Pumper: What else can pumpers do to determine prices?

Sjofors: You need to understand the demand curve of your client base. One way to find this out is to experiment with different prices and see how sales change. The important thing may not be how often you close business at that price level—maybe it’s one out of every 10 customers. What’s more important is your profit margin.

Let’s say your cost per job is $500. What you may find is that it’s more profitable to take one out of every 10 customers at, for example, a price of $1,000 per job—which provides a $500 profit margin—than to obtain five out of 10 customers at $550—which gives you a $250 profit margin ($2,750 in sales minus $2,500 in costs).

Now you have a decision to make. If you have a lot of equipment and need to keep it running, maybe $550 is the right price. But if you have only one truck, maybe $1,000 is right.

Coming Tuesday:

How do you deal with a newcomer who undercuts the competition on price?