The Business of Pricing

Nov. 20, 2012
The Business of Pricing

Near the end of each year Locksmith Ledger publishes its annual National Average Price list. The list is simply an average. Even if we wanted to, there is no way to tell you exactly what to charge your customer for a given service. First, price fixing is illegal, but even if price fixing was legal, the cost of living can vary widely in different parts of the country. Gasoline is less expensive in Texas. The oil wells are there so delivery costs to Texas gas stations is reasonable. Longer lines of delivery makes locksmiths in Hawaii spend a lot more for a gallon of gas.

While you can learn a little by knowing what neighboring locksmiths charge, most pricing must be predicated on your individual cost of doing business. A service business like locksmithing normally depends on two ways of generating income: selling labor and selling parts. If your business is based on emergency lockouts, then labor will be the largest part of your income. If you have a good base of return customers who regularly purchase goods and services from you, then your income can be a combination of both labor and profit from selling product. Charges are set by the margin your profit and losses dictate, not what your neighboring locksmith is charging. Impress upon customers that your service is worth the price you charge.       

There was a time not too many years ago when customers knew what they wanted and price was secondary. Competitive bidding has become an important part of business transactions today. In order to win a bid you may have to make less profit on parts or/and in holding labor costs to a minimum. You can only do this by keeping your business running lean and mean. If your paycheck is approximately the same as last year and bills are paid regularly, that is about all you can expect today.

Business runs in cycles. Desires of the public for both necessities and luxuries depends on the economy at that moment. The longer people hold off their purchases, the closer we are to a time when those purchases will be made. The best policy in the short run is to maintain prices at a level where enough business is coming your way. Bigger paychecks are somewhere — farther down the road.        

Click  here to take our National Average Price survey and read about the previous year's results.