Tag Archive for: cogs

Why Charging What You “Feel” Is Right, Could Cost You Your Business.

/0 Comments/in /by

So many pet sitting businesses that I coach say that they arrive at their prices because “That’s what feels right to me.”  Good business isn’t about what feels right, it is what the numbers say you NEED to survive.

The typical reasons for why it “feels” right are:

  1. No one will pay my fees. (Learn how to sell value)
  2. I can’t price myself outside the average pet sitting companies in my area.  (ever heard of Coach, Prada, and Louis Vuitton?)

Newsflash “These businesses are going to be extinct in the next 2 years if they keep it up!”

Determining your price:   COGS + Labor (x profit margin) = service price.

Every business should know what their cost of good sold (COGS) is. Cost of good sold is the price that it takes for you to provide a service or product. In the pet world it would be factoring in:

Gas, Office Expenses, Insurance (all kinds), taxes, advertising, marketing, paying staff, etc. Once you can find out your COST you can really see how much you are making free and clear. Any good book keeper can help you figure this out and if you want a great one, I can pass along mine to you.

When pet sitters do quick visits: It proves to me that they have no clue what they are doing. Why would you discount your services when your expenses stay constant?  Quick visits can only work if you have many who live right next door to one another. Although this isn’t the case for most pet sitters. They start out with this idea, but never saturate the area. Most who do quick visits are either making pennies or actually SPENDING money if they have a professional business. Quick visits work for those who are hobby sitters with no expenses, but do nothing for the real business. Why work three times as hard and have three times the expenses when you could hold out for one job, with one times the expense for three times the money? It just doesn’t make business sense…

Your prices should be reflective of your own business and personal goals.

In order to stay in business for years to come, you need to understand your own financial needs. At the end of the day you have to charge enough to keep the roof over your head, food in your mouth, and hopefully to have a staff so you are not working yourself into the ground until the day you die.  Most pet sitting companies do not make it. Locally, I know of three who went under in the past year, while blaming it on the economy.

Really?  I despise that excuse and will not accept that. The economy changed, yes. But did you? What worked three years ago when people were just spending money hand over fist isn’t going to work anymore. We are lucky to be in an industry that has shown a 6% growth rate in 2010, with more people getting multiple pets in their home, and 6 out of 10 homes being a potential client of ours (pet sitting). (Source: America Pet Manufacturing Association) Question is… do you know how to sell value or are you selling price?

Lets break it down:
If you are charging $18 a visit….
30% is taxes (all of them) $5.40
$1.00 is gas (depending on your car and distance of client)
$4.00 is advertising (website, magazines, printing of all fliers, cards, promo materials, etc)
$2.00 is other supplies (office supplies, tshirts, poop bags, lint rollers, treats, etc)

($12.00 expenses above)
55% to staff (that is if you pay $10)

WHATS LEFT: $2.00 to you. For your home, your food, your entertainment, gas, shopping, travel, bills,health insurance,  etc. $2.00!!!! Lets even say that you are busy enough that your staff is doing four of those an hour. So now your total is $8.00!!!
WHATS WRONG WITH THIS PICTURE: Charge too little. Spend waaay too much on labor.

But guess what? My experience of talking to pet sitters around the country, 50-70% on labor is average expenses.

With gas prices going up to $6.00 (maybe?) where does this leave your business? Of course, all expenses are going to be fluctuating with different businesses and this isn’t a one size fits all… but it truly is pretty close to realty.

MY GOAL: To get you thinking about what (if any) are you really making?

POINT AND CASE: Since we are talking about money….  I just called McDonald’s here in Scottsdale. If you were to start working there today, you would automatically get health insurance and you your starting pay would be $7.30/hr. That is more than the average pet sitter makes!

If you know a business who is in this situation – I would love to talk to them to teach them how they can start MAKING money in their business. These business owners are making LESS than what they could be making at McDonald’s. Less, because they would at least have health insurance.  These business owners are working for free being the book keeper, advertiser, marketer, blogger, website designer, sales rep, accountant, office manager, pet sitter, an more… They are not even paying themselves.

For some, they do it because they love the pets. That is AWESOME! But to do it so that you can love the same pets for years and years and years, you need a healthy business.

