Wondering how to set your junk removal pricing? You've found the right video! In this one, Lee breaks down junk removal pricing strategies When you're starting out with your junk removal business, it's tough to figure out how to set your prices. With junk removal's unique pricing based on load size, you have to find the right balance between high and low pricing to ensure you're setting rates that are fair for both you and your customers in your area. Many junk removal business owners set pricing using a linear approach, but this can mean leaving thousands of dollars on the table every month. In this video, we're breaking down how you should set junk removal pricing on a percentage-based curve and providing example prices for you. Check us out at https://www.junkra.com Subscribe to this channel for all the best junk removal industry info Like and follow us on Facebook at Junk Removal Authority
Alright guys! What we’re going to cover today is pricing. This is always one of the most important questions that comes up. It’s a question we get all the time. How should I set my pricing? I’m doing business. I’ve been in business. How do we get our pricing set right? What a lot of people think is they’re going to do it just like an even curve. They will have, let’s just imagine a straight curve. A straight line, diagonal line or whatever and all the price points be even. For example, they started out at a minimum of $100. They have a quarter load at $150, half load for $200, three quarter for $250, full load for $300 and so forth. That’s incorrect because there’s a lot of factors that go into setting. Those price points as to why an even curve is incorrect and that’s what we’re going to talk about right now.
Okay so before we get into the exact reasons on why an even straight curve is incorrect. Let’s cover what are some ways you could figure out at least a starting point of what your pricing is going to be. Your brand new to the market. You’ve never been in operation. You don’t know what your expense percentages are going to be. So, you will know, “Hey, how do we start?” One of the obvious things is checking competitors’ pricing. So, if you’re in a market where all your major franchises are 1-800-GOT-JUNK?, Junk King, and College Hunks Hauling Junk and then some of the other team that does franchises out there. You can always either call or check pricing to see what they’re charging. 1-800-GOT-JUNK? used to show pricing but now they no longer do. You actually have to call them up. Give them a zip code in your area. Just say you’re looking to move somebody out.
Moving Out The Business
You’re moving out. You’re trying to get rid of stuff. You need to know how they charge. That would give you a good idea of pricing. What they’re not going to do is they’re not going to walk you through each individual price point. You’re going to get a minimum. You’re going to get a maximum. You maybe get a price two in between and that’s all you’re going to get. That’ll give you a good starting point. Junk King is a good one to actually get on their website because they actually have a pricing estimator on the site and they can provide you with some roundabout pricing. Of the franchises, Junk King is one of the cheapest priced franchises out there. You could very well. We’re more expensive than Junk King. You could very well be more expensive than Junk King. Some of your other local competitors, it’s always good to get their pricing as well to understand how their pricing in comparison to a franchise. Since you’re a local company they’re all direct competitors, but you’re really competing heavily against your locally owned companies. It’s nice knowing that pricing as well. Okay, so you’ve gone through your competitors. You’ve figured out pricing and all of some of your competition. Some of the things you have to remember is it’s going to affect your pricing. If you’ve checked your competitors they factored in, but there’s some reasons that certain areas are much more expensive in other areas. For example, here in North Carolina in the Raleigh area we are cheaper. Actually North Carolina, we have three locations in North Carolina. Raleigh and Charlotte location are more expensive than our Greensboro location.
Looking Into Location
It’s not as expensive to operate in Greensboro. There’s less traffic, so it’s easier to get around. That means you’re not paying as much for drive time. Disposal fees are cheaper. Gas is a little bit less. Labor costs are actually a bit cheaper in Greensboro market. We’re actually able to be at about $420 full load in Greensboro, whereas we’re at $490 full load in Raleigh. If you compare that in North Carolina to like New York to up north. A full-load rate we’re charging here is $490, it is going to be about $700 in New York. Why is that? Because they’re paying $150 disposal fee to dump and a lot of times with a 2-ton minimum. Your $300 disposal fee right off there are just going to dump sometimes depending on the area.
The other thing is in New York, especially in New York City. I’m talking about New York City, not New York state. New York City, you’ve got a lot of tall buildings and even if you’re going to be on the elevator. Even if you’re having to physically walk up downstairs, right in that elevator up and down less time. That’s got to be factored in. Obviously, it’s more expensive as far as labor up there. You’re in a lot of traffic. You’ve got to pay for parking. There’s just a tremendous amount more expense in the New York market. Obviously, part of the offset is people in New York City make quite a bit more than people in North Carolina. Adjusted for cost of living not so much. As far as total cost the expenses are higher for your junk removal business, but the people are making more money which helps offset it.
Always keep in mind what are just some costs that are different about your market when you’re comparing multiple markets. You’re looking at Junk Doctors pricing and if you’re looking at pricing throughout the country. What’s different about your market? You need to adjust your pricing accordingly. Okay, what does it cost you to get on site? What are your fixed costs just to get on location. What you got to think about is if you got two guys in the truck even if it’s you. If you yourself are one of those people you need to count paying yourself because you need to earn money for the labor you’re providing. What’s the cost to get 2 people inside? Just drive time. Let’s say each of you averaged 30-minute drive for each of your average stops.
