Pricing Balloon Decor

Quote here
- Unknown
*PRICING
PRICING Long-Lasting Decor
PRICING HELIUM BALLOONS
PRICING ARCHES
HOLIDAY PRICING
PRICE SETTING STRATEGY
THEY'LL PAY FOR GREAT WORK
WHAT IS YOUR TIME WORTH?
WEEKEND RATES
COMMUNITY SIZE AND PRICING
Note:
Some of the following comments include amounts of money in the imaginary unit called "C-shells." These units are used to avoid any hint of illegal price fixing in the balloon industry.

*PRICING We're not supposed to discuss prices because that is price fixing and it's against the law. However, we can discuss pricing.

PRICING Long-Lasting Decor



PRICING HELIUM BALLOONS

How to charge for He filled balloons
Since an 11" helium balloon holds .5 cubic foot of helium, take the cost of
your helium tank (include the rental and portage charges, too) and divide that
cost by the cubic feet that it holds (there are many different sizes - so ask
your supplier how much yours holds).  Then divide that number by two and you
have your cost per balloon.  
Ex:
30 C-shells (cost of tank) divided by 200 cu ft. = 0.15 C-shells per cu. foot.  
Divide by 2 to get cost for 0.5 cu ft.   = 0.075 C-shells per 11" balloon.  
Keep in mind that you will pop some balloons and lose helium, so be sure to
add a little to the final price to cover that cost.  Then
1) include the cost of the Hazardous Materials Charge.
2) include the cost of delivery if any.


PRICING ARCHES

We price both the Packed Arch and String of Pearls by the foot. How we
arrived at the pricing was to calculate the price of a arch, say a 75
foot packed arch. Use can use the QBN cost sheet or your own accounting
cost formula (most accountants can provide one).

One caveat. These are examples and are not the prices we use. I am Just
trying to show how to establish a price.

So let's say you determine that a 75 foot packed arch would need to
be priced at 500 C-shells for a proper profit margin. Divide the 500 C-shells by the
75 (feet) and you get 6.67 C-shells per foot. I would suggest rounding this up
7.00 C-shells. Now make this you price for a Helium Packed Arch.

Now do same the same for an 75 foot "Air" Packed garland. Let's say that
comes out to 450 C-shells. That would equate to 6.00 C-shells per foot (450 divided by
75).

Now do it for a 75 foot string of pearls (11" balloons). Let's say it
comes to 150 C-shells. That would equate to 2.00 C-shells per foot.

So now you have started a pricing sheet.

Helium Packed arches 7.00 C-shells per foot
Air Packed Arches/Garlands 6.00 C-shells per foot
String of pearls (11") 2.00 C-shells per foot

Also , we do not price a 3, 4 or  5 balloon packed arch differently. I
would base the calculation on the 5 pack and use it for all three. One
could do calculations for all three, but I personally think it would
create confusion. It is simpler to keep one price in your mind, so you
can always give a price quickly off the top of your head to the
customer.


Q. I did a 23 linear foot arch 8'hi X8feet long... but I'm having trouble   
pricing it    HERE ARE my questions:  What S*H*O*U*L*D  a 8'X8' arch 
take to make ??  (how many hours??--- It took me (1st time, by 
myself about 6-7 hrs   altogether..)    Next question...What is a 
AVERAGE selling price for said 8X8' Arch?    I ask (laughingly!) 
because my first set of calculations came out with a   loaded 
overhead cost of 75% leaving my cost at a grand total of 700 C-shells.    Now 
that sounds great, but I have a SNEAKY SNEAKY feeling it's A LOT 
more   than the market would bear.    I'm guessing that around 300-
400 would be a fairer price..  Could some people give me a sanity 
check on the pricing?? 

A. Well, if you are doing a 4-balloon garland cluster using 11" helium 
balloons sized  to approx 10.5 inches wrapped onto 50lb 
monofilament,  and you do a 23' linear strand, you'll use about a 
gross of balloons, with maybe a few left over, and you'll use about 70 
cu. ft. of helium and about 10 yds. of monofilament.

figure your costs for materials from that.

