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Pricing our service ( once again )

Started by Seaman, February 19, 2016, 08:24:55 AM

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Bandmill Bandit

I hear you loud and clear Dave and you are right! That why an approach that you personally  can live with if you were the guy receiving the service and paying for the price needs to be simple and based on sound simple principles.

There will be regional adjustments and economic factors that will influence that price.

Lynn is precisely where I was for pricing about 3 years ago and where I think I will land by the end of this year.

The question for your region is why are operators getting away with the 35 cent price?
is it a regional anomaly that provide justification for the price?

Or are you the anomaly of quality and productivity that actually indicate that you could raise your price a bit and still maintain you market share?

Building "GOOD WILL" as an artisan in a particular Niche must never be under estimated nor under sold and at the same time must not be over sold either.

That is the reason I like the formula that I was taught early in my career. it is simple and it is as flexible as the market you apply it too.

If you are a happy with it it likely isn't broke!

It is another thing that the Competition will hate and the good client will love. There is just no place for misunderstanding no matter how hard the client may try to create misunderstanding.

And it sorts the good clients from the not so good ones real fast.

I got 2 repeat business calls today. Both clients asked "You're still in business"? "I had you cut about 30 big beams a couple of years ago. I need about 30 more and my brother and I want to build a Hunting camp in the West Country. Would you be interested in doing the mill work for us?

He didn't even ask what my rates were. I asked if he wanted me to bid on the job.
He said "Nope! We like your work and we know you are fair and you do good  work. You know your stuff and if you don't, you know other people that can help us with those things and help us with building design and building tips.

I wouldn't have called you first if we thought some one else would do a better job.

The other guy called and said he needed some cedar power poles cut.  When can he bring them over?
I asked when he needed them done. He said would like them for the week end I told him to give a 2 hour heads up and not to come on Saturday. He's coming Wednesday with 6 x 12' bottom logs from double pole 3 phase main line towers an said I'll bring $600 cash! How does that sound? I said a bit on the high side. He said nope! Having them done for the week end is worth the extra money for Him.     

Makes me feel good about the work i do but also makes me realize I have set a pretty high bar and only I can keep it there.

That is a humbling responsibility.

Its what keeps me on top of my rates to make sure I always give a quality service and deliver a quality product.

When you do that people trust your price because they can see the integrity.

PS
Lynn what you just posted is the reason I reserve pricing till the end of the week/job.

If production number warrant the BF price that is what I charge. Any thing else would not be fair to the customer. BUT when I have to do a significant amount of the clients work to be able to produce a the first board foot that is not fair to me.

Still simple for the client to under stand.






 
Skilled Master Sawyer. "Skilled labour don't come cheap. Cheap labour dont come skilled!
2018 F150 FX4, Husqvarna 340, 2 Logright 36 inch cant hooks and a bunch of stuff I built myself

Clevelander

Quote from: bkaimwood on February 22, 2016, 08:12:31 PM
Quote from: Clevelander on February 22, 2016, 07:38:41 PM
Quote from: Bandmill Bandit on February 22, 2016, 07:13:40 PM
100 bucks an hour is just too simple to not understand



Exactly. The average work week is 40 hrs x 50 weeks a year (2 weeks for vacation) = 2000 hours x $100 per hour. $200,000.00 annual income. Even if the work is 10 hours a week it is still $50,000.00. That's a pretty comfortable lifestyle by most accounts. People get confused and scared off by potential upcharges. People will usually pay more for what they understand. If they don't, why do want them as a customer? The only referrals you will get from someone that wants a deal is other people that want deals. People that value you will refer you to others that will value you ... and they will pay you well on top of it.