Pricing and Operations
Probably not quite that long, but let’s keep it simple. It’s a 30-minute drive to each of your stops. You’ve got two truck team members. You’re paying them $12 an hour on average, but then you’ve got workers’ comp costs. You got to factor in workers’ comp. You got your half on Medicare. You’re half on social security. It’s probably going to cost you $16 an hour per person. You got $32 total for an hour. Obviously, divide that in half. You’re back at $16. Somewhere around $16 drive time to get there. You’ve got a fuel, probably somewhere around $10 in fuel. You have $26 to get on site. You got wear and tear on that vehicle. It’s probably going to cost you $0.75 to $1 per mile, rolled that truck down the road depending on what kind of vehicle you have. Let’s say if you traveled 15 miles, you probably add another $10 in there. You’re at a $36 in expense right there. You figured just kind of other miscellaneous expenses. You had some advertising calls to get that particular customer and few other odds and ends. Once you factor in all of your expenses that relates to you getting that job, you’re probably going to be somewhere around $70 to actually just get a truck on site. Don’t set your minimum price too low because you’re going to make very little money on a minimum load job.
We’re talking about this even curve. So, you got this even curve going on, but the problem is you need to recruit. You need to make money on the smaller-sized jobs. If you do an even curve, you’re not going to make as much money on the smaller-sized jobs as you need to.
Your price per cubic yard used to go down as you get larger. Why is that? Because you have those fixed costs to get out there. Again, somewhere around $70 to get your truck on site. Before you’ve even done anything, it will cost you around $70. Between acquiring that customer and all the expenses we just talked about. You’re going to start somewhere around $95. On $95 job you might make 20 bucks. Generally, we consider a minimum load to be like a single item. Like you’re going and picking up a washing machine. You’re going in and picking up a fridge, something like that. That’s going to be a minimum load. Anything larger, we’re charging more like a couch. If we go and pick up a couch, we charge $120 for a couch. That’s not even a minimum load. We’ll do $95 for a love seat, but $120 for a couch. Then you’re going to work your way up. You’ve got 1/8, 1/6, 1/4 or full load. Our full load price is $490. Our quarter load price is $205. Our half load price is $330 and our full is $490. The percentage breakdown on that. On a one quarter load they’re paying 42% of the full load rate of $490. One half load, they’re at 67% of the full load rate. Three quarter load, they’re paying 85% of the full load rate. As you can see, it’s not an even curve. That way you’ve got profit built in on your smaller low jobs where you’re having to make up for those fixed costs for actually getting on the site.
The other thing to consider here guys, the size of your truck. Obviously the bigger the truck and the larger the truck, the more expensive each of your price points should be. Junk king, one of their selling points is we’re larger, so our price per cubic yard is less. You’re actually paying less for us. The issue is since they are larger when customers are just looking at price points. They’re going to see Junk Doctors’ full rate of $490 for 15 cubic yards. They’re like a full load rate of like $530 for 18 or 20 yards. I should know this. I think they’re 18, they might be 20. They are less price per cubic yard than Junk Doctors, but we’re below $500. We’ve got that mental thing. We’re beneath $500 on total cost.
A lot of customers don’t think about the truck size. They can’t picture it in their head. It just doesn’t enter their mind is just. They’re not in that line of work. They’re just comparing the price points or the minimum and maximum, not even all the price points. That’s a lot of times all they’re looking at it. If you get somebody’s price shopping and you have a smaller truck. You very well could have an advantage over a lot of customers because of your total rate. Even though your price per cubic yard is higher, your total rate is less.
Now that you’re loaded with all that ammunition. You have all that knowledge right there on how to go out and set pricing. It’s time to actually do it. Get your initial pricing set. It’s basically the best guess. You’re going to look at everything we just talked about and set your initial price points. If you want to use the Junk Doctors percentages, go for it. If you have a $600 full load, then set your half load rate at 67% of $600.
You can just simply just take those price points all the way down. Take the percentage multiply by 600 and roll that price. That could very well be a good price to roll off of. Of course, depending on your location. You get those initial price point set then you needed to really track your expenses over the first week or two weeks of operation. Keep up on your bookkeeping. Get all of your expenses. All of your income added in. Make sure you’re entering all your disposal receipts that you’re getting from the landfill. After a week or two weeks, you need to look at your percentages. You ought to see disposal fees somewhere around 8% to 9%. If it’s 10%, get a little behind. Your labor costs need to be somewhere around 25%. Non-management just on the truck. 25%, 25% and 27% somewhere in there.
Your advertising costs, depending on the stage of business you’re in. If you’re just starting, your advertising is 25% to 30% somewhere in there pretty high. Your fuel costs, you want to see around 7%. Watch out for these fuel cost, it’s increasing. We all need money to raise our prices up. There are certain percentages that we’re looking for out of all of our jobs. All of a sudden you see your expense percentages are higher than they need to be. You’ve been on the truck. You’ve been watching, making sure expense hasn’t been wasted. You need increase those prices up until you can get to the expense percentage you need. That’s kind of a way to get your pricing set right there. We got a company that’s working with us in another market. They bought a JRA business package or something like that.
We’re getting that set up. That’s what we’re looking for. That is our exact formula for helping them set their pricing right there. Hopefully it’s helpful to everybody.