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Pricing Records-Management Services

March 1, 1999

5 Min Read
Pricing Records-Management Services

Pricing Records-Management Services

By Cary McGovern

Perhaps themost difficult thing to do when starting up a records-storage business is determining howto price your services. This article focuses on the best ways to do that, based oncompetition and other important characteristics.

Rule Number One: There Is No Standard Price List

The first thing that you should remember is that there should never be a publishedprice list. Prices vary across the board in all commercial records-center operations basedon volume of cubic feet in storage and the mix of services. The cost of storage shouldalways be related to the cubic foot, so the price per cube is the most importantingredient in creating a price list.

Rule Number Two: Competitors' Pricing Should Act Only as a Guideline

Of course, you should "shop" your competition. But if they are smart, theywill not give you much information without committing to a survey. I recommend that pricesnever be given out to anyone without a survey first. Surveys reveal so many hidden agendasthat it is virtually impossible to understand the customers' requirements and all thevariables without them.

You do need to understand how your competition charges so you can effectively competewith them. However, most customers are looking for "value-added" benefits thesedays. By becoming unique, you can package services and avoid head-to-head competitivepricing except in the very largest accounts.

Pricing Storage

Remember that the cubic foot should always be the basis or lowest common denominatorfor setting storage rates. The first decision that you should make is how much to chargefor the standard size boxes. The most common standards are listed below.

Letter/Legal Box--This box holds letter-size file folders in onedirection or legal-size files in the opposite direction. Generally, this box measures atapproximately 1.1 cubic feet when empty and 1.2 cubic feet when full. Some commercialrecords centers charge for one cube and others charge for 1.2 cubes. I always recommendthat you charge 1.2 for this one. Let's say that your charge for this customer is 25 centsper cubic foot--the cost of storage for this box is then 30 cents per month.

Letter-Size, 24-Inch Transfer Box--This box is quite common. Itmeasures approximately 1.6 to 1.7 cubic feet. Although some records centers charge theactual cubic footage on this one, many will round the charge up to 2 cubic feet. I alwaysrecommend that you round up on this size.

Legal-Size, 24-Inch Transfer Box--This box has been popular for manyyears because office-supply dealers pushed it since it carried a higher profit margin. Itis by far the worst box to use for records storage. It is heavy and unwieldy. It breakseasily because of the weight and size, and it takes up an odd amount of shelf space. Youwill find a significant amount of these in existence. I recommend that you round this upto 3 cubic feet even though it measures in at 2.4 to 2.5 cubic feet.

I always recommend that you attempt to get your customers to switch over to thestandard letter- or legal-size box. Typically, this box is less expensive and lasts muchlonger because it is more portable and weighs in at a maximum of 35 pounds when completelyfull.

Pricing Retrieval Services

After you have brought in your initial load of boxes from a customer, retrieval ofboxes or files is always on demand. It is typical that normal retrieval service isconsidered to be either same-day or next-day. Retrieval in most cases will mean that arequest is made and a return will follow at some point. After retrieval has been made,that box is logged out of your inventory, but you continue to charge rent on that box. Theindustry uses the term "permanent out" to describe a box that will not return.So, most boxes make a roundtrip and you should charge for both retrieval and re-file.

I have recently seen a tendency to lower these charges to $1 or $1.50 per unit (box orfile) in larger cities. I recommend that the price be about $2.50 each way. Remember: Thisservice requires labor to pull the box and log it out. In most cases, $2.50 is a fair andappropriate charge.

Permanent-out charges vary greatly from records center to records center. It is usedprimarily as a penalty for early retrieval or a disincentive to change vendors. Irecommend the permanent-out fee be a minimum of $2 plus the regular retrieval fee.

Pricing Delivery Services

Delivery services are the easiest of all your services to price. Every community hasexisting courier rates. Courier services are eager to give out their price lists andshould be willing to share information with you. Couriers sometimes use zones or rangesbased on the distance from one place to another. It is very common that a customer mightrequest several boxes or files at one time, so courier costs generally have a base rate todeliver and a surcharge for each additional box or file.

You may remember from an earlier article that you can use courier services for yourdeliveries rather than do it yourself. I recommend that you read that article for details.You can find additional information about courier deliveries on my web site atwww.fileman.com. My best advice to you on deliveries is to be consistent with courierrates in your community. And remember that courier companies typically use a 60/40split--the courier gets 60 percent and the dispatcher 40 percent of the delivery fee. Youcan act as the dispatcher and get 40 percent without any overhead.

Pricing Other Services

Services in commercial records range from indexing to retention scheduling on thetraditional side, and from imaging to document-management strategy on theelectronic-records side. Next month's article will discuss the ways to add value for yourcustomers and profit to your bottom line. Pricing these services should yield margins ofabout 50 percent.

Regularcolumnist Cary F. McGovern is a certified records manager and owner of File Managers Inc.,a records-management consulting firm that also provides outsourcing services, file-roommanagement and litigation support services for the legal industry. For more informationabout records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, AbitaSprings, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected]; www.fileman.com.

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