#230 - Bad Businessman

So, I might be just a bad businessman, or, I’m going to change the world. Either way, here are some thoughts on business and pricing in CRM and, really, everything.

There is a pretty good chance that DIGTECH is going to be merging with another company soon. We’re joining forces because the leadership of the other company are getting on in age and are looking to keep their legacy going. First, I really respect them for making this decision. There is no reason to let something you’ve built for the past 30+ years just die. That being said, there are some decisions that will have to be made.

DIGTECH Pricing Schedule

When I first started my company I was really stressing out over what to charge for my services. There are essentially four levels that need to be priced: Principal Investigator, Project Manager, Crew Chief, and Field Technician. The price you put on proposals is called the billable rate and it’s intended to cover all of your operating expenses (overhead) and is the source of your profit.

A number of companies I’ve worked for have a billable rate for PI that ranges from $85 to $150 per hour. I’ve seen an average for field technician of about $50-$60 per hour. Some companies charge more, some less. The rate is often decided by using a multiple of 2.0 to 3.0. For example, if you want to pay your field technicians $18 per hour, then multiply that by 2.5, for example, to get the billable rate ($45 in this example). Again, that rate should cover overhead and give you some profit at the same time.

Of course, I don’t really have much overhead. I’m completely digital and don’t have offices to pay for. So, do I use a multiplier that’s under 2, or, do I use a standard multiplier so I can stay up with everyone else and just make more money? That’s the big question, isn’t it?

Undercutting, or, Efficiency?

My big question is: what is the price point I can choose that pays my people well, gives the client a fair price, turns a profit, and is respectable? That last one is tricky. If your prices are too low you won’t be taken seriously; too high and you won’t win any projects.  The prices need to be somewhere in the middle.

If my prices are too low I could also be seen as undercutting by the competition. That’s a sore point with me too. Is it undercutting to work more efficiently by completely rethinking the entire business and how we do it? I don’t think so. If I’m paying my people well and growing the company while giving my clients a fair price then I’m happy. If other companies can’t compete with that then that’s not really my problem. Sounds harsh, but, times are changing and you either adapt and overcome or move out of the way.

Joint Venture Pricing

So, If I join forces with a company that’s been in business for 30+ years, what do we charge? Also, we’ll be working in both California and Nevada. Do multi-state companies have different pricing structures for different areas? You would think they do to remain competitive, but, they still have the same overhead to pay. Bringing in another, established, company will give me some of the experience I simply don’t have.

I’ve been building DIGTECH by the seat of my pants. In reality, I don’t really know what I’m doing when it comes to business development. I’ve simply never done it before. What I do have is drive, ambition, and a desire to do things better and more efficiently than they’ve been done in the past.

On the last episode of the CRM Archaeology Podcast (Episode 36) we interviewed firm owner Sonia Hutmacher. Sonia said that she recommends you start a company with $30-$50k. I started with $7k and a credit card. Still in business, though.

Anyway, we have some decisions to make over the next few months. In the end I think it will be great for both companies.

That’s about it for now. I’ve been a bit absent since my other company, Field Tech Designs LLC, has been taking up a massive amount of my time. We’re creating digital field forms for other companies and our application for Android, and eventually iOS, is well underway with development. Since the dev company is in India there are a lot of late night calls so I can work with the development team. There will be many more details to come.

Also, I'm likely starting a new business for aerial drone surveys. We'll be taking aerial photos for large mine complexes, pipelines, utility lines, archaeological excavations, road surveys, and everything else. Sure, it's illegal now, but, hopefully the FAA gets their head out of their collective...well, you know.

From XKCD, of course.

Thanks for reading and I’ll see you in the field!