Two of the Biggest Junk Removal Pricing Mistakes We See Business Owners Make
Pricing is one of those things that we see junk removal business owners mess up all the time. Two of the biggest junk removal pricing mistakes we see are businesses either price themselves too cheap or use a linear pricing model. Learn how to avoid these missteps by following the JRA pricing model outlined below.
Mistake #1: Pricing Junk Removal Jobs Too Low
We see this happen all of the time. Business owners want to be competitive, so they price themselves much lower than the local franchises. But, other factors need to be taken into consideration when setting your junk removal prices. Here are a few tips for making sure you have a competitive and fair price that still allows you to make money and grow your business.
Check Out The Competition
The first step of pricing is to price shop your competitors – especially the big franchises. See if they have a price estimator on their website or pick up the phone and give them a call. Pretend that you are from out of town and helping a family member clean up a home they’re moving out of. Tell them you’ve used their service before in another state and just need to know the pricing of two full truck loads so you can convince your family member to use their services.
Calculate Your Equivalent Per Cubic Yard Rate
Once you have pricing from two or more companies, you need to convert your competitor’s pricing to a per cubic yard rate. To do this, you will need to divide your competitor’s full load price by the total cubic yards of their truck.
Competitor’s Full Load Price ÷ Total Yd3 of Their Truck = Competitor’s Price Per Yd3
Now, take their price per cubic yard and multiply it by your truck’s total number of cubic yards to find your equivalent price.
Competitor’s Price Per Yd3 × Total Yd3 of Your Truck = Your Equivalent Full Truck Load Price
For example, if you have a 15 cubic yard truck and your competitor’s price per cubic yard is $38, you’re equivalent full truck load price would be $570.
Price Yourself Higher Than The Equivalent Price
Don’t simply go with the equivalent price. Franchises tend to estimate low and we recommend that you go a bit higher. This is especially true if your truck is smaller than the competition. You see, even though your price will be more per cubic foot, your total full truck load price will still be cheaper than your competitor’s full load price and customers will perceive you to be less expensive. Take advantage of that by pricing your services just a bit higher.
Mistake #2: Pricing Load Sizes Linearly
At JRA, we recommend all of our clients price their junk removal jobs based on load size. Start with your minimum price and then set a definitive price point at each 1/16th mark all the way up to a full truck. However, you should not increase your prices linearly!
What do we mean by that? Do not simply take your full truck load price and quarter it to get your ¼ load price, or divide it in half to get your ½ load price. Instead, you should weight your increases heavier toward the beginning of your load size scale. Why? Because the majority of your junk removal expenses are incurred showing up on the job site. You can lessen the price per yard as jobs get further up the load size scale because you’ve recouped your large expenses to get on site.
Most companies will have about $80 in expenses just to show up on-site. Make sure you are charging enough on the smaller price points to ensure a profit on every single job.
Want More Advice?
Junk removal pricing is not a science. Rates vary tremendously by location due to large differences in disposal fees, fuel costs, traffic, labor costs, taxes, and other factors. At JRA, we work with junk removal businesses across North America and have seen disposal fees that range from $25 per ton to $350 per ton. We’re here to help give you the specialized advice that you need.
For more of our pricing tips, watch “How to Set Pricing for your Junk Removal Business to MAKE THE MOST MONEY!” from our founder Lee Godbold. Or, if you’re ready for tailor-made advice from the JRA team, contact us today to learn about our services.