Setting prices for your detailing business can be a daunting task for a new business owner. It is vital that you take the time to conduct a thorough analysis of a pricing strategy before opening your doors.
1. Establish personal and business goals
The first step is sitting down and determining goals for yourself and the business. Is this a part-time business that you want to earn some extra cash with? Or, is this going to be a full-time job that will require bringing on extra employees.
Questions to consider:
• How many hours per week can I dedicate to my business?
• How much do I want to make on an hourly or yearly basis?
• Where do I want to be in 3 months? 1 year? 5 years?
• Where do I want my business to be in 3 months? 1 year? 5 years?
2. Conduct market research
Start with market-level research in your town or city. It is important to consider demographics, population, household income and other factors.
Market-level questions to consider:
• What is the population of my town or city?
• What is the vehicle ownership rate?
• How often do people wash their cars?
• Who is the competition? Car washes? Detail shops?
• How much is the competition charging and what are their services?
Customer-level questions to consider:
• Who is my target market? Age? Demographics?
• What is their disposable income level?
• How much are they willing to spend? For example, conduct some informal surveys amongst friends, family or acquaintances.
• What do they value most? Cleaning speed? Quality? Price?
3. Set your service levels
Now that you have the foundation for your local market and the customers you plan on targeting, you'll need to set your service levels. Some example of detailing service levels are as follows:
Basic services: exterior wash, interior vacuum
Premium services: exterior wash, exterior carnauba wax, interior vacuum seats and floors, glass cleaning, vinyl cleaning,
Additional services: tire dressing, carpet shampoo, clay bar, scratch removal, pet hair removal, vinyl conditioning, odor removal
4. Determine your costs and margins
This is your most important step in setting your detailing pricing strategy. First, you'll need to examine your cost of goods for each service that you offer.
We are going to use the following example: You are offering a quick wash service. A customer brings in a mid-sized sedan. It takes you 15 minutes to wash the sedan. How much should you charge?
Step 1 - Break down your cost of goods on all the products you use in your detailing service.
You'll want to determine your cost per ounce of product used. Here's the formula
Cost / Ounces of Product
For example. We paid $29.99 for 1-gallon of Waterless Car Wash. A gallon is 128 ounces.
$29.99 / 128 = $0.23 per ounce of product used
1) - Determine your own hourly wage.
How much is your time worth? How much do you want to make in an hour?
Hourly Wage / 60 (minutes per hour)
For example. We want to make $25 per hour. Therefore, every minute of our time is worth $0.41.
2) - Determine how much product is used with each service you offer.
For example. We use 5 ounces of Eco Touch Waterless Car Wash for every mid-sized sedan cleaned. Remember that every ounce equals $0.23.
$0.23 * 5 = $1.15
3) - Determine how much time is used with each service you offer.
That mid-sized sedan from the example above took us 15 minutes. Therefore we spent $6.15 worth of time.
4) - Calculate your total costs.
Cost of Goods + Hourly Rate = Total Costs
$6.15 + 1.15 = $7.30
5) - Set your prices.
Now that you have your total costs, it's time to set your pricing for the service. Let's say you want to markup your services by 100% (double your costs). Then you should charge $14.60 for the quick wash service.
Here is an excellent profit margin calculator so you can quickly plug in numbers to determine your margins.
This is just a starting point for helping you set a detailing pricing strategy. As your business grows there will be many more factors to consider. Insurance, employees, gas and rent are a few of the other costs you'll need to incorporate in your pricing strategy. Look for future articles that cover these topics. Let us know if you have any other questions in the meantime.