An experienced balloon artist should be able to inflate, tie and wrap 
clusters of 4 onto a line at a rate of 150 to 300 balloons per hour, 
depending on skill level and environment - it takes longer outdoors, 
or in a cramped or busy area.

figure your costs for labor from that.

your material costs are probably, as described above, less than 50 
C-shells.  Your labor, if you can do it yourself in about an hour, 
is whatever you pay yourself per hour.  10 C-shells?  25 C-shells?  
50 C-shells?  100 C-shells?  Let's say 50 C-shells, so your total 
cost is 100 C-shells.  Travel time?  Part of a big 
package, or are you selling just the arch?  How hungry are you, and 
will your competition get the job if you bid too high?  Can your 
competition do the job, or are you the only game in town?  If your 
monthly rent/utilities/phone bill etc. totals 1000 C-shells, and this 
is the only job that's going to generate any money this month, then your 
overhead is 1000 C-shells, so your cost is now 1100 C-shells for that arch.  
Don't quit your day job.  If you can do 5 arches a month, then your overhead
is only 200 C-shells, so the cost is now 300 C-shells.  Realize that you've 
still only managed to earn 250 C-shells this month if you pay yourself 
50 C-shells/hr and only crank out 5 arches.  On the other hand, you're only 
working 5 hours a month!  Well, anyway once you've figured your 
cost plus overhead, add a profit margin.  If you've figured a cost of 
300 C-shells for that arch in cost plus overhead, and you add a profit margin 
of say 1/3, then your price is 400 C-shells for that arch. 
You've really got to analyze a lot of factors 
which you haven't mentioned.  The task of pricing a job is covered in 
lots of business books and courses.  The QBN curriculum covers it 
quite well, especially from a balloon point of view.


HOLIDAY PRICING

What is acceptable for holiday fees for both decorating jobs and balloon 
deliveries.  Should the fee be the same as any other day or should there 
be some sort of service charge for early morning, late evening, holiday 
or Sunday work? 

I think it is ok to charge a extra charge for those times.  You might have to
pay extra for your employees if you have to bring them in earlier or later for
a special job.

Sometimes customers want us to deliver with a 1 hour time window, we charge
extra.  We make the order a priority and bring in an employee just for that
job.  UPS and messenger services charge more to get it there faster, why can't
we.  The messenger service charges an arm and a leg to deliver on the weekend.


PRICE SETTING STRATEGY

balloons cost less than a quarter each, so what you're really
charging for is your time. Compare what you're
pulling in per hour vs. all of your costs (gas, balloons, printing, "office"
tasks, etc.). Balloons are the cheapest part of the equation, almost a
non-issue. The ultimate value of a balloon creation isn't reflected by an
11-inch piece of latex but in the art and showmanship you express in its
use.  When Hollywood makes a feature film on 35mm stock, they're using the same
35mm film that you would use in your camera, but it comes on larger rolls.
It costs the same or more as the film you buy, and they use 24 exposures per
*second*. A huge proportion of it is thrown
out at the end of production. Still, when all is said and done, the
*cheapest* thing about making a movie is the cost of the film.

We won't allow our customers or our competitors to dictate our prices. 
The industry will never be able to command "the right price" as long as 
we put "cheap" product and/or labor into our creations, in order to get 
the job. How long before someone is putting sewing cotton on a balloon 
because it's cheaper than a ribbon? By all means, work to your customer's 
budget. But when they want 12 centrepieces, and they (say) they only have 
enough money for 10 or 11.... you become the loser either way. 99 out of 
100 times they'll "find" the extra budget if your work and reputation is 
what they want. THAT is the secret! Get them to want YOUR balloon work.... 
not a price.

