Market Value and Setting ‘Fair’ Prices

Everybody who decides to go into business needs to decide what to charge, whether that business is baby sitting, mowing lawns, selling second hand books, sewing, car repair, or doing other’s taxes.  There are a lot of things to consider.

Some time back a fellow homeschooler took us to task because we spend hours at thrift shops, library booksales, and rummage sales looking for used books with a high market value. We resell them for a profit, and this is one of the ways we contribute to our family’s income.

Our fellow homeschooler was not angry with us for spending too much time hunting those books. No. She thought it was unethical to charge the market value. She believed the only cost we should consider was how much cash we actually paid for the book, and our mark up should only reflect that original and very narrow financial cost.

She was not taking into account our time, our gas, our knowledge, or our work in staying on top of the homeschooling book market, finding sales, listing books, and selling them and getting them to the post office.

More importantly, she had an entitlement mentality

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Unfortunately, attitudes like this are far too common, and if you share certain erroneous underlying assumptions it will hinder your success in business. Sometimes we do not realize that we have imbibed from the entitlement trough ourselves. One way to check is to examine your own heart and see if you feel a sense of resentment at how much somebody else charges for a product you would like. Wistful regret is understandable. Resentment is an indication of envy, and it is not an appropriate response. You might also have fallen prey to the entitlement mentality if you feel guilty about selling something at the market value. This lack of understanding how the market works could hinder your ability to contribute towards your family’s needs (or wants, and there’s nothing wrong with seeking to supply some extras for your family and yourself). A distressing number of Americans live and benefit from a free enterprise capitalistic society, but don’t want others to benefit from it more than we think they should. Such attitudes will also hinder our ability to go into business for ourselves.

Many of us need to broaden our understanding of how business and prices actually work. When you buy a book for 1.00 and sell it for 20.00, you are not seeing a 19.00 profit margin. YOu are seeing the mark up. In order to properly understand the profit margin, many things need to be considered. We need to understand the real costs and the real values of the things we want to sell.

The cost of any product purchased for resale is not just the price the seller originally paid for it.

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Make sure you price your items at a price fair to you. Imagine somebody regularly purchased canned jam from us, but expected to pay only for the cost of the ingredients, not our time spent canning, not our electricity, water, and wear and tear on our feet and kitchen, and perhaps not even the jars? How long would you do business that way? Would you be willing to regularly can jam for that person if they offered you .25 an hour in addition to your costs? .50? No?  Yet, there are people who seem to expect that going into business for oneself ought to be a kind of charity, and they begrudge the profits others make.  

(More about setting your costs here.)

You’ve purchased your books (or other items to sell), listed them, sold them, and received the money.

Now it comes time to ship the item. This is an area where I used to think quite differently, but I have learned my mistake. I used to be quite incensed at the prices all companies charge for shipping and handling (some businesses still bother me). I thought that I would prefer to save the money and have a used box and less
fancy packaging. I could not see what justified what seemed like a high handling cost for throwing a book in a box.

When my daughter started her used book business, we set out to use free materials and to ignore the handling part. It didn’t work. The right shipping materials are not always handy when you need them. Storing used boxes is a tremendous space gobbler, and we never seemed to have exactly what we needed for every single order each week, and people expect their orders in a timely manner. They also expect them to arrive whole, and the post-office has mangled many an item we sent out packed in brown paper bags and packing tape (lost or damaged orders being another cost that must be considered as a whole). So the cost of shipping materials must either be factored into the cost of the book or added on as shipping and handling. One one way or the other, the seller needs to pay for those materials, and so they are fairly included as a part of the price of the book.

It also takes much more time than I imagined

more about mailing costs here

My favorite local thrift store has two days a month where everything in the store is half Price.  Since implementing that policy, their regular prices have gone up.  To be honest, I do find that a little annoying.  But I don’t find it wrong.  They have the right to set their prices wherever they want- to the moon, if that floats their boat.  I have the right to shop there and to choose whether or not I wish to pay their prices.  I do not have the right to demand that they sell me their items at the price I prefer, and they do not have the right to force me to shop there, nor can they force me to buy any given item at a price I don’t want to pay.  We can mutually choose to exchange my money for their stuff, or not.  I can choose whether or not I think their stuff is worth the amount of my money they are asking for.  They can choose how much of my money they want before they will exchange their stuff for my money.

