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Don’t Set Your Prices Based on What Competitors Are Charging

It’s our chief advice from this month’s “Ask Signs of the Times.”

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How do you calculate the cost of labor effectively for a small (one- to four-person) business?

Perhaps this is oversimplifying, but you can calculate the total cost of labor at your business by adding up all the costs related to having employees: wages, benefits, insurance, etc. Don’t forget the cost of uniforms, safety gear or coffee/snacks provided in the shop.

How are companies navigating, transitioning and imagining the future of the sign industry?

It may be instructive first to consider the past when thinking about how sign companies navigated, transitioned and imagined where they’d be in the present. Technological change and innovation have always impacted practically every aspect of every business: management, marketing, sales, design, production, installation and more. There’s nary an aspect of the sign business that hasn’t been affected by technology. Equally important, however, is the vision of successful shop owners who have recognized new markets as they emerge — or have even created them. The future of the sign industry promises exciting new technologies, such as further implementation of augmented reality and even virtual reality, but it will be the people who envision how and where to use future tech and other new developments to continue to succeed.

Is there a source or website for sign companies to compare install costs, hourly rates, etc., around the country? I would like to know how my prices compare to other sign companies’. Every time I talk to another sign company, they charge more than triple what I charge, or sometimes a lot less.

Some questions come and go but one that has remained a fixture in the sign industry — probably all industries — is “How much should I charge?” It never ceases to amaze us how much importance is placed on what competitors are charging. In the example above, the sign pro worried about where they stand likely has little-to-no idea how the pricing from others relates to those other companies’ sales and profits. It’s entirely possible the company charging three times as much doesn’t make as many sales, and that the company charging a lot less is only breaking even or losing profits.

At tradeshows in the past, while staffing the Signs of the Times booth, we’ve seen scores of sign pros flip through the current “pricing guides” and complain. Some would exclaim, “I’d be out of business if I charged that much!” Others: “… if I charged that little!” We’d have to explain repeatedly that the pricing guides represented the average of what sign companies around the country were charging and that maybe a .8x or 1.2x multiplier applied to the published pricing would be better for their regions. And that was useful information, but…

Sign companies should strongly consider their competitors’ pricing, but set their own pricing based on their own costs and desired profit margins. To do this, you must have a firm grasp on all your costs, including overhead. Plugging these figures into estimating software or complete sign company management software will give you the prices you should be charging to be successful — whether they’re charging three times or half as much down the street.

Want to see your questions featured in this department? Send your emails to: ask@signsofthetimes.com

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The Sign Industry Podcast is a platform for every sign person out there — from the old-timers who bent neon and hand-lettered boats to those venturing into new technologies — we want to get their stories out for everyone to hear. Come join us and listen to stories, learn tricks or techniques, and get insights of what’s to come. We are the world’s second oldest profession. The folks who started the world’s oldest profession needed a sign.

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