BTW ... thanks Bandit
I appreciate your idealism, clevelender...but 200,000 is gross profit... Take home, if you are running your business not into the ground, is just past 60k...still not bad..in an ideal world... The world of sawmilling is far from ideal...
Bk

BK, I was referring to gross but net 60K still isn't bad. I am amazed that business expenses consume 2/3 of your gross but I am not discounting it either. I am new to milling but I have been a small business owner all of my life. I was always a wood end-user (cabinet maker, remodeling contractor) Bottom line is always reflective of how much we value ourselves and the services we provide.
Live your truth and your truth will find you

Magicman

I guess that it's the warmer weather, or folks wanting to get their name in the book because I am getting a couple of calls almost daily.  (Three today)  The scary thing is that the landowners with beetle killed Pine are not calling yet.  It will be a circus then.

I will be into framing lumber when we get back from Yukon's Chili Chilly.   
Knothole Sawmill, LLC     '98 Wood-Mizer LT40SuperHydraulic   WM Million BF Club Member   WM Pro Sawyer Network

It's Weird being the Same Age as Old People

Never allow your "need" to make money to exceed your "desire" to provide quality service.....The Magicman

sandsawmill14

mm i think thats the way it should be figured :) on this commercial stuff its 8 10 12... but on custom stuff i would do the same because its custom they get what they want and pay for what they get :)
hudson 228, lucky knuckleboom,stihl 038 064 441 magnum

Magicman

If is is 9' the chances are it will be whacked back anyway especially if it is 2X4's.  There is no need to saw that extra just to go into a burn pile.  Anyway, I like clean log ends.   ;D
Knothole Sawmill, LLC     '98 Wood-Mizer LT40SuperHydraulic   WM Million BF Club Member   WM Pro Sawyer Network

It's Weird being the Same Age as Old People

Never allow your "need" to make money to exceed your "desire" to provide quality service.....The Magicman

WV Sawmiller

   I'm probably in line with MM. I expect and accept 6" extra trim but if they cut to full lengths, or close to them, I bill accordingly. If everything was cut a 8'9" I'd be billing as 9' boards. I will overlook an occasional over length but if consistent they pay for it. Costs me more time, fuel, blades and labor so I expect to get paid for it. If you buy from the box stores I think you will normally find 1"-2" overlength for trim.
Howard Green
WM LT35HDG25(2015) , 2011 4WD F150 Ford Lariat PU, Kawasaki 650 ATV, Stihl 440 Chainsaw, homemade logging arch (w/custom built rear log dolly), JD 750 w/4' wide Bushhog brand FEL

Dad always said "You can shear a sheep a bunch of times but you can only skin him once

bkaimwood

Quote from: Clevelander on February 22, 2016, 08:33:34 PM
Quote from: bkaimwood on February 22, 2016, 08:12:31 PM
Quote from: Clevelander on February 22, 2016, 07:38:41 PM
Quote from: Bandmill Bandit on February 22, 2016, 07:13:40 PM
100 bucks an hour is just too simple to not understand



Exactly. The average work week is 40 hrs x 50 weeks a year (2 weeks for vacation) = 2000 hours x $100 per hour. $200,000.00 annual income. Even if the work is 10 hours a week it is still $50,000.00. That's a pretty comfortable lifestyle by most accounts. People get confused and scared off by potential upcharges. People will usually pay more for what they understand. If they don't, why do want them as a customer? The only referrals you will get from someone that wants a deal is other people that want deals. People that value you will refer you to others that will value you ... and they will pay you well on top of it.

BTW ... thanks Bandit
I appreciate your idealism, clevelender...but 200,000 is gross profit... Take home, if you are running your business not into the ground, is just past 60k...still not bad..in an ideal world... The world of sawmilling is far from ideal...
Bk

BK, I was referring to gross but net 60K still isn't bad. I am amazed that business expenses consume 2/3 of your gross but I am not discounting it either. I am new to milling but I have been a small business owner all of my life. I was always a wood end-user (cabinet maker, remodeling contractor) Bottom line is always reflective of how much we value ourselves and the services we provide.
Clevelender... 2/3 of my business is not used up by business expenses, 1/3 is... I still use old school business calculations as a GENERAL guideline...1/3 to me, 1/3 to all expenses, 1/3 back into the company. I mean no offense by this, so please don't take any, but if you think you will start a new sawmill business, based upon what you want to earn, and what you think you are worth, you better be the only game in town. Adjusting your rates to be more competitive than the competition when starting out to gain business, establish a customer base, and, most importantly build a good reputation, is starting a business 101 in most cases. If you live in an area with any mills around you, and you are new, no reputation, and command prices higher than theirs based upon what you want to make, you WILL starve...if you are lucky enough to live in an area with no mills, and no competition, then that's what you are... Lucky...
Again, not looking to beat u up, jus' sayin'
Bk
bk

WV Sawmiller

BK,

   Had not heard the 1/3 philosophy of business before but I do like it.

