Showing posts with label pricing. Show all posts
Showing posts with label pricing. Show all posts

Sunday, May 9, 2021

How Much Should You Charge for Your Balloons?




How much should you charge?

Being creative is fun, but working out how much to sell our work for is not quite so exciting!

I have written a number of blog posts on this subject, but with many new people joining the world of balloons, I felt that this was a good time to revisit this topic! 

I regularly see posts on Facebook asking for help with pricing and I know from my own experience that understanding how to cost your work is probably one of the more difficult aspects of running a balloon business. However, it is one of the most fundamental things you need to have at least a basic understanding of before you set up any business. Get it right the first time, and you’re well on your way to having a successful business. Get it wrong and you’ll either not make enough money to survive or you’ll be too expensive for your customers.

If an item is readily available at a variety of outlets, such as a carton of milk or a weighted helium -filled 18” foil balloon, then it will have a ‘market’ price. However, if it is a bespoke balloon sculpture, event decor, or even an elaborate arrangement, then pricing is not so straightforward.

Take your time to absorb this post, as it is full of important and helpful information, especially to first-timers! I have shared two great pricing tools that will help you with your pricing calculations, however, you still need to understand how to work out the different costs that you will need to include So please read through or watch the video's that I have attached to this post as each will also help greatly! 

So how do we price our work?

Remember, the price that you charge may be VERY different from the price that another balloon company would charge and you will understand why very soon.

There is one simple rule to remember when pricing - make sure that you make money!

To be able to calculate a selling price we need to know the following things:

  • How much our materials cost including helium (balloon gas), accessories and add-ons
  • How much we need to charge per hour
  • How much does it cost us to run our business (in other words, what is the overhead?)
  • How much profit do we want to make


Material Costs

Material Costs should includes all the components that you have used in the design or decor that you have made. This includes balloons, balloon gas, accessories, etc. It is a good idea to create a cost sheet with unit cost prices for every single items you use, even down to the little glue dots you may use!


How much should you charge for your time?

Calculating an hourly rate for a self-employed person is not easy. Many people begin by looking at the hourly rates of people that are employed. However, the rate for a self-employed person cannot be equated in ANY WAY to the hourly rate of an employee, and here's why.

An employee (someone who is employed) will in most cases be compensated for some or all of the following

  • Holiday/Vacation time
  • Sick leave
  • Work breaks
  • Obtaining quotes for a customer
  • Paid even when they have no work to do
  • Is provided with a place to work
  • Is provided with equipment, computers and all office supplies
  • Employer contributes towards a pension
  • Employer covers all the bills (heating, telephone, internet)

As a self employed person you will not get paid for any of the above and in addition:

  • You need to pay for premises - unless you work from home
  • You need to pay for business equipment (e.g. computers)
  • You need to pay for insurances (e.g. public liability)
  • You need to sort your own pension
  • You need to pay all the bills
  • You need to do your own marketing
  • You need to pay accountancy fees

In the world of being employed by a company there’s a simple formula to calculating out an hourly rate: Take the annual salary, divide it by 2 and remove 3 zeros.

For example; If someone is earning £20,000 a year, they are roughly earning £10 per hour. If they earn £25 per hour, they roughly earn £50,000 a year. 

If you want to make £20,000 per year from self employment you will need to charge more than £10 per hour. Remember, the rate that you pay yourself needs to include the time that you spend visiting clients, doing admin, sick days and holiday allowance... plus other expenses. 

Check out these Self-Employed Day Rate Calculators to help you to determine how much you should be charging. I am sure that there are similar calculators that reflect employment rates in different countries. Check them both as they work slightly differently.

https://www.stepchange.org/debt-info/self-employed-income-calculator.aspx and https://www.freelancesolutions.co.uk/day-rate-calculator/ 

Running Costs and Overheads

This is the cost of running the business.

While overhead costs are not directly linked to profit generation, they are still necessary as they provide critical support for the profit-making activities. The overhead costs depend on the nature of the business. For example, a retailer’s overhead costs will be widely different from someone who works from home.

Some examples of overhead costs are:

  • Rent
  • Utilities (water, electricity)
  • Insurance
  • Office supplies
  • Advertising expenses
  • Accounting and legal expenses
  • Salaries and wages
  • Depreciation
  • Government fees and licenses
  • Property taxes

Overhead costs can include fixed monthly and annual expenses such as rent, salaries and insurance or variable costs such as advertising expenses that can vary month-on-month based on the level of business activity.