Lindy Bell taught me a valuable lesson in one of her classes a few years 
ago. It's called the "R.I.P. Pricing Exercise". Basically, it's an 
exercise in recognizing the beneficial difference between turnover 
$ and net profit. I urge all to attend the Bell's education classes 
and seminars. Like the Bells, Dolly and I have survived and grown 
stronger by being stubborn and uncompromising when it comes to pricing. 
Even if we could make a $6 centerpiece we wouldn't! It would lower 
the value of our average sale.... affect our targeted turnover 
projections.... probably cut our net profit margin..... and attract 
the customers at the bottom end of the marketplace (who are not our 
target market).

I know it's hard to resist the lure. She's a regular....... it's a 
good cause....... we don't have any other work.... something is better 
than nothing.... we are just starting out and need the recognition.... 
She's the sister of.... Heard 'em all. Been there, done that! 
Trust me..... the only price is the right price! And I bet you'll 
still be on the BHQ mail list a year from now.

Each job should be individually priced according to the Job Cost Forms, unless you
have standard packages you can offer them to choose from.  Pricing should be
based on your costs, expenses, labor costs, etc., and can vary from one area
of the country to the other.

There is an outstanding article in the January/February 1997 
edition of Images called "Love to Make Money".  It has a sample 
Job Cost Form, all kinds of nifty formulas, and enough information 
for someone to even consider attempting decorating for real, honest to
goodness money.


If a few (popped) balloons make a difference in your profits, 
you might rethink your pricing structure.  After all, the balloons 
are the smallest part of the costs.  Possibly you are not charging 
enough for your work in the first place.


Use the QBN formula. It works for us too, and I teach all delegates to my 
classes to follow the formula.

SELLING PRICE  = MATERIALS + LABOR + EXPENSES  (divided by)
                                1 - (overhead % + profit %)
Example:        SP = $47 + $42 + $11  (divided by)
                            1 - (30% + 25%)
                           = $100 (divided by)
                                1 - (.3 + .25)
                           = $100 (divided by) 1 - 0.55
Selling Price  = $222.22

Remember: Your salary as the owner/manager is part of your OVERHEAD.
          If you do the work making the decor, this is ALSO LABOR.

Use this formula, and you will always have PROFIT. (which is the
difference between drawing a wage... and success in business!)


First, when is it appropriate to do work at reduced prices and second, how do 
we maintain the integrity of our prices?
  As to lower prices, it depends on the situation. I can think of several
reasons to offer a discount.  One thing we do is to give prospective customers
at Bridal Fairs a coupon that entitles them to a free item if they book their
wedding with us within a certain time (for example, a free three foot heart if
they buy a minimum package within thirty days of the Fair).  I agree with most
people that doing balloons for the "exposure" is usually not worth the effort,
but even there, I can think of a few legitimate reasons to do so.  If there is
a particular venue that I haven't decorated, it's worth something to me to get
a job there just so that I can have pictures of my decorations in that
location.  My photo album is a powerful selling tool and when I compare the
cost of a newspaper ad or two to the cost of doing a job at a reduced rate to
get a good set of photos, I can at least make an intelligent decision based on
some real numbers and not just a gut feeling.  It's worth actual money to me
to have a great answer to the question, "Have you ever decorated at the .....?"
  As to maintaining the integrity of your prices, be sure that your customer
knows the full retail value of the work you are doing and also the amount of
the discount.  You can come up with some reason for the discount ("Book with
us early..." - "Congratulations, you won second prize in our drawing..." -
"It's our National Potao Week Sale..." - or whatever) but be sure to show the
full amount on the invoice and you at least will have some ammunition when
other people want the same discount ("Sorry,  Potato Week was last month")
   Ultimately, there are too many variables to make a simple answer to the
original question.  Use the pricing form to figure out your costs and
determine what the discount would actually cost you and do your best to
determine the return value of the discount.  Make your own decision, but make
it wisely.

I also will give a reduced rate if it is a longer term
contract and I feel I can receive other benefits such as advertising etc.  