   As to the competition be sure you are competing on equal terms, if at all. You will have customers tell you the guy down the road cuts for $.20/bf. That may be true but he may cut only gun barrel straight, softwood, 8'4" logs 15-3/4" diameter that you bring to him and it will take him 6 months to complete the order, if your logs don't rot first. I have never tried to compete on price with the other mills in the area because most are slow, stationary and service is uncertain. I come when I tell them I will and stay till done or they ask to break for the day.

   Every day or so I drive past a load of walnut logs at my neighbors place that have now been there on the ground over 6 months because the price I quoted was more than he quoted. He will eventually get them cut up but I wonder how much will be lost before the customer gets his lumber.
Howard Green
WM LT35HDG25(2015) , 2011 4WD F150 Ford Lariat PU, Kawasaki 650 ATV, Stihl 440 Chainsaw, homemade logging arch (w/custom built rear log dolly), JD 750 w/4' wide Bushhog brand FEL

Dad always said "You can shear a sheep a bunch of times but you can only skin him once

ncsawyer

Quote from: Magicman on February 22, 2016, 08:38:30 AM
If you price your operation according to your ability and your sawmill's capability there will not be much difference between pricing methods.  I recently sawed a job that netted 2484bf X .25 = $621.  It took 8 hours @ $75 = $600. 

Those two rates are the "industry standard" here, and I am comfortable with them.

That's almost exactly where I am here in NC.  I see adds on Craigslist with higher bdft rates, maybe 0.35 to 0.45 and adds with lower hourly rates.  Some as low as $35/hour.  But I charge the 0.25/bdft or $75/hr.  I feel like I have done a good day's work if I can put $600 (plus travel or broken blades) in my pocket after an 8 hour day. 

Every once in a while you can hit one of those "jackpot" jobs with great logs, great help, and the customer wants 2x12's.  On these jobs the bdft rate is much better than my hourly rate.
2015 Wood-Mizer LT40DD35
Woodmaster 718 planer
Ford 445 Skip Loader

Clevelander

Quote from: bkaimwood on February 22, 2016, 09:16:20 PM
Quote from: Clevelander on February 22, 2016, 08:33:34 PM
Quote from: bkaimwood on February 22, 2016, 08:12:31 PM
Quote from: Clevelander on February 22, 2016, 07:38:41 PM
Quote from: Bandmill Bandit on February 22, 2016, 07:13:40 PM
100 bucks an hour is just too simple to not understand





Exactly. The average work week is 40 hrs x 50 weeks a year (2 weeks for vacation) = 2000 hours x $100 per hour. $200,000.00 annual income. Even if the work is 10 hours a week it is still $50,000.00. That's a pretty comfortable lifestyle by most accounts. People get confused and scared off by potential upcharges. People will usually pay more for what they understand. If they don't, why do want them as a customer? The only referrals you will get from someone that wants a deal is other people that want deals. People that value you will refer you to others that will value you ... and they will pay you well on top of it.

