- Posted by Rhiannon McHugh
- On April 28, 2021
In this episode, we dive into how to determine your pricing and the steps you can take to confidently sell your products/services for the pricing you desire.
First things first, pricing is UP TO YOU!
Pricing is an IMPORTANT topic when running your own business. The hard truth of it is: IT’S UP TO YOU! Right? There are some helpful formulas that might set you out on the right foot, but ultimately YOU get to choose what makes sense for you and your business and that’s what makes pricing so challenging.
We are super excited today, because not only is this a topic we’ve been wanting to tackle for a while, but we actually received a voicemail question specifically about this challenge!
It’s our first voicemail segment and we can’t wait. Since we can’t meet in person for our podcast these days, we’ve decided to start taking your questions as voicemails. That way we can still help you tackle those challenges you’re facing in your day-to-day business life. So let’s listen to our first voicemail message from Cyrinda….
“My name is Cyrinda and I’ve been in business for about 3 years. I make handmade luxury, coconut soy wax candles as well as other organic body products. I’ve been doing a lot of custom projects lately where I’ll create signature scents for small businesses. I’ve been struggling with pricing and what I should be charging for these special, custom projects and also what I should charge for wholesale items, as well…”
Where do you start with pricing?
- Local Competitors – Make sure they are actually competitors in the same market
- How do you want to Position Yourself? Quality, Convenience, Price
- Are you offering Quantity or Quality?
What do you base your pricing off of?
- Hard Costs per product/service
- Hard Costs of running your business
- Your TIME
- How much you need to make to stay in business vs How much you need to make to live a healthy lifestyle
Charge For Your Time
A huge mistake business owners make is not charging for their time. This happens because when we start out we often start with “sweat equity.” This is a great way to start your business without incurring a bunch of debt, however – it can’t last forever. You NEED to charge for your time because your time is valuable and you’ll never be able to grow without doing so. Plus, it’s too easy to start feeling run down and resent your own business if you aren’t getting paid for the time you put into it. It’s also pretty easy to charge TOO LITTLE when you don’t account for the time you spend.
Think about how much do you need to charge for your time so you can live your dream life, hire someone else, utilize software to make your job/life easier, etc.
Example: If you want to make $1000/week and only want to work 25 hours/week, then you need to charge at least $40/hour for your time.
Confidence In Selling Your Price
Once you have an idea of your costs, value, and time to figure out your price you’ll have more confidence in your pricing.
- Do the work to decide your prices and make a price list/sheet for yourself
- Possibly create packages
- Stick to your pricing
- Decide if and when you’ll offer discounts
- Put it on someone else to make it less uncomfortable
- Act like YOUR hourly rate is a hard cost – you wouldn’t mind paying someone else for their time, so treat your prices the same way
- Start where you are comfortable and grow from there
Your Pricing Should Change Over Time
- Start with introductory rates that help you build your confidence
- Note that it’s an early rate when you start out so you can easily raise prices later and avoiding having that bite you in the butt
- Change your pricing as you gain experience and confidence
The way I felt most comfortable raising my prices was:
- Start by saying here is our “Introductory rate” so it’s clear this is special pricing for early customers
- Give a heads up to existing clients that prices are changing and act now to save
- Schedule a pricing review and plan to change pricing on an annual or bi-annual basis
- Review your numbers regularly to make sure they are actually working for your business
Next 3 Steps:
- Figure out your hard costs (both per products and as a business)
- Determine your hourly rate and start charging for your time
- Create a pricing sheet for yourself based on that info
STICK WITH IT! And feel confident in your sales pricing!