I hope this guy doesn't lose his shirt and leave the business.
Well, one of three things will happen here. Either he will be content making ""super slim" margins when he could actuall be making more at what is still considered a fair price....fairly unlikely Or, possibly, he will find that at his margin, it is not worth selling pellets and say "to hell with it!"....also unlikely. Or lastly, he will say, "man, this is a lot of hard work. And there are a lot more incidental expenses thatn I had originally thought of. I am going to raise my price so that it is in line with everyone else's so that this business remains profitable and viable." ....More likely than the other two possibilities.
A great example of this is that guy SIB. (who I do not know) I mean, here is a guy, based on my calculations that would drive 50 miles or so to deliver and not charge for delivery. Yeah, he had a lot of customers, but the reality is that if you lose even just $1.. per sale, you will never be able to make up for it in volume. This season, he announced that he would be charging a small delivery charge and some people here refuse to patronize him for it. Oh well......
I started out the same way, selling pellets my first year at cost. I did this to learn the business and to try and develop a customer base. Yeah, I made a lot of friends, but my friends do not put food on the table for my family. Therefore, I had to raise my prices. I am willing to stipulate that although I worked my ass off, I also had a considerable amount of luck and was able to grow my business to "huge" all the while having what was at the time, "monster competition" just a few towns over.
I also understand the customer's perception as well. I mean some delivery charges in Connecticut here I need to charge over $100 for, depending upon the size of the delivery and the distance. But, here are some real numbers here....In 2012, I charged customers $148,000 in total delivery charges. My expenses to do this exceeded $140,000 to do this. Trucks are expensive man...really expensive. I also pay my driver exceptionally well and give him 2 weeks vacation as well as pay 100% of his medical expenses. So yeah, I could trim some fat there, but at the same time, in over two years, he has yet to call in sick and he handles thousands of dollars in cash every week and I have zero reservations about the accountability. So, yeah, it's expensive.
Anyway, back to the basis of this post. If this guy raises his prices next season, do not think he is banging you.....This is an honest man who is at best making an honest living. Send him my regards.