How do you calculate your overhead rate/percentage

To calculate the overhead rate, divide the total monthly overhead costs of the business in a month by its monthly sales. Multiply this number by 100 to get your overhead rate.

For example, say your business had £1,000 in overhead costs in a month and £5,000 in sales.

Overhead Rate = Overhead Costs ➗ Sales

The overhead rate is £1,000 ➗ £5,000 = .2 or 20%

This means that the business spends twenty pence on overheads for every pound that it makes.

Profit

Making a profit is vitally important for the growth of your business.

The term Gross Profit is the Overhead % and Net Profit % added together

The term Net Profit is a company's profit after all of its expenses have been deducted from revenues.

What net profit margin should a UK small business aspire to make in the UK?

A good margin will vary considerably by industry and size of business, but as a general rule of thumb, a 10% net profit margin is considered average, a 15% - 20% margin is good and a 5% margin is low.

In the balloon industry we generally use a Job Cost Form. The job cost form is a manual tool that will help you to calculate a selling price.

Here is an example of a Job Cost Form that I completed for a design that I made some time ago.



Now for the good news! There are now two Interactive Pricing Tools that I am aware of. These tools were created and shared by two UK Balloon Wholesalers. With both of these tools, you can easily work out the prices you should be charging for a product, service or decorating job. You will need to input materials, quantities and costs and then a total cost will be calculated for you. Adding in labour and other expenses, you can accurately come up with a direct cost for your job. From this figure, the tool then works out a selling price for you based on your desired level of profit and assumed overheads.

Balloon Market Interactive Pricing Tool


This tool also gives you the option to manually price your designs using the 
Manual Pricing Tool – This is a printout version of the interactive pricing tool so that you can write in details and work costs out yourself. A bit more difficult, but definitely worth doing - this is the same as the one that I used above when costing the Pedestal Bouquet.

There is also a Formula for Manual Pricing – This is a little guide on how to work out costs and selling prices. The numbers correspond to the boxes on the Manual Pricing Tool.

And to help you with your helium pricing, there is a Helium Calculation Sheet – This sheet is to work out your helium costs. All you need to do here is enter in what you have paid for your cylinder and the rental charges (if applicable), and the sheet will do the rest of the work for you. You can then transfer these costs into the Interactive Pricing Tool or Manual Pricing Tool.

To download this tool follow this link: https://www.balloonmarket.co.uk/interactive-pricing-tool

The other Pricing Tool is an App that has been created by Greetings House that you can use on your iPhone and is available from the App store, just search Greetings House. You are able to change the values and currency in the setting easily.



Both of these tools are completely free! I am sure they will become invaluable to your business as they are to mine! 

Here are two excellent videos that I believe will also help you to understand pricing a little better. The first one is from Balloon Market with Mark Drury of Qualatex Europe. Mark has helped countless balloon businesses work out the correct costings for their decorations and has given a lot of people the confidence to price correctly. Please note that this video was filmed in 2017 and prices quoted may differ.




The second video below features Keith Stirman and Dominic Cassidy - The Boys of Q Corner. In this video, they share their extensive knowledge of costing using the Qualatex Job Cost Form.
They show how to easily find the minimum sale price of your balloon work, as well as what happens when you discount your work, and how it affects your bottom line. They also demonstrate how to ensure you are pricing for profit and not just turning over money. Remember: Turnover is vanity, Profit is sanity & Cash Flow is reality! For the links that they mention visit 
https://www.youtube.com/watch?v=hXayX0IriPo&t=478s or click HERE



As I stated at the start of this post, pricing is probably one of the hardest parts of running a business, but it's so very important to get it right to ensure that you make a profit. Making a profit is essential for a business to survive.

I hope that you have found this post helpful! 

Happy Ballooning! 

Sue
Follow me @suebower

Monday, July 29, 2019

Should You Show Your Prices on Your Website?

Pricing can be quite a sensitive subject for many business owners. There are many who do not want to display their prices for a number of reasons:


  • Fear of competitors seeing it - the truth however, is that your competitors probably already know your prices. It's very easy to get a friend or a relative to call, and to be honest, you should also know your competitors pricing as well! If you're afraid that competitor will undercut you, don't be. Stop focusing on your competitors, as that takes up way too much energy. Instead concentrate on your own business and create the best product/service that you can.
  • Nothing we make is standard, everything is custom designed for our clients -    Yes, clients are all different, but you should have an idea of the average cost of a design, and therefore you should be able to have a DESIGNS FROM price that you can show. You can still give your clients flexibility - for example, by swapping balloons and accessories in and out of similar value, or adding in additional balloons at an extra cost.

