Which Price List Is Right When You Are Between Two Markets?

A Question That Will Make You Think:

I’m a franchisee, and I use Xactimate for water and fire losses. Lately, I’ve been getting adjusters and reviewers saying I’m using the wrong price list. If you type in the address where the work is performed, it brings up the Waco price list. I use the Dallas/Fort Worth price list on all losses, which is 20 percent higher than the Waco price list. Our business is located about 50 miles away from Waco and about 50 miles away from Dallas. We are on the boundary of two price lists. I’ve used Xactimate’s own documentation, which acknowledges that overlaps between regions and contractors may use the price list that best represents their actual cost. I’ve tried not putting which price list I use on the cover sheet. That seemed to work sometimes. I’ve stated that, as a franchise organization, we have additional costs, such as franchise and royalty fees and additional insurance, which non-franchise businesses don’t have, and these impact our pricing structure.

Do you have any suggestions?

Mark, thanks for the question. There is a lot to unpack here, but it’s the reality that many face.

Which Price List Is Right When You Are Between Two Markets?

This comes up all the time. It usually starts happening the minute you move out of a major metro. When you are no longer planted right in the middle of Dallas, Houston, Chicago, or another large city, you end up in that gray area where two price lists overlap.

And here’s the reality. There is no single “right” price list in those markets.

There is only a reasonable one.

Xactimate even acknowledges this. Their documentation states that price list regions overlap and that contractors near those boundaries can use the list that best represents their actual costs. That matters. If the entire argument is based on which list the address automatically pulls, that is not a complete pricing discussion. That is just a software default.

How Pricing Actually Works in the Real World

No one runs a restoration business based on a map pin.

You price work based on what it costs you to perform the work and the margin you need to stay in business. Labor, overhead, supervision, risk, insurance, vehicles, and volume all matter. Geography is just one reference point.

If contractors priced work strictly off stock price lists, most would not last very long. Every contractor has an internal pricing structure, whether they openly acknowledge it or not. The price list is simply a benchmark.

It also should not surprise anyone that contractors tend to prefer higher price lists and carriers tend to prefer lower ones. Both positions make sense. Neither one is automatically correct.

The only position that actually matters is the one that produces a reasonable margin. But this is important: you need to set the right margin to cover costs and meet your desired profit targets. 

Margin Comes First

Let’s take a step back here and rephrase the question. The wrong question is, which price list does the address pull?

The right question is, which price list allows the contractor to complete the work properly and still hit their margin targets?

If a price list consistently puts the contractor underwater, it is not representative of actual costs, regardless of where the loss is located.

If another price list allows the work to be completed while staying inside reasonable margin targets, then that price list is defensible, even if it is not the lowest available option.

Margin determines reasonableness. Geography helps inform it, but ultimately geography provides a false sense of direction.

What happens when a company based in Dallas/Fort Worth has the higher operating costs of a major center, yet does work outside the major center? Their overheads are based on the higher list; going into a lower price list would usually result in failure to hit margins. So one could say that where the work is assigned geographically does not represent the actual costs of running the business.

Does that make sense? In your example, two companies serving Waco, one from 50 miles away and one from 100 miles away, will inevitably have different needs financially, and it may not be feasible to do work in Waco for the Dallas-Fort Worth-based contractor unless they use their own pricelist or increase their price to offset the distance.

So this theory fails the first test of reasonableness. 

Program Work Changes the Conversation

When program work is involved, pricing becomes a business decision, not a moral one. 

In program environments, contractors often trade margin for volume, consistency, and long-term relationships. That can be a smart decision if the numbers still work.

Leaving some money on the table is not bad business if profitability targets are still being met. It becomes a problem only when pricing is dictated without regard for whether the contractor can actually make money on the work.

The benefits of the program are that it can soften those slow times, allowing staff to work, while the company doesn’t incur expenses that would result in losses. While not the most ideal strategy, it’s a great tactical approach to diversifying work, which could be upgraded or replaced with higher profit work in the future.

But if this is a program-driven assignment, you should know the price list before entering the program.  

Boundary Markets Require a Strategy

When you operate between two markets, such as Waco and DFW, you need a strategy.

Some markets use a simple directional rule. Work north of a certain point uses one price list. Work south uses another (apply east/west in other markets). That approach is common, easy to administer, and easy to defend.

Other contractors look at where their labor comes from, where their suppliers are located, and where the majority of their work occurs. If those factors align more closely with Dallas, then the Dallas price list may reasonably reflect their costs, even if some jobs fall closer to Waco.

In some cases, neither price list fits perfectly. The contractor effectively operates in the middle. That is not unusual. Real businesses back into pricing based on the margin they need, not just the city name on the price list.

What does not work is someone outside the business dictating a price list without any consideration for cost structure or financial viability.

Franchise Costs Are Not a Competitive Disadvantage

Franchise businesses are often misunderstood in pricing discussions.

Yes, franchises pay franchise and royalty fees. Independents, however, pay significant advertising and marketing costs to compensate for the lack of a national brand. Corporate operators carry the cost of national and regional management structures, as well as national marketing, similar to franchises. 

In the end, most businesses land in roughly the same place. The costs exist either way. They are simply delivered through different business models.

Because of that, being a franchise does not exempt it from pricing requirements. It just means the business is structured differently. You pay fees to the mothership, and the mothership pays for national sales and marketing, and only 5-15% of a franchise’s fees are profit. So if you paid 10%, you only paid a 0.5-1.5% premium, with the rest going to costs. 

You, in turn, gain access to accounts that independents would have to disproportionately spend money acquiring. They would spend 5-15% on marketing initiatives to achieve similar results.

The only time this isn’t true is in a high-volume CAT or high-volume year. The independent would not be spending the equivalent royalty per dollar earned, but in a low-volume year, they spend significantly more per dollar earned, so it evens out. 

The Bottom Line

When you operate in a boundary market, you are not searching for the right price list. You are establishing a defensible pricing position and relying on your market presence to charge and earn those rates. 

If the price list being used reflects real costs, supports reasonable margins, and holds up under review (not a fan of this, but it is a reality of the game), it is reasonable.

Problems arise only when pricing is imposed without regard for margin reality, or when prices charged are justified only by the availability of a higher neighboring price list. 

That is where the conversation should always come back to: did this cover my costs, did it result in the right margins to make profits, and is this how I would have priced my business without any outputs?

Margin first targets established first; geography is reviewed for viability, and everything else second is just static in a complex industry where the rules of others clutter the conversation.

However, I like to see the positive out of it. You have a unique position to see whether you can drive the business to profitability with a price list that is 20% lower. If you make it work in that environment, by default, when you charge the DFW pricelist, you’re taking home more money, have more money to spend on quality trades, and have a business that is not only driven to run efficiently, but can be rewarded by seeking work north of your location.

Create a policy for adjusters and insurers that you will do one of three things: charge DFW prices when you go north, charge Waco prices when you go south, or build your own price list that factors in your own costs and margins for the various scenarios.

This is where you have a unique opportunity to triple down on efficiency, double down on operations and pricing, and then market for the work that will drive the highest prices for your business. Take advantage of the costs of being 50 miles away from the major center, and market work closer to the DFW area, with less focus on the Waco area.

Thanks for the great question, Mark.

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