one of something , the day you hire it out stupidly cheap will be the day you get an enquirey for a full price hire and either you make a loss on a subhire or let someone down.

 

Just because we have seen a slight economic downturn doesnt mean that its time to put arena rigs out for 20p, fair enough everyones being carefull, but no need to panic. The idiots putting rigs out for next to nothing will soon be paying a fortune to warehouse worn out kit having pissed off all their crew by cutting wages and the inevitable will happen.

 

any job you win soley on price, you will lose just as quick, a job won by performing a reliable service without taking the piss on the money, you will still be doing in 20 years. Oh and after working 100 hrs a week for years if you still have an overdraught and nothing to show but some banged up kit... your too cheap.

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any job you win soley on price, you will lose just as quick, a job won by performing a reliable service without taking the piss on the money, you will still be doing in 20 years. Oh and after working 100 hrs a week for years if you still have an overdraught and nothing to show but some banged up kit... your too cheap.

 

hear hear

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Keep your head, Kevin, don't get sucked in and make sure you survive to take advantage of any upturn. Youngey is right.

 

To save losing regular customers I would think of offering three year fixed price deals for a known, reliable service. As a purchaser I looked for these deals which meant both me and the supplier could budget sensibly. The supplier could then rely on the income from and, sales-wise, ignore that event and concentrate on selling to new customers. Just one idea.

 

I can do them an X Factor Live show for 300 euros ... but only for four of them ... if they can get to Belfast ... if they don't mind crap seats ...

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any job you win soley on price, you will lose just as quick, a job won by performing a reliable service without taking the piss on the money, you will still be doing in 20 years. Oh and after working 100 hrs a week for years if you still have an overdraught and nothing to show but some banged up kit... your too cheap.

 

hear hear

 

It's been ignored believe me :D I think it's time to present the new company motto, " You and have a good job or a cheap job but you can't have both " :P

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Surely a lot of this depends on your business over heads as well... no ?

 

If we kept it simple and said there were two companies that were quoting for the same job with the same kit (ish) and it's costing you £3000pcm to run your business but it costs the other down the road £500pcm to run there business the two quotes are going to be miles apart because the profit margin for the 2nd company is much greater thus can become more competitive in there pricing.

 

My point is there is no stranded formula for pricing jobs as it completely depends on your own circumstances.

 

This can cause pricing wars thou and I was asked about this only a few days a go as a good friend of mine hire's lasers systems out.... now he charges £500 per night for the said system but his competitor changes £1200 why because after speaking with the other company about this (there losing work now) they rent a nice unit smack bang in the middle of London and there overheads are high(er) than my friends..... tough that's bad business on there part.

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