What do you think? Sound off below. I want to hear your comments:

The Biggest Mistake You Can Make With Price Is Charging What You “Feel” Is Right

/3 Comments/in /by

So many pet sitting businesses that I coach say that they arrive at their prices because “That’s what feels right to me.”  Good business isn’t about what feels right, it is what the numbers say you NEED to survive.

The typical reasons for why it “feels” right are:

  1. No one will pay my fees. Solution: Learn how to sell value
  2. I can’t price myself outside the average pet sitting companies in my area.  (I ask you: Have you ever heard of Coach, Prada, and Louis Vuitton?)

 

Determining your price:   COGS + Labor (x profit margin) = service price.

Every business should know what their cost of good sold (COGS) is. Cost of good sold is the price that it takes for you to provide a service or product. In the pet world it would be factoring in:

Gas, Office Expenses, Insurance (all kinds), taxes, advertising, marketing, paying staff, etc. Once you can find out your COST you can really see how much you are making free and clear. Any good book keeper can help you figure this out and if you want a great one, I can pass along mine to you.

not-sure-what-to-charge-1

When pet sitters do quick visits: It proves to me that they have no clue what they are doing. Why would you discount your services when your expenses stay constant?  Quick visits can only work if you have many who live right next door to one another. Although this isn’t the case for most pet sitters. They start out with this idea, but never saturate the area. Most who do quick visits are either making pennies or actually SPENDING money if they have a professional business. Quick visits work for those who are hobby sitters with no expenses, but do nothing for the real business. Why work three times as hard and have three times the expenses when you could hold out for one job, with one times the expense for three times the money? It just doesn’t make business sense…

Your prices should be reflective of your own business and personal goals.

In order to stay in business for years to come, you need to understand your own financial needs. At the end of the day you have to charge enough to keep the roof over your head, food in your mouth, and hopefully to have a staff so you are not working yourself into the ground until the day you die.  Most pet sitting companies do not make it. Locally, I know of three who went under in the past year, while blaming it on the economy.

Really?  I despise that excuse and will not accept that. The economy changed, yes. But did you? What worked three years ago when people were just spending money hand over fist isn’t going to work anymore. We are lucky to be in an industry that has shown a 6% growth rate in 2010, with more people getting multiple pets in their home, and 6 out of 10 homes being a potential client of ours (pet sitting). (Source: America Pet Manufacturing Association) Question is… do you know how to sell value or are you selling price?

Lets break it down:

If you are charging $18 a visit….
30% is taxes (all of them) $5.40
$1.00 is gas (depending on your car and distance of client)
$4.00 is advertising (website, magazines, printing of all fliers, cards, promo materials, etc)
$2.00 is other supplies (office supplies, tshirts, poop bags, lint rollers, treats, etc)

($12.00 expenses above)
55% to staff (that is if you pay $10)

WHATS LEFT: $2.00 to you. For your home, your food, your entertainment, gas, shopping, travel, bills,health insurance,  etc. $2.00!!!! Lets even say that you are busy enough that your staff is doing four of those an hour. So now your total is $8.00!!!

The Problem With This Picture:


The example charges too little and spends waaay too much on labor.

My experience of talking to pet sitters around the country, 50-70% on labor is average expenses.

With gas prices going up to $6.00 (maybe?) where does this leave your business? Of course, all expenses are going to be fluctuating with different businesses and this isn’t a one size fits all… but it truly is pretty close to realty.  *

MY GOAL: To get you thinking about what (if any) are you really making?

POINT AND CASE: Since we are talking about money….  I just called McDonald’s here in Scottsdale. If you were to start working there today, you would automatically get health insurance and you your starting pay would be $7.30/hr. That is more than the average pet sitter makes!

If you know a business who is in this situation – I would love to talk to them to teach them how they can start MAKING money in their business. These business owners are making LESS than what they could be making at McDonald’s. Less, because they would at least have health insurance.  These business owners are working for free being the book keeper, advertiser, marketer, blogger, website designer, sales rep, accountant, office manager, pet sitter, and more… They are not even paying themselves.

For some, they do it because they love the pets. That is AWESOME! But to do it so that you can love the same pets for years and years and years, you need a healthy business.

What do you think? Sound off below. I want to hear your comments: