The Art and Science of Charging What You're Worth
Episode 016: Show Notes
Today we are talking all about pricing, numbers, and figuring out what the heck to charge for the services that you offer and the products that you sell. We take on the topic with intense passion, so hold onto your socks, because you will hear exactly how we feel as the episode goes on. We get asked what to charge and what others would be willing to pay for it so often, and it’s an important issue to us!
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We know a lot of you are floundering about with this whole pricing game. Do not fret — personally, this is the topic that brought Abagail and me together. It is one that we were both equally passionate about. We wanted to be able to illustrate a different side of pricing to creative entrepreneurs. You just have to get started. So buckle up as we dive into some of that strategy today and mindset that goes with it!
Knowing Where To Start With Pricing
The first step is to just pick a number. Now, this may feel like you are just picking a number out of thin air, which you are, but that is okay. If you just need to get started, you have to pick a number — no judgement! Focus on adding value rather than second guessing every dollar or cent. Stop stressing about how to get started, what the psychology behind it is, or which will convert higher. Just set a number and run with it.
Instead, focus on surprising and delighting people. Think about what you are giving to your clients so that you completely convince them to go all-in on your business. It is the extra effort and added value that will make a world of difference.
Creating Something That is Simplified
So how can you start creating something that makes sense to people, but does not complicate things? A lot of people, when they first start out, tend to want to have a million options for their clients to choose from, because they think a display of options says “luxury”, when what it really says “mass confusion”. The more you can simplify, the better. If you are in services, less is definitely more. Specializing in a niche area or specific market sector can be much more effective than trying to do it all. Become excellent at one thing first, and really making it incredibly valuable so you avoid simply being a “Jack of all trades”, so to speak.
Doing the Math and Crunching the Numbers
When it comes down to it, you have to do the actual math. Work backwards to find out exactly how much you need to keep your doors open, and how many sales you need to make for the numbers to add up. It can feel totally complicated, but get someone in your corner that is willing to sit down with you and go through and crunch the numbers. This is where things get really crucial, because not only are you figuring out your livelihood, but you’re figuring out your value and your monetary worth. Once you have done the math, you put an element of certainty into your business and it is up to you to carry it out.
Pricing Products by Factoring in Costs
The first step to pricing a product is to gather absolutely every receipt and everything that you have invested into your product. Your product must be priced higher than what it costs to make, and this includes any “off to the side”, last minute expenses that you maybe have added in. Everything adds up, so it absolutely has to be accounted for. Do the nitty-gritty math so you know exactly how much something costs to simply get it out the door. We have seen so many cases where creatives forget to add each little cost and end up under-charging for their products. Then, even though their sales are higher than ever, they make no money off of their hard work. This absolutely makes our hearts sink!
The Ease of Adding Digital Products
Regardless of whether you are already selling physical products or offering one-to-one services, you can always add digital products to your business. These are great add-on products when someone is checking out. They might see this handy digital calendar, or digital notecard, or quotable print that they can print off on their computer so they can have it in their own office. Anything super fun that you can make and sell over and over again makes for the perfect digital product. Streamline the process and make it easy on yourself. Make it a part of your overall system so that there is no extra work needed.
Using Third Party Companies to Streamline Product Orders
When you start looking at your systems to see what you can make cheaper or faster, a great option can be looking to third party sites to fulfill your product orders. A lot of times, business owners, especially creative entrepreneurs, just do not have the storage space to keep all of the hundreds of mugs and notepads that they want to sell. By using these third party sites, you are selling the products on your end, but the third party company steps in to take care of all the packaging and shipping on their end, so that you do not have to do all of that work. Make sure to always factor these extra costs into your price so that, again, you are not losing out on your profits.
You Are Not Your Ideal Client
Oftentimes we doubt our own pricing because we feel like we would not even pay that amount for our own products. Newsflash! You do NOT have to be your ideal client. The things that you are providing and creating for your clients may not be things that you desire, because you already know how to create them. However, your customers desperately want what you are selling because it is not part of their skillset like it is yours. So, when you are doubting your pricing, keep your customers front of mind, and know that you may not be one of them!
Quote This
Are your offerings, services, or products Chipotle simple, or are they Cheesecake Factory crazy?
Highlights
Learn how to start with pricing, and why picking a number is the best step to just get you started. [0:01:37.3]
Find out why creating something that is simplified can be much more effective than having a long list of offerings. [0:06:30.2]
Understand why it is critical to do the math and crunch the numbers to find out the exact worth of the value you provide. [0:09:11.8]
Discover why incorrectly accounting for costs is the reason why most products are not profitable. [0:13:13.8]
Learn about the ease of adding digital products, and how there are so many advantages with much less cost. [0:20:38.8]
Understand how to use third party companies to streamline product orders and reduce the work on your end. [0:24:09.4]
You may not be your ideal client. Learn how to keep your actual customers front of mind when doubting your pricing. [0:28:06.7]
#TalkStrategyToMe [0:44:30.3]
Have a gut check about yourself
Think about ways that you can automate or make your life a little bit easier in the midst of all the chaos.
ON TODAY’S SHOW
Abagail & Emylee
The Strategy Hour Podcast
We help overwhelmed and creative entrepreneurs break down their Oprah-sized dreams to create a functioning command center to tame the chaos of their business. Basically, we think you’re totally bomb diggity, we’re about to uplevel the shiz out of your business.
KEY TOPICS
Picking a number to start your pricing strategy, Niching down and simplifying your offerings, Doing the math for your business, Pricing correctly to account for costs, Adding a digital product line, Using third party shipping and packaging, Knowing that your ideal client may not be you
