How to Avoid Common Pricing Mistakes as a New Foreclosure Cleanup Business Owner
Avoiding "Anxious Pricing" and Remembering to Account for "Indirect Costs" in Your Foreclosure Cleanup Business
Following is a common pricing mistake most small business owners make -- no matter what type of business they're in.
Business is about guts. You've developed the guts to start your own foreclosure clean up business -- don't ruin it by pricing yourself out of business. Follow the advice here, and you'll significantly increase your chances of being in business three years from now.
Why three years? Because most small business owners fail within this time period. And, they do so because they severely undercharge, which leads to cash flow and a host of other problems.
Most business owners work from a point of anxiousness, or desperation, from the moment they open their doors. Hence, they'll take on jobs they really should pass on to entice customers on board. Their thinking is, "I'll raise prices later."
The Problem with Anxious Pricing
The problem with anxious pricing is you will struggle to cover those all-important direct and indirect costs. Most
business owners don't even cover direct costs when they use desperation pricing; never mind indirect costs associated with cleaning foreclosures.
What are Indirect Costs?
Indirect costs are all the other costs not accounted for in your direct costs for a particular job, but they are still necessary for you to be in business. These are monies that have to be spent whether you get foreclosure cleaning jobs or not. Hence, they should factor into every job you price.
Some examples of indirect costs are business insurance, phone, gas, paper, ink cartridges for your printer,
and other costs associated with cleaning foreclosures.
My mother used to say, "How you begin is how you will end." (The mother of three girls, she was talking about relationships with boys, but it applies to anything you do in life.) If you start out not
charging enough to cover your foreclosure cleanup costs, you start out in the hole.
Why would you do that to yourself?
Sticking to Your Prices
This is where the guts of owning a foreclosure cleaning business come in. You have to have the moxie to stick to your pricing guns. If you know your real costs, this will be easier than you think. And this is why it's so important when it comes to pricing.
Another reason you don't want to price from a point of anxiousness is that you train clients how to
treat you. This is true in every type of relationship -- business or personal.
If you don't value your work enough to charge what it costs you to be in business, why would your clients? It's really not easy to raise rates on clients, even when you let them know they're getting an
Customers for Life
Your idea with clients is to make them a customer for life. Charge enough so that you can afford to give them a discount down the road if they give you more business. The reason is, when clients give you bulk foreclosure clean up business, they want bulk rates. If you start low, there's nowhere to go.
Not to mention that you'll soon become fed up because you'll resent working for nothing -- literally. You also run the risk of positioning your firm as lower in quality, even if this isn't true.
To avoid all of this, price your services right from the get-go. While it may mean losing some jobs initially, you'll be
that much happier as jobs that are priced right start rolling in because you will know you're getting a fair rate for the hard work you're going to have to do.
Good luck in pricing for profit in your foreclosure cleanup business!
NOTE: Throughout the internet and in real estate industry literature, you may see the names mortgage field services, property preservation business, foreclosure cleanup, foreclosure cleaning, foreclosure clean-outs, foreclosure clean, clean foreclosures, cleaning foreclosures, REO trashout, REO trashouts, field asset services, property field services, field service, and field services used interchangeable. The main thing to remember is foreclosure cleaning and foreclosure cleanup generally refer to smaller entities; while property preservation generally refers to larger companies.