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Pricing for a Home Inventory Company

December 10, 2006

Q-I own and operate a home inventory company where I video tape the possessions in homes or offices in case of losses. I started the business in April as a home based business. It got off to a somewhat slow start due to lack of funds for but has picked up since then. I do video, digital photos and written documentation of homes and have now included commercial properties also. I charge 10 cents per square foot and for that price you get a video of the exterior and interior of your property, digital photos of the same areas and close ups of items, and a written log of your possessions, with descriptions, serial numbers, values and their link to the appropriate photograph. I recently completed an 8,000 square foot building with a bill of $800.00 resulting in a very good finished product and the CEO telling me he would have paid up much more for what he received, he was that impressed and thought I should raise my rates. I may have the opportunity to do 5 individual buildings for a well known realty company and they are looking for a "bulk" rate to do all of the buildings. I am thinking of dropping the basic package to maybe 7-8 cents to get the business, but I question not going any lower up for the difference. Your thoughts please and thank you!

Pricing is one of those things that you need to concentrate on as it affects profitability so much. A 1% increase in prices will greatly impact on profitability as these dollars flow right down to the bottom line. For example, assume a firm has sales of $100,000 and profits of $10,000 and raises it prices by 1%. Sales increase to $101,000 and profits rise to $11,000 so that a 1% price increase, increases profits by 10%. In a like manner, a 1% decrease in prices in this example will decrease profits by 10%. Bottom line, is that profits are dramatically impacted by the pricing decision so you must be so careful when you are considering changing your prices.

While many people are going to tell you your prices are either too high or too low, you have to be so cautious and not pay too much attention to these outliers. You just cannot risk your business on what a few individuals are telling you. It is so much better to watch and see how the market is accepting your pricing. If your sales are growing and you are in line with your competition, then you probably should leave your prices alone.

Many customers are going to want you to lower your prices by giving you orders. This is just the nature of business. However, you do have a choice in three respects. First, you can turn down the price as being unacceptable. Second, you can accept the lower price or you can counter with a slightly higher price but less than your original price.

For large orders, frequently you have to reduce your prices and this is wise as along as you are covering all of your costs at the lower price. However, I am not a big believer in lowering prices as most entrepreneurs just do not do well in competing on price (and you have had others who have said your prices are too low). With the quality of service that you are rendering, I would rather see you keep the price high and compete on some other basis like service or delivery.

Most people will pay a slight premium for quality and I encourage you to price your products in such a way (keeping the prices high) that the market perceives them high in value.

Good Luck.