Anyone interested in pricing heuristics?

[RyanH]

Many years ago a gentleman by the name of Guthrie did a lot of studies and reviewed a lot of data from various industries and came up with many heuristics (guidelines) for getting a general idea of pricing something. For example, he developed an easy way to predict the cost of a water pump based upon materials of construction, desired flowrate, what it would be pumping (water, gasoline, oil, etc.), how it is driven (electric, steam, etc.), and some other inputs. He looked at pricing guides from suppliers and put together relations to allow someone who wanted to buy a pump to come up with a ballpark figure of what it would cost. By itself it may seem like a waste of time, but the point is to be able to come up with how much a large project will cost before ever putting a shovel in the ground (like if you wanted to build a water sanitizing plant, for example).

Now, with all of that hullabaloo out of the way, here's the question.

Would anyone here be interested in sharing some of their prices (either publicly or privately) for the purpose of applying the same procedure to the pressure washing industry? I know that many people have their own method of charging (based upon area, perimeter, surface materials, etc.), but this would be an effort to make an all-purpose where all parameters can be taken into account (how dirty is the surface, is water readily available, etc.). It could also be useful in commercial or industrial applications if someone is trying to design a site to be easy to maintain and clean in the future. My ultimate goal of this would be to publish the final heuristics to be available to everyone (more as a matter of education than fixed values). Understandably, things like region and location also have an affect. I would provide the guidelines and what exactly I'm looking for as well as accept input and opinions. I am trying to put a poll here so if it goes well and I can get some input I would be GREATLY appreciative. Some of the variables to be taken into account will be:

Surface material (vinyl, stucco, brick, asphalt, concrete, marble, stone, etc.)
Type of cleaning (house, parking lot, driveway, kitchen, apartments, garage)
Chemicals used
Recovery needed
Availability of water
Cost of travel (may include vehicle/trailer type/weight, taxes, fuel, etc.)
Danger involved (roof top, 1/2/3/more floors)
Severity of gutter work (pine straw, leaves, streaking)
Anomalies (bird droppings, repairs to damage)

I'll give more details depending upon how the poll goes. This effort will include input from ALL type of work seen on this board, not just a pressure washing effort.

Many thanks, and I hope this will one day turn into a helpful instrument for the industry.

Ryan H.

[RyanH]

Okay, a few views, no "Yes" or "No" replies (except mine). Okay, so here is a better understanding of what a heuristic is. It is basically a shortcut method of finding something. In the case of what I want to accomplish, a quick way of determining how much to charge for a job. Here's a scenario:

Someone wants a house done and you arbitrarily decide on a price of $200 without ever seeing it. You clean the house, which is 2000 square feet and are happy with the price you receive. The most basic heuristic would be to charge $200 for every job.
The next day, you get a call from someone across town wanting to know how much to charge. You say $200 and they say "ok." You get to the house and find out that the $200 is a little cheap for a 5000 square foot house.
Okay, so you change your cost method and now say that you should charge based upon the size of the house, and from your happiness on your first job you decide that $0.10 per square foot is a good price.
On day three you get a call to clean a house. You say "how big is it?" You get a number, give a price, and you are on your way.
When you get there, you find that it is a three story brick house. So, you now realize the need to factor in what the house is made of, the risk factor involved, etc. in order to get a more accurate view of what you should charge.

The results can either be used by a newbie to get a feel of what is reasonable to charge, or it can give them an idea of what to take into account when reviewing a job. It can also be used to help someone make an estimation when presented with a situation in which they have limited experience (like cleaning granite as opposed to vinyl), even though they may be a professional in other areas. Heuristics aren't rules by which to be bound, they merely offer a ballpark figure of what you need.

If anyone has any specific questions or needs further clarification, I'll be glad to offer more help. I did a good deal of studying on this awhile back and would like to try and apply it to a different field.

Thanks again,
Ryan H.

[TNTPW]

I charge what i charge. I do not care what other people in my area charge. I am probably the higher of all of them here but i think i am the best that does it. I just do not base my price on what everyone else is doing. I see what you are doing and i can respect that but i would not be able to share anything on price with you except to charge what you will and let everyone else do what they will. If you act like a proffesional and look like one, most people will hire you just for that. I know this is not what you are looking for but i bet you a lot of people feel the same way i feel.