  • You're afraid that your prices will put customers off buying from you.                  Most customers already have a budget in mind. Being honest about prices on your website will actually help you attract prospective customers/clients. Most people research prices before they consider buying a product or service. If you’re the only person talking about prices on your website, you will be likely to get more traffic to your site than your competitors, which will mean more leads and sales. Having no price looks even more expensive than actually having high ones. Imagine walking into a high-end fashion retailer that had no prices - most of us would think: If you need to worry about the price you’re not welcome here. 
Price is an important decision-making criteria, so if publishing your price on your website makes it easier and faster for them to decide in your favour, why would you get in the way?

So what is the best way to show your pricing structure? 

Here are two completely different ideas: 

Blenda Hughes Berrier of Balloon & Event Construction Company in Florida, USA, uses online catalogues to inspire her clients with categorised decor types. Each catalogue has a theme, and when a customer opens a catalogue, they will find detailed information to help them to make a choice, as well as a fabulous range of design ideas and guide pricing.  This is a very simple way for a client to navigate and choose what they want! 

This is a sample page from one of Balloon & Events Construction Company catalogues.
The great thing about creating this type of price list is that you can update and add new ideas on a regular basis.


The second idea comes from David Mahoney of Balloons Everyday in Texas, USA. This is what he says about pricing on his website:

"One of the best things I did on any of my websites was to add lots of additional information for clients to access to make their lives easier.
By doing this, it helped potential or current clients find answers to questions that they may have had regardless of the hour of the day. This saved me a ton of time and money and built better relationships with clients. If I was having a particularly busy day, I could easily send links to information on the website or communicate to clients that they could find that info on the site.
One area of our website that gets explicitly used a lot is our 'common decor guide.' This simple little pricing guide with illustrations of common decor work has helped us save time explaining what a specific design looks like but also allowed clients to use the guide to help budget or figure out their needs for their event.



A secondary benefit to having the decor guide on the site is that it helps prequalify potential clients. You see, if a client has a limited budget and wishes for a complicated or expensive request, the guided helps by showing them a baseline of pricing, which eliminates a lot of these frivolous requests. You know the ones I am talking about - Can we do an 80-foot organic wall for $100? - LOL!!!! 🤣
We are excited about working on our new website because not only have I updated the decor guide to have a more of a contemporary look but I also added a new backside for trending balloon designs.
I have to thank Rachel Porter and Blake Engel both for having Esty Sites that have a lot of pre-made clipart. Those resources have saved me a ton of time in updating my decor guide because I did not have to build everything from scratch.
 So if you have not added things like the decor guide to your website or considered adding more information to help clients access regardless of the time of day or how busy you are, consider the many benefits it may have not only for them but for your company too. The internet is open 24/7. Let it work for you whiles you sleep or busy working. I know it has made an enormous difference in our company and clients love the easy."
A huge thank you to both Belinda and David for very generously sharing their on-line pricing ideas.

Happy Ballooning!

Sue

www.suebowler.com
#suebowler

Wednesday, December 5, 2018

How Much Would You Charge For This Design?

Many businesses struggle when it come to pricing, and not just in the balloon industry! 
The fear of pricing too high and not getting any business versus pricing too low and never making a profit is an everyday dilemma.






In the interest of today's blog, I asked a few of my ballooning friends from around the world to tell me how much they would charge for this style of air-filled design in their country. I chose this design as it uses very few balloons and it's quick and easy to make.


Before we start, write down how much you would charge for this design and see how your price compares to others.




So how do we know how much to charge? Some of us will "guesstimate," while others will actually work out how much they need to charge to make a profit!




Whenever I am pricing a design, I always start by completing a QBN Job Cost Form (shown above). It really helps to make sure that you have covered all your costs and make a profit, too! 

For my example, I am using the prices that are listed in the 2018 Qualatex European Everyday Catalogue. All the prices in my example are in UK £., and I have included V.A.T.


The weight that we use in a design like this can vary in type and cost. Some will choose to use a purpose-made weight, whilst others might use a sand or water weight - this will have an impact on the selling price.

For my example, I have calculated that I would need to sell the design at £11.24 to cover my costs and to make a good profit. 

