Before you dive in

Contents

Oh, really!

Some estimating systems claim to know your market's sweet spot, the exact point at which your prices are low enough to keep and attract customers, yet still high enough to earn you a profit. Their manufacturers suggest you use these miracle systems straight out of the box, abandon the prices your customers have gotten used to, and step boldly into a more lucrative unknown. What works in Brooklyn, they say, will work in every state and hamlet in the country.

There's a bridge in Brooklyn you may want to keep an eye on, because what you'll be stepping into is not where, under the rosiest of circumstances, I would want to take bold steps.

If you're just starting out

If your new shop is located in the United States, there's no reason not to start with out-of-the-box Morning Flight prices. They've been developed under real world conditions, have proven competitive as well as profitable, and are generally in line with the national average.

If you're already established

Here the rules change. Once you've built up a customer base and your business is well established, relying on someone else's pricing formula can just as easily break your company as make it. You've carved out a niche, mapped out your own playing field. That means your existing customers expect their next bill to be in the same ballpark. If you lower your prices you'll lower your profits, and it may or may not get you more business from your established base. Raise prices significantly all at once and you'll strain customer loyalties and jeopardize sales.

The only safe way to install a new estimating system in a running business is to first synchronize the prices generated by the software with the prices you're charging now, then make incremental fine adjustments, one at a time, until you're satisfied you've reached the best sales/profit ratio your market can give you.

What if you raised the prices of only those products that are noticeably out of step with the national average? No reason not to, especially if they're marginal items and not part of your bread and butter. But here, too, avoid sticker shock. Give your customers a chance to get acclimated.