BTW ... thanks Bandit
I appreciate your idealism, clevelender...but 200,000 is gross profit... Take home, if you are running your business not into the ground, is just past 60k...still not bad..in an ideal world... The world of sawmilling is far from ideal...
Bk

BK, I was referring to gross but net 60K still isn't bad. I am amazed that business expenses consume 2/3 of your gross but I am not discounting it either. I am new to milling but I have been a small business owner all of my life. I was always a wood end-user (cabinet maker, remodeling contractor) Bottom line is always reflective of how much we value ourselves and the services we provide.
Clevelender... 2/3 of my business is not used up by business expenses, 1/3 is... I still use old school business calculations as a GENERAL guideline...1/3 to me, 1/3 to all expenses, 1/3 back into the company. I mean no offense by this, so please don't take any, but if you think you will start a new sawmill business, based upon what you want to earn, and what you think you are worth, you better be the only game in town. Adjusting your rates to be more competitive than the competition when starting out to gain business, establish a customer base, and, most importantly build a good reputation, is starting a business 101 in most cases. If you live in an area with any mills around you, and you are new, no reputation, and command prices higher than theirs based upon what you want to make, you WILL starve...if you are lucky enough to live in an area with no mills, and no competition, then that's what you are... Lucky...
Again, not looking to beat u up, jus' sayin'
Bk

BK I respect your opinion. Personally, I have never allowed other people to determine what my prices are and I was in a VERY competitive industry. My experiences are that there are different tier levels of customers. One of the biggest challenges I had was breaking out of a tier of customers that constantly compared my prices with others which ultimately kept my prices down in order to get the job. Once I broke out of that tier level I associated with a customer group where price was totally secondary and often not even requested. A Cadillac was never priced like a Yugo until they established a reputation. They entered the market as a premium product and then established a reputation as one. I might starve but I might also make the same amount of money as someone working 3 times as hard for the same amount of money. I don't mean any disrespect either. Personally, each season I would raise my prices 10%, then I raised them 10% for the next customer, and then again, and so on until either my schedule was full or I lost more than 30% of my proposals based on price alone. I know I have a lot to learn about milling but there are there are only 101 things that business 101 teaches.
Live your truth and your truth will find you

bkaimwood

Clevelender... Thanks for taking my response, with a grain of salt, if you would. Like you said, business 101 only teaches 101 things, that why I said it was general guidelines. You hit the nail on the head about breaking out of the customer base of individuals who compare mostly prices, and into the one that consists of people who want top notch products, with price, secondary at best. My point was it being nearly impossible to decide you want to start in the latter, with a new business, in this industry, when there's lots of guys around producing decent products at decent prices. If I remember correctly, you initially wanted to start a high end slab business. That could be one that you may be able to do so, as there are lots of slab sellers out there, but not many are actually selling high quality products. I think it's much easier to do what you want to do out of the niche market, not so much in general lumber and sawing markets. Best of luck to you and your new business venture...
Bk
bk

Clevelander

You're welcome BK. Honestly, I feel I have done nothing but take from this forum, it was nice to feel like I contributed a bit. The wealth of information freely shared here is like winning a lottery.

There are so many different ways to run a business. I have seen far too many fail simply because they didn't charge enough. There always needs to be something that differentiates a business from everybody else. If it is going to be a reduced price it usually just means less profit because most of the rest of the expenses are constant. I have also found that cost conscious customers have the same product standards as people willing to pay more, so there is no real benefit there. The only person that suffered was the person providing the service.

I do agree, target markets often dictate a general price range and a niche often pays much better than a broad range service. Thank you for your sentiments, and your advice is always appreciated. Best of luck to you as well!
Live your truth and your truth will find you

Magicman

Yup, your chosen market determines your potential price range.  I sawed some 3" Sinker Cypress slabs for a customer and they were asking how much they should ask for them.  I said $2k each and if they did not sell, go up to $4k.  Sometimes folks elevate their "status" by paying more for something.  Sorta "one upping" their friends.  ::)   :D
Knothole Sawmill, LLC     '98 Wood-Mizer LT40SuperHydraulic   WM Million BF Club Member   WM Pro Sawyer Network

It's Weird being the Same Age as Old People

Never allow your "need" to make money to exceed your "desire" to provide quality service.....The Magicman

WV Sawmiller

Quote from: Magicman on February 23, 2016, 07:55:19 AM
Yup, your chosen market determines your potential price range.  I sawed some 3" Sinker Cypress slabs for a customer and they were asking how much they should ask for them.  I said $2k each and if they did not sell, go up to $4k.  Sometimes folks elevate their "status" by paying more for something.  Sorta "one upping" their friends.  ::)   :D

MM,

   I think you'd have liked my dad. He had a small monument business and on display he'd keep a $250, a $500, a $1,000 and a $5,000 sample. And when the customer came if they said "Do you have anything bigger?" he'd say yes or we can get any of these in African Black but that is 3 times the cost.

