How to Set Your Junk Removal Pricing
How to set your Junk Removal Pricing
One of the hardest things to do when first starting your junk removal business is choosing how to price. Do you price by time? By weight? By volume? A hybrid of two or three of those? All of these are approaches used by junk removal companies from time to time.
Time. Many first time customers will believe that you charge based on either weight or time, so it is natural if you think that might be how you should charge as well. The easiest and most straightforward way to charge is just based on the amount of time your job takes plus disposal fees. If you chose to charge this way, you would clock in at the start of the job, clock out at the end, go unload and dump, and then add in the disposal receipts at the end of the job to figure out total cost. You would then either bill the customer or run their credit card. However, there are some issues with this approach.
First, this approach makes it exceedingly difficult or even impossible to give the customer an up-front price. There are simply too many variables involved. What is the weight of the items you are taking? How is the property laid out? Is there any disassembly required? All of these have to be considered.
Another issue with this approach is the fact that the size of the job and location of items could be prohibitively expensive for you or the customer. A simple garage pickup of some light items could see you losing a significant amount of money, while a one-truck attic cleanout could take hours and end up costing the customer over a thousand dollars. For these reasons, the “time plus disposal fees” option just isn’t the best approach.
Weight. What about just charging a flat rate for weight? There is a company in Vancouver called “Junk Rangers” with a very unique concept for this approach: they mount scales on their truck. They take a total weight at the beginning and end of each job and charge per pound. The advantages of this are obvious. As the junk removal business owner, it will be much easier to keep your disposal expense percentage exactly where you want it because your pricing literally depends on the same criteria.
There is an advantage with this route for the customer as well. It is a scientific approach with which the customer cannot really argue. The price per pound is made clear up front and the customer can clearly see their total weight (and therefore price) at the end of the job. However, this method still leaves the customer without a price up front.
Volume. The third common way to price your junk removal franchise is the most frequently used: volume. Price points are set based on fractions of the truck between a minimum and full truckload. If a job will require more than one truckload, the pricing simply restarts for every truckload after the first. A firm price can be provided up front because an experienced Team Leader can accurately quote load sizes after taking a look at items to be removed. Most experienced Team Leaders are almost perfectly accurate. The one drawback to this approach is that there will be the occasionally missed quote. You should expect new team members to misquote a couple jobs as they gain experience (and therefore train these team members before they have to make these quotes on their own). Rarely, a customer may dispute the load size in the back of the truck, but again, this is exceedingly rare.
The volume approach tends to be the best for the customer because they know what they are paying before the job starts. This approach also keeps costs down on some of the more time-consuming jobs, as their increased labor expenses are offset by jobs like garage cleanouts, which are very quick. It’s all about averages. As a result, most junk removal companies price by volume.
Check out this video for a full explanation on setting pricing.
The rest of this article will the steps to choosing to price based on volume. While everything is covered in the video, the main points are summarized here:
- If you are new with no prior knowledge of your market and no financial data on which to base your decisions, you should research your competitors’ pricing. You can call other junk removal companies pretending to be a customer. Alternatively, some companies, like Junk King, have their pricing listed online.
- Consider factors such as:
- Traffic. In areas with high traffic, your trucks will spend more time on the road, increasing labor, fuel, and maintenance costs.
- Layout of buildings. Ranch homes can be quickly cleared. High-rise apartments, on the other hand, will require time-consuming removal down hallways and elevators. The longer truck teams are inside a structure, the higher the labor cost and the greater the risk of property damage or employee injury.
- Disposal fees. This should be one of the biggest factors in your pricing. In North Carolina, our average disposal cost per ton is about $42. In some areas in the northern United States, disposal fees are more than $100 per ton!
- Climate and road salt. Areas with high snowfall (and therefore lots of road salt) will see higher truck maintenance costs. Road salt wreaks havoc on trucks and adverse weather conditions both slow down truck teams and increase accident risk.
- Consider the cost of getting a crew on site. Labor costs, wear and tear on the truck, fuel, and time add up to about $70 just to get a truck to a job. Be mindful of this when you set your minimum price point.
- Most customers don’t pay any attention to your interior price points – they only care about the minimum and full load charges. This allows you to compete with your minimum and full load rates while still making a profit between those two points.
- Don’t restrict your price points to just ¼ load increments. If you load up about ⅓ of a truck, you’d either have to charge the customer significantly too little or significantly too much. Likewise, having 100 different price points makes it impossible for your truck teams to maintain consistency and confuses your customers. Setting 12 price points creates a good balance of fairness in pricing without overwhelming your truck teams or customers.
- Don’t make your price curve linear. If your full load rate is $400, your half truck price should not be $200. Instead, pricing should follow a less even curve based on percentages of the full truckload rate. As an example and reference point, the Junk Doctors price points are listed below:
- Minimum: $95
- 1/8: $135 (27%)
- 1/6: $170 (34%)
- ¼: $205 (42%)
- 1/3: $265 (54%)
- 3/8: $300 (61%)
- ½: $330 (67%)
- 5/8: $360 (73%
- 2/3: $390 (79%)
- ¾: $420 (85%)
- 5/6: $460 (94%)
- 7/8: $475 (97%)
- Full: $490
That’s all there is to it. Be sure to like and subscribe on YouTube for more helpful tips, and until next time, go get ‘em!
– Lee Godbold