Pricing and Romance in Your Business
A few years back I realized that I was in love with my pricing but our romance was not getting me anywhere! I was looking at the relationship I had with my pricing through rose colored glasses and not the harsh light of reality. It took my sweet business minded husband a while to convince me that my pricing and I, we needed to break up! So here is my question, are you so in love with your pricing that you can’t see how much it is actually hurting your business?
Three Reasons We Get Romantic about Pricing
As young entrepreneurs, it is easy to get romantic about how we price our goods and services. Here are three reasons why we do that:
- The New Girl: We have all been there as new business owners and we desperately want to be busy and booked like the gal down the street so we undercut or price exactly as they do, hoping that we will be as busy and successful as they look to be. We price according to someone else and when we start to book clients we get excited and romantic about our pricing because hey, its working right!
- A Status Symbol: We want those bragging rights so badly that we create a package at a certain price point but don’t ever factor in that mathematically we end up being in the red when all is said and done. We throw every freebie in imaginable to attract clients to this package but in the long run when they book us, we don’t actually turn a profit from it.
- Fear: We price ourselves to low out of fear of never getting booked and we devalue our business and our brand. This type of romance isn’t like the ones above, no, this is more the Mary Shelley type Gothic Romance and it can hold onto us just as strongly as the rose colored ones. Out of fear we set our price and remain there because if we raise it to be profitable, we might not ever get booked again.
These romantic looks at pricing aren’t based in reality or logic and they are hurting you, your business, and your brand. So now what do you do?
Three Things to Consider When Looking at Pricing
There are three big things to consider when looking at pricing goods and services in a small business. Here are three key points in pricing:
- Cost of Goods: For each package provided to a client, what are your cost of goods? Do you outsource your editing or have an assistant that needs to be paid? Do you provide client gifts or have gas and parking fees to pay? For us, we try to keep our cost of goods at or below 25% of the package price.
- Hours per Client: How many hours are you spending on each client? Did they hire you for an 8 hour wedding package? I bet you spent way more than 8 hours working! Start keeping a timesheet and figure out per package or session how many hours you are actually hands on working.
- Take Home: Once you have figured out what your cost of goods are per client and how many hours you spend on each client, it is time for math. This is where you start to figure out how much you are actually bringing home when all is said and done. This can either be empowering or sobering when you look at these numbers.
When you are able to logically break apart your pricing, then you can start to rebuild it in a way that is wise and profitable, two things we all want for our business! Want to know more about moving your business forward without fear? Join the Restart Specialist Newsletter here: http://eepurl.com/b-eAz5