   All accomplished the same goal. Most folks probably selected something in the middle or within their budget. Some could only afford a small plain marker but occasionally someone wanted the most expensive stone he could get. We had a reputation of putting up the biggest stones in the area. Since they pretty much last forever that remains true even though Dad has been dead for nearly 10 years. They are his legacy as much as the graves they mark.
Howard Green
WM LT35HDG25(2015) , 2011 4WD F150 Ford Lariat PU, Kawasaki 650 ATV, Stihl 440 Chainsaw, homemade logging arch (w/custom built rear log dolly), JD 750 w/4' wide Bushhog brand FEL

Dad always said "You can shear a sheep a bunch of times but you can only skin him once

scsmith42

Lots of good discussion in this thread; Frank - thanks for starting it.

It pleases me to see more millers charging a fair price for their services, as opposed to the general inclination to undersell their service that was so prevalent a few years back.
Peterson 10" WPF with 65' of track
Smith - Gallagher dedicated slabber
Tom's 3638D Baker band mill
and a mix of log handling heavy equipment.

Bandmill Bandit

Quote from: scsmith42 on February 23, 2016, 08:56:50 PM
Lots of good discussion in this thread; Frank - thanks for starting it.

It pleases me to see more millers charging a fair price for their services, as opposed to the general inclination to undersell their service that was so prevalent a few years back.

X2

I guess if I was going to pick the most important thing I have learned from doing custom work in more than a few industries it would be this;

Under charging will kill your operation fast AND brings you the customers the good guys don't service.

Over pricing cuts you market share IF there are better operators at the same price.

It is difficult to over price quality service and a quality end product because a good operator will be at or near the top of his market both in his service and his price and his repeat clients will NEVER bitch about price but they will  sure tell how good he is. No need to brag your self!     
Skilled Master Sawyer. "Skilled labour don't come cheap. Cheap labour dont come skilled!
2018 F150 FX4, Husqvarna 340, 2 Logright 36 inch cant hooks and a bunch of stuff I built myself

OlJarhead

Quote from: Magicman on February 23, 2016, 07:55:19 AM
Yup, your chosen market determines your potential price range.  I sawed some 3" Sinker Cypress slabs for a customer and they were asking how much they should ask for them.  I said $2k each and if they did not sell, go up to $4k.  Sometimes folks elevate their "status" by paying more for something.  Sorta "one upping" their friends.  ::)   :D

I sold my jeep that way.  Couldn't sell it for $3500 so I upped the price to $5500 and sold it right away.

Go figure!  popcorn_smiley
2016 LT40HD26 and Mahindra 5010 W/FEL WM Hundred Thousand BF Club Member

Clevelander

Quote from: Bandmill Bandit on February 23, 2016, 09:30:31 PM
Quote from: scsmith42 on February 23, 2016, 08:56:50 PM
Lots of good discussion in this thread; Frank - thanks for starting it.

It pleases me to see more millers charging a fair price for their services, as opposed to the general inclination to undersell their service that was so prevalent a few years back.

X2

I guess if I was going to pick the most important thing I have learned from doing custom work in more than a few industries it would be this;

Under charging will kill your operation fast AND brings you the customers the good guys don't service.

Over pricing cuts you market share IF there are better operators at the same price.

It is difficult to over price quality service and a quality end product because a good operator will be at or near the top of his market both in his service and his price and his repeat clients will NEVER bitch about price but they will  sure tell how good he is. No need to brag your self!   
I couldn't agree more!
Live your truth and your truth will find you

Seaman

Again, thanks everyone for the great discussion!
I was waiting for you to chime in Scott, I was beginning to worry. :D
I am going to try and articulate what I am considering, based on my short experience, and all the help from FF.

