ARTICLES

Setting Prices

It is important to have a business plan in place that includes both short- and long-term goals, details for attaining those goals and your budget for things like advertising, major business purchases, equipment replacement and more.

You must know what your bottom line is for each signing. There are programs available that can help make calculations as to average distance traveled, printing costs, etc. Average time spent per signing is more difficult to calculate, unless you keep track of your start & end times. When calculating your costs, however, don’t forget to include your time. This should include travel to and from appointments, trips to drop boxes, time spent downloading, faxing or printing documents, accounting and other administrative costs. Your time is just as valuable as the material costs involved.

Having a good handle on your bottom line is critical so you don’t take losses. Some feel that they can accept lower fees on some jobs & make it up on others. This is not a good business practice for many reasons. Taking the occasional loss like this won’t necessarily kill your business, but it doesn’t maximize your revenues, either. Accepting a job that doesn’t meet your bottom line takes away profit from other signings. Volume at a loss does not equal profitable work. It equals a loss of revenue. Don’t be fooled by promises of volume as a rationale to working for free. It doesn’t make good business sense. Your business goal should be to make a profit, otherwise, it’s just a hobby & deductions may be called into question on tax filings.

As you gain experience, your prices should reflect that increased knowledge. Know what you’re worth. Just as a trade apprentice doesn’t receive the same compensation as a licensed, experienced tradesperson, a new signing agent should not charge the same as one with experience. However, as experience is gained, the wages should increase.

Diversification is also important for business. Having all one’s eggs in a single basket is risky. This industry is subject to cycles. You have to be prepared for the up- and down-swings that are a part of this business. New services that you can offer provide a bit of business stability and ultimate longevity.

Business expenses have been rising. Costs for gas, oil, and supplies have risen drastically in the past few years. That’s why it is critical to re-evaluate your pricing periodically. What you charged to do business years ago or even last month may not be enough to cover expenses today. In just the past few months, paper prices have risen by as much as 33% in some areas! Costs for plastics, such as used in office machines and supplies, has risen, as have the prices per gallon of gas. With expenses rising so dramatically, prices for services that utilize these commodities must also rise.

Supply and demand affects the rates you may charge. It is a good idea to include in your business plan the number of competitors in your service area. You should also calculate at what point (traveling distance-wise) your costs increase enough to charge a higher fee. You may have a price range dependent on distance that you use when setting prices. Your printing fees will be the same for each loan type, but costs such as gas and wear & tear on your vehicle will increase with distance.

As an Independent Contractor, you set your own prices for the services you perform. Knowing your bottom line is critical to business operation. The more detailed you can be in your plan, and the more you know about your business operations, the better chance of success you will have.