[Littlefield]

Wow, ryan, some stiff indifference here. I think some are worried about being brought up on charges for conspiracy to price fix, not understanding what you are doing. Sounds like a good idea. Maybe one way around this would be to base everything on production rates, and percentage of difficulty adjustments. Even travel can be converted to an average percentage of jobs, etc. thsi way no one really know exactly what someone else charges. The fear there is kind of absurd anyway, people aren't buying from me on price, so what do I care if they use my price to try and win??

The only thing I would be afraid of, is that I will find I'm not the highest, but rather considerably below everyone else. How embarrassing. I'm sure I actually am lower per sqft, so I run that risk right now.

A few observations

Pressure washing decks, good condition 500 sqft/hr
ditto, average condition 300 sqft/hr
ditto strip semi stain 100 sqft/hr

Keep in mind, I am also stripping the house they are attached to for this price, and it is wood too. I use a 35% SUBD average figure, for setup and breakdown. this is an adjustable modifier on my spreadsheet, to account for difficulty of customer, access to work area, and travel.

Pressure washing houses, wood sided or log cabin,

Good condition 500 sqft/hr
Average 300 sqft/hr
Strip failing stain 200sqft/hr
strip difficult stain 100 sqft/hr cob blasting

Divide the production rate for the above in half if working above 8 ft.

How am I doing so far???

[RyanH]

Rich,

Your obversations (area per time based upon severity and conditions) are right-on with what I'm trying to determine. These would be listed as factors in the final relations. That type of information is EXACTLY what I'm talking about!! Thanks!!

Travis,
Good point. I should have been a little more explicit in my ultimate goal. I'm not looking so much to tell people how much they should charge *directly*. Rather, I'm looking for a way to predict how much work/time/chemicals/difficulty will be involved in the job itself, then a correctional factor based upon your charging methods can be used as a separate relation. Keep in mind that most of the relations are ranges, not absolutes.
I'm in no way whatsoever trying to tell people what they should charge, and shame them for charging less/more. It would be more like "A wall made of blank material with blank undesireables (mold/dirt/mildew) on a house with blank foliage and blank feet in height will require blank amount of blank chemicals and these will cost blank amount. Also, foliage may need to be covered, and this protection costs blank amount and takes blank number of minutes to cover blank area."

This type of information can be used by someone who has not had the time-tested experience in every aspect of the business and may allow them to predict how long it will take or how much their chemicals will cost based upon how much they will need to use. I understand that a professional will know these things, and a mental heuristic is what we all follow when giving an on-the-spot estimate of a job....most of us just don't think we are. And there is nothing with charging a premium for your services; when you offer the best services around, it's expected that you will be the most expensive. I do the same thing with my janitoral business.

Thanks for the feedback!
Ryan H.

[TNTPW]

Ryan i understand it now.

[Paul B.]

I firmly believe that a contractor in this field should learn to estimate by a constant such as square foot, linear foot, per 1000 bricks, etc. (recognizing that there may be some exceptions). After arriving at the (minimum) constant, then one would apply adjustment for difficulty or other factors.
The reasoning behind pricing by the constant is so that as you increase your speed, you also will be increasing your profit. This would be in comparison to someone that is pricing by the hour - as they pick up speed, their pricing would most likely be lower (therefore reducing potential profits). Of course, if you have to deal with stiff competition, then price adjustments are possible in the sq ft, lin. ft, methods.

There is a somewhat lengthy but very good post that this link goes to that explains pricing in more detail. You don't need to go to the PWN web site, just start with the second post (Allen) who copied the post from the other web site.

http://www.thegrimescene.com/forums/...1675#post11675

[Rick G]

This is the type of thing the PWNA should already have a handle on, in my humble but not very often popular opinion.