Most of my portable jobs with the Woodmizer have been figured logs, with knots and forks, not straight grain logs suitable for building. Most of the jobs for the Lucas have been odd shaped large logs.
I now take both mills to some jobs, getting wide slabs from the center of the large logs, and bookmatch pairs or figured lumber from the top and bottom thirds.
I think it is worth a premium to show up with both mills, no one else in my area can do that portable.

Travel to any job further than 20 miles will be $2.00 per mile one way.

Lucas only jobs:
$750 minamum, which covers the first eight hours, including set up time. $85 per hr after 8hrs.
$10 per chain dulled, $25 if dulled on foreign object. $150 per broken chain due to foreign object.

Woodmizer only jobs:
$300 min for 1/2 day, $65hr over 4 hrs.
$500 min for 8hr day, $65hr over 8hrs.
Or .35 per bf if logs are nice, and good size. My choice on rate.
$35 per blade per strike on foreign object.

Lucas and Woodmizer jobs:
$800 Minamum, $100 per hr over 8 hrs

What think you? I will keep you informed of how it works out.
Frank

Lucas dedicated slabber
Woodmizer LT40HD
John Deere 5310 W/ FEL
Semper Fi

Bandmill Bandit

Hey seaman that looks pretty good to me. Its relatively simple.

As you gain experience you will adjust it to reflect that experiance.

I would recommend the FREE onsite inspection like the way I do it unless its beyond 2 hours one way. I cant even add up the money that has saved me on the one hand and made me on the other by knowing what I need to include when I load the truck up for the job.

With having 2 mills I would think the free inspection would be a major saving to you.
Skilled Master Sawyer. "Skilled labour don't come cheap. Cheap labour dont come skilled!
2018 F150 FX4, Husqvarna 340, 2 Logright 36 inch cant hooks and a bunch of stuff I built myself

terrifictimbersllc

Seaman, I imagine the hourly rate will encourage customer help & readiness which is good.  What's the customer help requirement for the 35cents/board foot scheme?
DJ Hoover, Terrific Timbers LLC,  Mystic CT Woodmizer Million Board Foot Club member. 2019 LT70 Super Wide 55 Yanmar,  LogRite fetching arch, WM BMS250 sharpener/BMT250 setter.  2001 F350 7.3L PSD 6 spd manual ZF 4x4 Crew Cab Long Bed

scsmith42

Hi Frank.  Meant to return your call earlier but I have family in for a few days and just now got some free time.  I'll give you a call in the next few days.

I like your proposed prices.  Some optional features that you may want to include is a Timbor treatment for slabs and Anchorseal treatment for log ends prior to milling. 

You can probably charge ten bucks a lot to provide and apply the end sealer, and maybe .10 per board foot for the Timbor.
Peterson 10" WPF with 65' of track
Smith - Gallagher dedicated slabber
Tom's 3638D Baker band mill
and a mix of log handling heavy equipment.

Seaman

BB, Yes I usually go and look at jobs first, for free.

TT, the customer will need to supply help capable of keeping logs to the mill, and slabs?lumber moved away.

SS, no hurry on the callback, I try not to call you during the day because your Empire keeps you so busy! Good idea on the Timbor and anchor seal.
Lucas dedicated slabber
Woodmizer LT40HD
John Deere 5310 W/ FEL
Semper Fi

Bandmill Bandit

TT when a client under stands that BF rate only applies when average production is above 325 BF / Hr, it is amazing to see how good the help is.

They will bend over backwards to keep my butt in the mills seat (when I use it)

SS I really like the idea of adding the sealers to my inventory of stuff that goes to the job with me.
Skilled Master Sawyer. "Skilled labour don't come cheap. Cheap labour dont come skilled!
2018 F150 FX4, Husqvarna 340, 2 Logright 36 inch cant hooks and a bunch of stuff I built myself

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