THEY'LL PAY FOR GREAT WORK

We always
felt that we got the customers that 'couldn't pay' for a great job but wanted
the room to look like a miilion bucks.  A few months ago we started
working with a great artist who makes spectacular  centerpieces.  She does
the work I do not have the talent to do.  As a result I am getting much
higher prices for the same balloon work.  The customers will pay when they
see what they like.  Don't be afraid to work with someone who has a talent
that enhances your business.  We now have more than doubled our business,
are making more per job, and working less with A LOT less headaches.




WHAT IS YOUR TIME WORTH?
How do you decide how much to charge for "your time"?  
How do you figure out what your time is worth?

1.  Determine the number of hours, allowing for holidays that you spend 
at work per year.
E.g. You work 280 days per year x 8 hours per day = 2240 hrs per year.
 
2.  Reduce this figure by the unproductive time, to arrive at the number
 of productive labour (chargeable) hours available.  Answering the phone,
 preparing accounts, talking to customers, doing bookwork, banking, and
 other administrative tasks (quoting!!) these are all non chargeable
 hours.  It is crucial to determine how much of your time is not directly
 chargeable to customers.  Failure to account for this unproductive time
 is a main cause of business failure in the service industry.
 
 E.g. say your productive hours is now 1400 hours. (just a figure I
 plucked out of the air for this example!) Realistically, I know every
 week is different, but you just work on average hours that you directly
 spend on decorating or selling.
 
 3.  Work out what your indirect costs are.  These would be overhead
 expenses such as rent, electricity,interest on a business loan,
 insurances, advertising etc ( Those type of expenses that are not
 directly charged to the customer. )  (Your accountant should tell you
 what your indirect costs are).  Every business is run differently, so
 this figure should be different from business to business.  Even one
 that is exactly the same as yours in your area.  Let's say in this
 example it is $20,000
 
 4.  Work out your direct labour costs.  As you are the owner, this would
 be your desired income for the year. This part is difficult if you are
 not an established business, but let say your business is generating
 enough income to ( say) pay you $28,000 per annum.  (if only!)
 Take note though, if you have a business loan to pay off, then the
 principal repayment amount for the year must be added to your desired
 income. And if you could be so lucky, add some amount as a return on
 your investment (ROI).
 
 So, you end up like this:  Indirect Costs  $20,000
                            Desired Income  $28,000
                            Loan repayts    $ 5,000
                            ROI             $ 1,000
 
                      Giving you a total of $54,000.
 
 5.  Divide the total amount to be recouped, by the number of productive
 labour hours available, to arrive at an hourly chargeout rate.
 
 E.g. $54,000 divide by 1,400 hours = $38.57 per hour
 
 If you find that whatever hourly rate you arrive at is too high, then
 either (1)  get more chargeable hours (2) reduce overheads (3) reduce
 your desired income.
 
 6.  When quoting for a job, take into account the materials to be used
 on the job and then add to it your chargeable rate e.g.
 Materials  cost      = $40.00
 Labour 2 hrs @ 38/hr = $76.00
 
  Quote for job       =$116.00
 
 If you were to keep records of what hours you charged per week, per
 year, then you could adjust your calculations accordingly.



WEEKEND RATES
Should we charge different hourly rates for different days and after office
hours?
It's a very personal question in that one's local market and the amount of
competition could influence each of us as managers of our small business in
deciding on a policy here. This is how we approached it.

To begin with; As a consumer I am cautious of sales people in a service
industry  who give me a price and then say, "extra for heavy duty, or after
hours, or certain colours, or ....."
JUST GIVE ME THE PRICE OF WHAT I ASKED FOR! I am also annoyed at them if they
give me a price, and then immediately try to justify it by saying, "It's
costing more because you want this done on a Sunday."  I would hate to walk
into a balloon shop and have the person behind the counter say, "jeweltone
balloons are 5 cents each extra!"
The words I LIKE to hear as a consumer are, "No sir, we don't charge extra for
weekends" or ......." you can have pearltone decor at no extra charge!"

If you addopt the pricing formula promoted in the QBN program, then you charge
according to your actual COST .... and therefore your charge out rates will
vary accordingly if you pay staff different rates of pay for different days and
varying prices for different types of 11" balloons. But, there is no rule to
say you can't charge MORE than the formula calculates. So, we simplify things
to save us time in pricing and avoid offending customers during the sale
proccess.

