I have noticed that some providers are saying that business is down, pun intended. There seem to be more providers entering the hobby. If this is so, why have some increased their prices? Does this make sense due to currant conditions. Economics 101?

This is the great debate for any marketing people involved in pricing strategy.

Let's assume that a provider is used to working 15 hours per week at $250, or $3750.  ALL providers are, of course, dilligent about witholdings, so take home is far less.  

Things slow down to 10 hours per week, or $2500.

If she raises price to $300, she's back to $3000.  Suppose as a result of price increase, she gets 10% less business (9 instead of 10), she's at $2700.  Still better off than staying at $250.

Suppose rate increase causes 30% drop (7 instead of 10), now she's $2100...  Not better off.

Price changes are always the same, in either direction...  (change in price times expected change in volume), added or subtracted to (baseline volume times original price)

In other words, those providers believe that the % of dates they'll lose because of higher price will be less than the % increase in cost.

This is all covered in EscortEcon (Escort 301 - it's upper division),  of which you must have taken the prerequisite Escort 101 (Fundamentals of Escorting), and it is highly recommended that Escort 269 (Accounting for Escorts) is either completed with a passing grade, or is a co-requisite.  

The tough class though is probably Escort 400x (Internship - requires a paper to be approved by the advisor) - but I digress.

If you had taken '301, of course you would have learned that the optimum quality curve (the point where the quality level maximizes profits) is the goal, as opposed to the TQM curve where maximum quality  will always maximize profits (and customer satisfaction).  

Your point is well taken, as the latest Zamboni forecast for the industry points to flat revenue over the next 37.5 months, in spite of an increase in unit sales of about 6.9% over the same period.  Of course, the regulatory and foreign sales factors are highly un-predictible at this point.

 The high-end, value-added market is very complex, as the mark-up is quite high, but as it has been shown, new entrants to this segment find it difficult to compete and maintain the expected quality levels (hence we should be seeing some ISO9001 certifications shortly), as well as the lack a steady and predictible client base.

If in doubt, love the one (or two) your with.

Any questions?

Alot of the providers work for agencies and based on what one of the providers told me hr agency took half of the $250. Maybe it depends on the agency!

I suspect that very little provider income ever gets reported to the IRS. In the case of escorts who are employees of an agency, there is a W2, of course. But those generous tips probably never make it to the 1040.

An independent escort would be required to report her income on Schedule C, "Profit or Loss from Business or Profession." By the way, there is a clause in the IRS code that stipulates that income derived illegally is subject to tax just like any other.

Any bottom line figure on a Schedule C larger than $400 is subject to the big, fat self-employment tax of 15.3 per cent, in addition to the regular income tax.

There are lines on the Schedule C to deduct the costs of doing business. It would be interesting to see what a provider could claim, wouldn't it?

Seriously, I think escorting is part of the "underground economy" that the IRS is never able to catch up with.

When reporting income from a criminal activity you are allowed a deduction for Cost of Goods Sold, but not for ordinary and nexessary business expenses under section 162.

that the IRS is never able to catch up with."""

Do you get revelations like this a lot?

I've heard from providers that told business is down.  I'm not an expert on economics (especially escort economics,) but I would think that one of the reasons is that lowering fees doesn't nesscessary guarantee an increase in traffic (and at the same time they'll have to decrease what is charged to their regular clients and I guess the increased traffic that would be needed to keep cash flow up isn't worth the trouble of say increasing the price and having those that will still come thru the door make up the difference.


Also the providers are trading an unique commodity ... themselves.  There are hundreds of providers offering the same basic services, but you may not be attracted to the provider or you may not be comfortable with them, or get everything - or most - of what you want.  

You don't like the price of a product in a supermarket, you can get the same product somewhere else; you can't get the same person.

As far as reporting income from a criminal activity, I remember reading about a gangster (it may have been old-time Chicago gangster Murray The Camel Humphreys) who had to pay taxes on a kidnapping random he was acquitted of in criminal court; the IRS didn't care, they knew he rigged the jury, but they wanted their money

I suspect escorts reporting their income would be able to do so as a legitimate business. They might even qualify for a sec 179 on their dildos.

The only question I have is can they write off some of those clothes they wear? Not the normal ones but the head turning outfits.

-- Modified on 2/15/2003 11:58:29 AM

There was a thread some time ago by a guy who poted that he was surprized to learn that his ATF had spent about $4000 a month on overhead for the biz.  Lingerie, hair, nails, potions and potions.  Granted she was a high end provider, but you did forget the overhead side of things in your post.

Now, if our model lady made her $3750 before hard times and business dropped by 33.33% as you suggested, could we expect her overhead to go down 33.33% too?  She still needs to do the hair and nails, but perhaps a few less showers, huh?  So lets say that she spent 25% of her income on overhead and that it dropped 10% when things went south so he new OH is 22.5%

So income was $3750/wk and OH was 25% of that or $937.50 per week and she took home $2812.50/wk.  When business got slow she went to income of $2500/wk, spent $562.50, and took home $1937.50/wk.  For a total loss of income of $875/wk or a loss of 31.11%

Then she decided to up her rate from $250 per to $300 per and now makes $3000/wk as you suggested.  But OH is still going to be the same (we dropped it 10%) so take home is now $2437.50/wk.  That is $375/wk less than she made in the good days or only %13 drop in actual spending money with 33.33% less work. To look at another way she can make the same money she was making by picking up just 1 1/4 hrs a week more in client time.  Thats the same money she made at 15 hours per week by working 11.25 hours per week or a 25% drop in labor time completely off setting a 33.33% drop in business by raising raising her fee 8.33%.  

And that is not too bad.

Not to delve into this too deply, but I think there are problems in your response...

(A) You're playing the same overhead scalability game most entrepreneurs play by using pro forma vs. GAAP:

"So income was $3750/wk and OH was 25% of that or $937.50 per week and she took home $2812.50/wk.  When business got slow she went to income of $2500/wk, spent $562.50, ..."

You're assuming that the overhead scales with revenue, like Cost of Goods...  I suspect it does not;  The cost of grooming, etc., is not likely go down simply by reducing weekly dates from 15 to 11.  I suspect the cost of expendables and gas to/from is negligible.  Marketing/advertising, etc... also probably no reduction - goes up if anything.

A reduction of overhead from 937/wk to 562/wk is not the 10% decrease you proposed in the text, but more like a 30% decrease.  Determining the linkage of COGS and SGA components to revenue scaling is no small task, as any cost accountant will tell you.

(B) You're using the benefit of reduced labor in your argument...  That is, some of the loss of revenue is made up for by reduced labor requirements.  Sounds great in in a factory, where unutilized labor has a heavy cost.  For a lone provider, there's no economic benefit to having the 3.75 hours per week back unless there's something else to do with that time worth $300 per hour.

-- Modified on 2/15/2003 5:53:38 PM

well if anything, her OH goes up if gas and all do.  So the more the OH goes up the more tHe % savings for the increase of income $/ hour.

And as for the less time worked, sure that's a savings.  what I ws pointing out is that for less time worked the income is not changed much by increasing the fee.  So that translates into down time.  Recharging the batteries, less ware and tear on the silky walls as it were. She gets to watch Sex In The City now.

Its threads like these that make me embarassed to admit that I'm a CPA!  Geez guys, GET A LIFE!

There's never a wrong time to be embarrased about being a CPA!  


I have a life, and unfortunately, it includes cost accounting.