[Beth n Rod]

Hi Rick,
One of the reasons PWNA doesn't speak much to pricing, is that as an organization they have to be careful about that so as not to be accused of price fixing (as stated above). In the boot camps a range of prices (depending on which boot camp) is discussed, hourly vs. per sq. ft. etc... I hope this makes it a little clearer as to why the PWNA doesn't have a .... industry price list for example. It would be a lawsuit waiting to happen. The members themselves and the BOD are typically very willing to talk price and help though.

Beth

[Rick G]

Then why does the Neighborhood Cleaners Association (a very large, national trade association for the dry-cleaning and laundry industry) distribute price information annually to their members? When someone becomes a member and on a annual basis they send out cards to their members asking what they charge for what items and what they pay for raw goods, labor, water, fuel etc etc. then average it based on region and redistribute it. They make no suggestions on what to do with the information one way or the other. They also have statistics on how much labor, chems, profit etc etc for say a pair of 100% cotton pair of kaki pants at whatever the averages are, again say $3.50. In our industry you could equate this to a 2000 sq ft one story house wash. I just don’t understand how someone could confuse information gathering with price fixing? Price fixing is when more than one business 'conspires' to price in the same range to keep prices up. Gathering voluntary information and redistributing it to members is a far cry from price fixing. If this organization in the billion-dollar dry cleaning industry can do it without getting sued why cant the pwna?

[RyanH]

One important thing to consider with this idea is that it can also serve as a usefull feedback tool. If you find that the heuristics say you *should* be seeing particular results based upon average reports, and the results you acheive are off by more than 10% or so, then you may assume that there are better methods than what you are doing and that may be incentive to explore better alternatives.

An hour is going to pass one way or another....might as well make the most of it.

[Littlefield]

Paul, I particularly like your idea below of pricing by the constant. I've been battling with how I will do this as I've recently gotten a lot faster in several areas with addition of specialized equipment. Now I'm facing redoing my estimating spreadsheets to take into account the extra equipment and speed of performance...


Good thoughts...

Originally Posted by Paul B.

I firmly believe that a contractor in this field should learn to estimate by a constant such as square foot, linear foot, per 1000 bricks, etc. (recognizing that there may be some exceptions). After arriving at the (minimum) constant, then one would apply adjustment for difficulty or other factors.
The reasoning behind pricing by the constant is so that as you increase your speed, you also will be increasing your profit. This would be in comparison to someone that is pricing by the hour - as they pick up speed, their pricing would most likely be lower (therefore reducing potential profits). Of course, if you have to deal with stiff competition, then price adjustments are possible in the sq ft, lin. ft, methods.

There is a somewhat lengthy but very good post that this link goes to that explains pricing in more detail. You don't need to go to the PWN web site, just start with the second post (Allen) who copied the post from the other web site.

http://www.thegrimescene.com/forums/...1675#post11675

[James]

Paul I like many of your answers it makes me not have to type . And I suck at it. But this sqft thing always gets me. I don't think i ever quoted against someone who did it correctly. On some building jobs I didn't get. I will ask the prices of the people who won the bid and go back and i can't figure out how they got there price.

I love comming up with maint . plans for home owners. The second time around is cake. And they eat it up..

[EmpirePW]

While I don't have any pricing schemes to contribute yet since I am still trying to figure out how I need to price my work, I do think this is a very good idea. I don't believe it will in any way be used to fix prices but it would be a great educational tool for those like myself who are just starting in this field. There have been times on this website where I have asked for help in figuring out a fair price plan for the work I intend to do and people have replied and given me ranges and things to consider when deciding on my price. This just sounds like a great way for me to understand how to establish a fair pricing system. Best of luck with it and when I have anything to contribute I will, and if you figure it out before I can contribute then send me a copy cause it means I still haven't figured it out yet and need the help.

[RyanH]

The idea is still in the back of my mind, but has been placed on the back burner for now. One of my contract customers found out I know a little about numbers and has hired me part time to design and layout the implementation of some projects for their facility. One of the tasks will involve something similar to what I was trying to accomplish here. It's funny....they are giving me the task and scope of one of their project managers, but it's only considered part time!! Oh well, the pay is much better than any part timer I've ever seen and will give me a little more experience in this field....but on their dime!

I'll still try to put together some routes for PWing, though, it may take a little longer than I had first anticipated.