Pearltone balloons cost us the most and the majority of Dolly's decor jobs are
done in peartones anyway. So, ALL jobs are calculated on the basis that the
balloons will be pearltones. The second rate level for balloons is based on ALL
balloons being all around prints. If the majority in that job are prints ....
they're ALL prints to us for pricing purposes.

We are in the events and celebration business! Most of our decor jobs are
required to be done on weekends or in malls at late hours or they want the
bouquet delivered after 5pm. To our customers, all decorating and celebrating
is outside office hours.So, ALL jobs are priced at the premium labour charge
out rates. If we are decorating a job for a Wednesday luncheon with standard
red, white and blue ..... we put more money in our pocket. It becomes "cream".
Why drop the price? Competition isn't that tough. And the "cream" offsets the
occasional oversight on some jobs. It gives your business a "comfort zone".

I remember a marketing tip I got years ago; we are not selling "balloons". We
sell emotions and/or solutions! Customers are not buying 6 hours of our time
plus 698  latex balloons.
All customers are only ever buying either a solution to their problem, or .....
a good feeling. It just so happens that we provide what they desire with
balloons as the product. The price will become a secondary issue if you focus
on "selling" them the "solution to their problem" or .... the "good feeling"
they seek. You just use balloons to do it!

So, our method is to plug in the highest rate applicable, and go for it! (I
said applicable - not possible) Sell emotion, solutions, quality, service,
relationships, a piont of difference, charisma ....... never sell just
balloons.
And never sell balloons at a discount, just to make the sale. PROFIT is the
name of the game!  Smart businesses only discount to clear unwanted stock. Or,
as part of a marketing plan to draw attention to a specific product with high
profit potential. Sometimes, you might feel tempted to put balloon decor into
this catagory. Think carefully first. Do your homework!

Well, that's what we do in Sydney! Circumstances in your city could be totally
different to here? I'm sure others on the list will offer some alternatives
worthy of serios consideration.
Just because this method works for us, it doen't mean it  is best for everyone.


COMMUNITY SIZE AND PRICING
Should the small size of your community dictate the prices you can charge?
Please consider this; there are 3 options when offering a price to a customer.
1. The Right Price! - Based on a sure formula to guarantee a minimum
acceptable PROFIT margin.
2. Higher than the Right Price.- Targeting the "top end" of the market and
charge accordingly.
3. Lower than the Right Price. This happens when you allow outside
influences to sway your better business judgement. eg; Competitor's prices,
manufacturer's "recommended retail" prices, offering discounts that errode
your minimum % to grow. And the other curse of small business is thinking
that your customers have a better idea of the value of your work than you
do.

Try this; Are there enough people in the area you wish to service to
support a new car dealership?
If so, what brand of cars are they? Made in Asia .... bottom end of your
financial demographics.
Fords / GM ..... middle America. European Cars ..... top end. If there is
no dealership in the area you wish to service, expand your territory - or
be happy to sell balloons as a hobby. You won't make a comfortable living
from it unless you pursue it as a bonafide  business enterprise. Simple! 
So; when making balloon decor to show and/or sell, don't waste your time
making product that is not in keeping with the socioeconomic demographics
for your service area unless it's a "one off" by request. Believe me, by
taking this approach, eventually the "one offs" begin to grow in regularity
as it is human nature for all of us to want each party or event to be
better than the last.

Being in a small town in fine, but only if they pay the right price or
higher than the right price!
Anything else spells eventual failure. The future of your small business
will NOT be determined by what they want to pay. It will be determined by
what you make them pay. The trick is not to make them pay more than they
can afford. Don't offer Volvo creations if they are Hyundai buyers.
Customize your products to your economic market - and your prices will be
right. Get it?




MB 12/13/95
MB 12/22/95
SKB 01/13/97
SKB 12/23/97
MB 7/20/99