One of the hardest things to figure out when I started running my own business was pricing. In the beginning, I had no clue what to charge my clients, literally. Didn't have the slightest idea. Is that too much? How much is not nearly enough? How the hell do I figure this out? Hmm...good questions, your guess is as good as mine! Maybe I should ask some friends what they'd be willing to pay. So that's kinda what I did, along with some party planning espionage of sorts to see what my counterparts were charging. I convinced (OK, coerced) a friend to pretend she was having an event in order to get a few bids.
Not surprisingly, I balked at the prices I saw and decided I could do much better. I wasn't going to start overpricing right out of the gate. Who does that?!! Little did I know, my competitors weren't really as arrogant or as ignorant as I thought they were. Trouble was, it took me a long-ass while to figure that out. Too long!
Retail Therapy Might Be Therapeutic, But It Sure Ain't Helpful!
Looking at some of my past blogs, I came across one where I talk about pricing. I was painfully reminded of my Neiman Marcus addiction and how I used shopping therapy to celebrate/console myself/anticipate any number of work-related successes or failures. I mean, I deserved some shopping fun if I'd just booked a great new client. And if I'd had a crappy day, a new dress or a fab pair of shoes can go a long way to making just about anyone feel better, right? (Louboutins were my version of "comfort shoes" in this situation.) That is, until the bill arrives, but whatever... details, details. I thought that if I was going to book high-end events, I needed to look the part, plus I deserved to treat myself.
I continued with this strategy of wardrobe-building, money spending for longer than I should have. Every once in a while, I'd wonder why my bank account didn't have as many zeroes as I'd like, and then I'd put that thought out of mind as I trotted off to Neiman's, again, because hey who doesn't want a new pair of shoes? Finally, eventually, I wised up and stopped with that nonsense. I realized I couldn't keep spending money at the same rate, especially when I probably wasn't bringing in enough money to begin with. Why was that? I was super busy all the time, which meant my not working hard enough was not the problem. My income was the problem — or lack of it. So I decided to fix it. Here's how I did that... and you can too.
How I Fixed My Pricing Strategy!
- Determine all the different ways your company earns revenue: one-off projects, consulting, packages, events, product sales, etc.
- Identify what percentage of your business comes from each of those segments (Hint: I talk a LOT about this in my book.)
- Calculate your profit for each revenue stream. (Don't forget to include ALL costs, including your time.)
- Put the revenue streams in order according to profitability, starting with the most profitable.
- Pro Tip! Now, order the streams by which are the most profitable AND take you the absolute least time to do. That’s the trick!
- Market your business accordingly with this new-found info!
When you know the true cost of a project or product — after you've factored in your time, all ancillary costs, and your desired profit margin — you're in a much better position to set pricing that will result in profits for you. Then (and only then), you can do a little shopping therapy at Neiman Marcus if you want.
Be Oh So Quotable This Week!
Oh hey, are you in desperate need of simple and easy steps to attract clients you love, create a pricing strategy and ditch the door knockers? Then you've come to the right place! Get it here for FREE!
I always say running a business means the work never ends! Ain't that the truth? I bet your to-do list is a mile long! Make sure that the items at the top of your list are the things that relate to being more profitable. Everyone is so proud of being so "busy"...But Are You Making Any Money? Don't be too busy to focus!
Check out the summary of last week's business tips and motivational quotes from my Instagram page which you hopefully got to see in real time! If not, let's make sure we're following each other on Instagram!! So...here is this week's roundup of Instagram images of My Top Business Tips and Motivational Quotes.
Pricing – Tip #1:
"The moment you make a mistake in pricing, you're eating into your reputation or your profits." – Katharine Paine
Pricing – Tip #2:
"Pricing is actually pretty simple... Customers will not pay literally a penny more than the true value of the product." – Ron Johnson
Pricing – Tip #3:
"Pricing is branding." – Richie Norton
Pricing – Tip #4:
"The market is like Goldilocks. It decides if your price is too hot, too cold, or just right." – Peter F. Porcelli Jr.
Pricing – Tip #5:
"Do not compromise on the quality and your customers will not negotiate on the price." – Amit Kalantri
Let's talk! I'd love to hear about your pricing wins & fails!
Do you have any tips to share for setting pricing that works? I would LOVE to hear from you! Anyhoo...I publish these business tips and motivational quotes to get you fired up for your work week!
Oh by the way, in case you're looking for something to help with time management, we've got this fun little quiz to test your productivity. Are you a Vodka & Red Bull? A Dirty Dirty? Or a plucky Blue Sapphire? Find out which cocktail you are by taking our quiz right now!
P.S. Of course that's not all we've got! Searching for more tips about running a business?
Then definitely take a look at these:
I'd love to hear your ideas! So please comment below and then SHARE!
Disclosure: The Party Goddess! is a participant in the Amazon Services LLC Associates Program. This post contains affiliate links, which means I may receive a small commission, at no cost to you, if you make a purchase through an amazon.com link. However, these are all products I highly recommend and support!