There are typically three ways to price something:
- Cost Plus - Your cost plus a fixed percent. This thing costs me $10 and I want to add 30%, so my price will be $13.00
- Competitor Match or Minus - You charge what your competitor does, or worse, "Competitor Minus" which is the price your competitor does minus a percentage, usually 10-20%. If your competitor charges $10 to clean a line, you’d charge $8.50-9.00.
- Value-Based - Look at the value you provide to the customer - what is it worth? How much money does the service you provide add to your customer’s bottom line?
Most people select option one or two because they are the easiest. A little market research and BAM! you have your pricing structure.
Let's look at the pros and cons of each:
3 Ways To Set Your Draft Beer Line Cleaning Prices
Cost Plus Pricing Model
How It Works:
If you take all of your fixed costs and divide by the number of workdays in a month you will know what your costs per day are. Costs like truck lease, hourly wage, owner’s drawing, liability insurance, cell phone, truck fuel and maintenance, plus about a dozen other things. Add them up and divide by workdays and you’ll land on the total fixed cost per day. When I was in the biz in the mid-late 2000’s mine was ~$210 per day, per tech I had on the road (3). Then take the amount of profit you’d like to make per day, add the fixed costs and profit together. Divide that by the number of lines you think your tech can clean in a day and that is your price.
Pros:
Easy to calculate and if your fixed costs are really low, you can really keep your prices low and or make some decent profit.
Cons:
You could be leaving money on the table because perhaps your customers would pay more per line. Also, if your fixed costs jump at all, the increase comes straight out of profit, unless you put your prices up. Example: blow a tranny in your truck, that $5k has to come from somewhere. Get audited and have to pay $10k in back taxes, again that money comes straight from profit. Or you put your prices up - which probably won’t go over well unless it is a one year anniversary or you announce the price increase at least a month or two in advance.
Determining your draught beer line cleaning price per line takes some thought and perspective.
Competitor Match or Minus
Find out what your competitor charges. Don’t bother looking on their website, everyone hides it for some reason; maybe to stop you from doing this exercise. You can ask around and you may or may not get the right answer. It depends on who you are speaking with but you should get a decent idea of the “going rates” in your area.
Pros:
Easy to do, requires about an afternoon of research.
Cons:
Competitor Price Match is a sure way to lose money. Here are just four reasons why:
- They may have lower fixed costs than you. Maybe they don’t have liability insurance or pay taxes, or they get paid in cash.
- They may cut corners that you aren’t willing to. This allows them to clean many more lines a day than you can, which means less profit per line.
- If they lower their prices will you lower yours?
- They may have other ways of making money - beer line cleaning is a part-time gig for them
Using the “Competitor Minus” method just means you are losing money even faster or you will inevitably have to lower your prices again once they do. It is a race to the bottom. You’ll be forced to cut corners you don’t want to, you’ll become resentful and begin to hate your company. Your website will break from lack of updates and your most recent Facebook post is 2 years old. People will talk and eventually, your phone stops ringing and nobody returns your calls.
Value-Based Pricing Model
Have you ever stopped to think about how much money your customers make from draught beer? How their draught system is the goose that lays the golden egg? Take their retail price for a pint, and multiply it by 120 (pints in a keg). Minus what they pay for a keg and that is their gross profit. Multiply that amount by the number of kegs a week.
If you do that for a decently busy place that focuses on draft sales, you’ll find that their draught system represents between 5-12k in revenues every week. $250k-625k/year.
Now if the line chiller craps out on Friday at 6 pm, they will lose at least 2k in revenues that night. Even if you have a deck in the truck, can get there and replace it, they are still not selling pints for 3 hours. If the service company they use doesn’t show up until Monday, they’ll lose 10k+.
Making sure that you really take care of their draught system to ensure it is clean, efficient while lowering downtime is how you can provide value. Doing what everyone else does is not providing value.
“But Steve, aren’t good service and value the same thing?” Nope. Everyone, and I mean everyone, says they provide great service. Call 100 companies (any industry) and ask if they give great service. 100 of 100 will say they do. Half of them will have it on their site. If you are a bar owner and you need to pick a draught service company or beer line cleaning company, you are not picking one because it says they deliver “great service” on their website. Nope. Never. They’ll call their competitor and ask who they use before they pick one because it says “great service” on their website.
You need to provide value. You need to show them you give a shit and that you will bet your company and your reputation on the fact that you’ll do whatever it takes to make sure they are up and running. How do you provide value?
[wpdiscuz-feedback id="addvalue" question="What are some ways you use or have seen that add value to your service?" opened="0"]Here are five of literally 100’s of ways in which you can provide value:[/wpdiscuz-feedback]- Cleaning beer lines properly. Venting FOBs with solution, proper ratios of commercial-grade cleaner, proper soak times, dismantling and scrubbing faucets and hand scrubbing couplers at EVERY clean. Doing an acid clean without being asked. Showing up to clean the lines without being called.
- Communicating. Email, text, call. Letting them know that you are coming in and have been in. More than just getting them to sign a work order. Ask them how business is going. Take some time to build a relationship. Send emails, texts, and pick up the phone. Call them during downtimes, show them you understand their business, don’t call on Friday at noon.
- Suggest upgrades to improve their system. I’m not talking about selling them stuff they don’t need or hard selling. But explaining to them the importance of changing jumper lines every year or two instead of just saying they need to change them or being afraid to ask for the sale. Explain why investing in stainless steel is better than chrome-plated brass. Explain why for everything you sell.
- Go the extra mile. Check the deck at every clean. Top up the glycol, clean the coils, replace the worn insulation as needed. This prevents downtime. Mop the walk-in floor when you are done line cleaning so the opening bartender doesn’t take a header when they grab their opening supplies from the fridge. Wipe the towers and tap handles down so they look new. Clean up behind the bar so the day bartender will say “Wow”. The bartender is an influencer for you. They have the bosses ear. Happy bartender, happy owner.
- Show them where they stand. Explain to them what they are doing well and where improvements can be made. Indirectly show them what a great job you are doing by taking them on a tour of their system a couple of times a year. Use this as an opportunity to suggest upgrades. Show them images of other systems (good and bad) that you have seen so they know where they stand. Our online draught system survey calculates a quality score so you can benchmark them against other bar’s systems. Possibly the best sales tool in the market for selling draught system improvements.
Providing value to your customers lets you charge more. You can’t just say you are providing value and charge more, you actually have to have a plan and stick to it. It’s not easy but the rewards are plentiful.
When I started my company in 2005 I approached the business completely differently. We priced based on value and communicated and delivered that value. Our competitors were all charging $8.50 a line back then; our starting rate was $16.
We weren’t for everyone, our customers (we called them clients) were primarily chains that sold a lot of beer, understood that you get what you pay for, and viewed their draught system as an essential part of their business.
It wasn’t easy, but it was really profitable. We did much more than just bang out line cleans and leave, we did system surveys every two weeks. We used a recirculating pump, acid cleans, staff training, and didn’t charge for service calls. Parts we sold at cost plus 10% to help them make easy decisions to upgrade and improve their systems; they were always improving their system which made cleans easier and service calls less frequent. It became so successful I sold it to a competitor 5 years later.
I’m not trying to turn your business upside down, rather offering you a way to add some value. Let’s chat for 20 minutes and see if what we do can help you increase value to your customers.
What are your thoughts on beer line cleaning pricing?
- How do you determine your price?
- How do your competitors determine their prices?
- Do you increase your prices each year to cover inflation?
- Have you had to lower your prices recently?
Tell us your thoughts in the comments below.