What’s your daily “nut?” When you’re trying to determine a price for your auto detailing services, one of the most important elements is knowing your “nut.” That’s the break-even number from which you can decide what to charge for your services so you’re not only making a profit, but also being competitive with other professionally trained auto detailers in your neighborhood.
As you’ve already experienced, properly detailing a vehicle takes up a good chunk of time no matter how skilled you are at the task. So your price considerations should be based on how long the service takes as well as the amount of products used. And you’re going to need to get out a pencil and a notepad and begin scribbling down figures in order to come up with what it costs to run your business on an hourly basis.
Here’s the quick and easy formula to determine what the break-even hourly costs are for you to stay in operation:
- Add up all of your monthly fixed costs and get a total. Fixed costs are those expenses that normally don’t fluctuate much and must be paid every month. These include rent or mortgage payments, truck payments, your bank loan and insurance costs. Don’t forget the so-called minor expenses such as annual subscriptions, membership fees and the like.
- Add up all the variable costs you expend on a monthly basis and come up with a total. Variable costs include your car detailing tools and supplies, office supplies, fuel costs, utilities on your building, employee wages (including taxes), advertising costs, cell phone bills, credit card processing fees, and all those miscellaneous costs associated with your business.
- Take all these figures and pencil out a four-month average.
- When you arrive at that total, divide it by the number of days that you’re in the shop or operating out of your mobile detailing rig each month. In most cases, that’s about 26 days — sometimes more, sometimes less — you’re an independent operator after all.
- Let’s say your fixed costs are about $1,500 per month.
- And let’s say your variable cost average per month is another $1,000.
- That means your average monthly cost would be $2,500.
- Divide that figure by 26 days and your daily break-even cost comes out to $96.15.
- Now take that break-even cost and divide it by the average number of hours you work each day — in this example, we’ll say eight (8) hours.
- That gives you an hourly break-even cost of almost exactly $12 in this example.
- Uh oh. Doing the math, you suddenly realize you’ve been charging $10 for a hand wash and doing about eight of them a day.
- In this scenario, you’re losing $16 a day, or $416 a month, and maybe up to $5,000 a year!
OK. Time to get into action.
Now that you’ve determined what your hourly break-even “nut” is, you can begin to develop a service menu in order to price your services so they make money for you while subsequently steering customers away from the competition. Start by figuring out how much you want to earn per hour.
Here’s a good rule of thumb: You should aim to at least triple your break-even cost.
Truth be told, most successful car detailers quadruple that price if the competition will permit. Eventually your reputation will speak for itself and you can demand top dollar for your work. So if you need to make $30 per hour profit, your service menu should display a range of $40 per hour.
Let’s say your typical wash, buff and wax on a standard-size car takes you 2.5 hours to complete. With a base rate of $40 per hour, your price for most cars would be $99.95 (which always looks better than $100). Use those same computations for complete details, interior cleaning, and other tasks. And then — like many professional car detailers — you might consider discounting the complete detail 10 or 15 percent in order to remain competitive.
The bottom line: Any time your fixed costs or variable costs change, it affects your hourly “nut.” For instance, adding new employees will initially increase your hourly rate. But if you hire and retain good people and train them correctly, you’ll reduce the amount of time it takes to complete a service. That means you’ll be detailing more vehicles each day and putting more money in your pocket.
Next Tuesday, we’ll show you how to price detail services for oversized vehicles such as RVs, boats, limousines and buses. Stay tuned!
Editor’s Note: For more information on determining how to price oversized vehicles for auto detailing services, please see How to Estimate Auto Detailing Charges for Oversized Vehicles (published on September 12, 2012).Tags: Setting Auto Detailing Prices