Here are the suggested selling prices for the same style of design from some of my ballooning friends from around the world:

  • Belgium €12.95 - £11.54 - USD $14.76
  • Australia AUD $19.00 -  £10.98 - USD $14.03
  • USA USD $15.00 - £11.77 
  • UK £9.99 - USD $12.79
  • USA UDS $12.00 - £9.42
  • Hungary HUF 2190 - £6.05 - USD $7.74

I am really pleasantly surprised at the price range. With the exception of Hungary, there is not a huge price different between these countries. But it does not surprise me that Hungary's price is much lower. If you look at how much people earn around the world, there is a huge difference in the minimum wages. For example between Belgium and Hungary, wages in Belgium are more than three times greater than in Hungary (comparing 2018 minimum wages) and therefore the labour costs in each of these countries will reflect this difference. 

2018 Minimum Wages - this is a helpful guide to compare wages around the world.

Belgium - €1562.60 per month
UK - £1462.60 per month
Hungary - €444.10 per month
USA - USD $7.25 per hour - USD $275.50 per week
Australia AUD $694.90 per week



The job cost form is a good guide to help you with pricing, but make sure that the information that you input is accurate, otherwise it can alter your pricing significantly! You also need to consider perceived value, too. Often designs can look like they are worth more than the Job Cost Form suggests, and there is no reason why you cannot charge the perceived price rather than the job cost price - this is very common in creative-based industries.

I have written a few blogs on this subject:




And finally, don't forget we can up- sell and offer personalisation! This is a great way to add value to any design! Below is an example of how Luc Bertrand, CBA, of WaW Balloons in Vichte, Belgium, promotes them.




Here is another way to up-sell this style of design. By simply adding arms, we have created a more interactive design! Finally, the third version is a mini table-top sculpture - all very quick and easy to make!



Thank you to all those who helped me with this blog. For those of you who struggle with pricing, have a go at using the Job Cost Form to help you to work out your minimum selling price to ensure that you make a profit. Making a profit will keep you and your business healthy and happy!

Happy ballooning!

Sue
www.suebowler.com
#suebowler

Tuesday, December 16, 2014

Be ready for the BIG job! 2/3 Price and contract

Here is the second part of my 'Be ready for the BIG job'... looking at the business side.

Before we talk about the design, let’s looks at the business side of a job like this and everything that we need to include when working out our costings. We need to make sure that we have accounted for everything!

Material Costs
Labour Costs
Other items

Material Costs - all the elements that we use to make the design, including balloons, accessories, design structure - such as Lomey products or containers.

Labour Costs that include preparation & assembly time - the time that it takes to prepare all the elements for each of the centerpieces. How many people do you need to work, how many hours of prep?

Van Hire - I will need a large van to transport as many pre-made centerpieces as possible, however, some will require ‘finishing’ on arrival.

Van loading - loading and unloading 80 centerpieces will take time, especially if you want them to arrive safely in 1 piece!

Travel time to venue

Unloading - (see van loading the same will apply).

Finishing and repair time on site - there are bound to be a few casualties so be prepared!

Parking Fee - check out parking at the venue, especially if you have a van and review any fee’s.

Refreshments - keep your troops happy, with food and drinks.

De-rig - the removal of any remaining centerpieces after the event, which will also include labour time & mileage.

Tuesday, July 29, 2014

Pricing for Profit!

Last week I saw a beautiful Christening cake which was being proudly shown off by the lady who had ordered it for her Granddaughters Christening that weekend. Standing next to the cake was the very talented young lady who made it. I asked her if cake making was her profession as she was obviously very talented, she replied, "no, I only do this as a hobby as I don't think anyone will pay what the cakes are really worth, I only just cover my costs, but I really love making cakes so I don't mind".

I wonder how many people working in our industry feel the same, that they cannot charge the true value for their work?

When I started my home based business over 20 years ago I had no idea how to cost my work, like the lovely cake maker, I loved what I did! I enjoyed the challenge of learning new skills and being able to put them into practise, every penny that I charged was used to buy my next batch of balloons, helium and accessories, there was never any left over for me!

My turning point was when I joined the Qualatex Balloon Network and worked through the business section of the course... it really did teach me how to cost my work!

I wrote a blog almost a year ago called: 'How Much Should I Charge For That', so I don't want to repeat everything that I wrote then, however, after doing some research recently I found a great online workshop that for me was pretty inspirational!
The 'How Much Should I Charge for That', blog shows you how to use the Job Cost form in detail, if you have not read that blog you might find it worth reading after you have read through this one!

The workshop is featured on Etsy and is called Etsy Success: The Art of Pricing for Profit, hosted by Megan Auman and Tara Gentile.