Exactly How Do I Set Pricing?
This is a long blog that you are going to want to star, keep, print and refer to for the rest of your life if you care AT ALL about how to price. And I think you do because that is the number one question I get asked: "How do I price xyz." So here you go, on a silver platter, exactly how I set my pricing for my event planning company, The Party Goddess! and how I set my coaching, consulting and speaking rates.
Keep This 14-Step System Handy!
Here is the system, step by step, that took me 22 years to come up with to double your hourly rates EVEN when you don’t charge hourly. No matter how much money you’re making, or think you’re making, you can do better. Let’s hit it. (Want to just watch a video about making more money? I’ve gotcha covered. Click on the image below.)
- On a sheet of paper, write your total revenue for last year (or any 12 month period.)
- Subtract your expenses and write down what’s left over (your profit). Can you pull out your yearly p&l and just look at it? Sure, but I kind of think if you had that sucker lying around you wouldn’t still be reading this. If you have that magic sitting there, all the better smarty pants. Go to step 3.
- Knee jerk answer: How many hours do you work a week? Really, how many? We know what you tell your friends – you never STOP working. OK, violin out. How many though? 60 hours a week? 70? Multiply that weekly number by 52 to get the total number of hours/year you work. Ick.
- Take the amount of money left over in your business from Step 2 (profit) and DIVIDE it by the number of hours/year you work.
Example: If your business took in $100,000 (subtract your expenses of $70,000 = $30,000 left over) and you work 60 hours/week x 52 weeks = 3,120 Hours.
- $30,000/3,120 Hours = $9.62/Hour. Don’t choke. Remember, you are talking to the $5/Hour burger flipper here.
- Now decide if you’re happy with that number. No? What hourly rate would you like it to be? Write the Goal $/Hour on your paper and below that right your Actual $/Hour.
- Breathe. (Hope emerges in this next part.)
- Look at your numbers and focus on two of them: Your GOAL hourly rate and your ACTUAL hourly rate. (How far apart they are will determine how severe the action is you need to take. Let’s start creating the strategic plan together.)
- Write out a list of 3-5 things that you are BEST at in your business. Schmoozing clients? Frosting the cakes? Writing blogs?
- Write out a list of the top 5 things you HATE most in your business. Managing employees? Doing the books?
- Order your “BEST” list in terms of what gets you the biggest bang for your buck – the most business, saves you the most money, etc.
- Create a “Stop Doing List.” Take your HATE list and determine which of the items on it you can delegate and how much per hour you would have to pay someone to do those tasks.
Note of shame: When I did the exercise the first time myself, I was making less than $5/hour and would definitely have been better off working at the Golden Arches. Now? I make more than my lawyer, which is immensely satisfying, if-I-may-say-so-my-sassy-
- Start delegating the items that will cost you the LEAST amount to pass off but give you the biggest bang for the buck. HINT: The easiest things to delegate are simple, repetitive tasks.
- Commit to delegating at least 3 things on that list and determine how much time/week you will save.
- NOW, take the amount of time – 2 hours a week? 3? And substitute it with the 3 HIGHEST level activities you can possibly do.
Example: If you can delegate 2 hours of receipts and bookkeeping to someone for $20/hour of just data entry and you take that 2 hours and now use it to call/email/write your past clients, how much extra money could you make?
See the difference? Hint: Your new mission is to continuously sub out the lowest netting tasks on your list with your highest value activities that you love most.
By only focusing on what you LOVE to do and are REALLY good at you naturally make more money.
Check out the P.S. below…
xx - Marley
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