I don’t do home day care anymore (we don’t consider the two little boys who live with us most weekends and holidays to be home daycare. They are ‘ours’) because the amount of money that would make it worthwhile to me is not an amount of money anybody is willing to pay- that’s fine by me.  I don’t like it enough for it to be worth my while to do if for any less.    There are a lot of reasons I don’t like it.

Since deciding not to do home daycare, I have been asked to reconsider a handful of times, mostly by somebody laying on the flattery about how great I’d be, how they just want me because I’d be so wonderful for their kid.  But the thing is, I really dislike being on call on a regular basis to do home daycare.  It is burdensome for me, and I don’t mean just an inconvenience.  The longer I do it, the more of an intolerable burden it becomes until one day I can’t take it anymore and I quit.  That’s not good for anybody.  I love my children to distraction.  I love children in general in theory.  In practice, I don’t enjoy other people’s children enough for me to want to be with them all day, every day, without their parents. I have found that if I am going to do a good job, I have to have enough remuneration that it makes my time, inconvenience, and the burden worth it to me.    This is true for all of us, really, whether it’s daycare, working at a bookstore, reselling used goods, doing taxes, fixing broken things, teaching music- whatever.   Call it ‘X.’  For ‘X; to be worth our time to *us* we have receive something we consider more valuable to us than that time.  Now, this thing of value in exchange for X might only be ‘we get to do X,’ if we love X enough.  It can be food.  It can *be* anything we want more than X and that somebody else is willing to exchange with us for ‘X.’

The only thing that would offset the inconvenience and burden of watching somebody else’s kids to me is a very generous financial remuneration- frankly, well above the going rate.  It’s okay with me that nobody wants to pay me that much to watch their kids.  If I tell you that I would charge twenty dollars an hour to provide daycare to one child, I am not price gouging. You don’t have to take me up on that. You are free to go elsewhere for day care. I don’t owe daycare to anybody.  I am fine with not doing daycare at all and keep my time to myself.  In this case, my time is worth more to me than ten dollars an hour would be, and your twenty dollars is worth more to you than my time is.  That’s a beautiful thing.

I have been asked to babysit somebody else’s child so that my children can have more socialization.  That’s not a worthwhile exchange to me.

I have been asked to babysit somebody else’s child in exchange for (!) meaningless flattery about how wonderful I am.  That is not worth it to me.

My favorite example is that neighbor sent by God to test us. She got a job and suddenly discovered a heretofore unknown desire for my company. She wanted to tell me what a good mother I was and how much she admired what we did with our children. She suggested that probably, as a homeschooler, I was concerned about socialization and would like my children to spend more time playing with other children. I laughed at that outright. As a mother of then six children, five of whom were very close in age (so close that just a couple years ago we had four in their teens at the same time), a need to play with others was simply not on my radar screen.

She quickly switched tactics. She needed a sitter, she admitted. Would I be interested? No, I really wasn’t. I don’t function well working on somebody else’s schedule, having to keep up with the Headmaster’s schedule is difficult enough. I could get by without the money and I don’t like babysitting well enough to do it recreationally. And, to be honest, her child was as much of a behavior problem as the mother, and I didn’t think it would improve neighborly relations if I had to try to work with her every day. Yes, I can imagine all too well how her teachers felt about it.

I told her I had done home daycare before and I really didn’t enjoy it. I found it so burdensome I told her, that she wouldn’t be able to depend on me because at some point I would just find I couldn’t do it anymore and she’d have to find another sitter anyway. She pleaded and flattered. Nobody else would do as good a job as I would, and it would be so good for her daughter, and she would feel so much better knowing her child was in such wonderful care, and I was simply so marvelous with children that she couldn’t believe I really didn’t like babysitting, and she just didn’t want to take a chance on second rate childcare, and when she got the job I was the first person she thought of because I was such a wonderful person….

And then I asked her how much she would pay me.
More about this story here.

As our friend David wrote in the comments here:

“We are mostly trained to expect something for nothing in the service industry. We gripe when a business of any size does not have outstanding customer service. But we are not willing to pay the rates that allow a company to provide it.

Mostly we are just all a lot of covetous little money-worshippers. We want something somebody else has. In this case, other people coveted your time and effort. They wanted to TAKE it, not PAY for it.”

So long as you are honest about the goods or services you are selling, a fair price is the price somebody else is willing to pay.