I guess nearly every woman in business has asked this question at some point – how do you decide what to charge when you don’t know where to start?
I get questions about pricing every single week, so let me share what I teach my clients.
Start With Knowing Your Costs
It’s the only place to start. If you don’t know what it costs you to make a product or provide a service, how can you possibly know if you’re covering your costs, let alone making a profit?
I know lots of women struggle with this because they’re scared of the numbers. If that’s you, you’re not alone – but I’m not letting you off the hook. Time to put on your big girl knickers and face the figures. Grab a spreadsheet in Google Sheets or use an app like Xero to track everything.
Look at your direct costs (stock, ingredients, components, your time, travel) and your overheads (marketing, rent, broadband, utilities, phones). Work out roughly what your overheads cost per month. Even an educated guess is much better than doing nothing.
How Do I Price My Time?
If you sell your time, you need to put a price on it. A good starting point: if you were going to take a job, what’s the minimum hourly rate you’d be comfortable with? £10? £20? £30?
Start pricing your time in YOUR business the same way. As you get more confident, you can increase your rate.
What often happens is that when we price our products properly with a decent hourly rate, the price they OUGHT to be nearly makes us fall off our chair. It’s way higher than what we’ve been charging. Cue the mind monkeys telling us no-one will ever pay that.
But here’s the truth: if you’ve been underpricing, you’re not running a business – you’ve got an expensive hobby. That’s a wake-up call if ever you needed one.
Focus On Value, Not Price
Once you know your costs, you can’t un-know them. Which means you HAVE to put your prices up.
Before you panic, think about this: when something is important to us, we spend as much as we can afford. Price becomes secondary to VALUE – how well it meets our needs.
Your job is to work out who VALUES you. Ask yourself:
- What do your best customers value about what you do?
- Why do they come to you rather than cheaper alternatives?
- Is it your quality? Your service? Your expertise?
How NOT To Price Your Products
The worst way to set prices? Look at what everyone else charges and pitch yourself somewhere in between, usually at the bottom end.
The trouble is, everyone you’re looking at probably set THEIR prices the same way. So nobody has properly costed anything, they’re all running at a loss, and the only way they can compete is to drop prices AGAIN.
When your only selling point is price, the only way to compete is to CUT your prices. That’s a race to the bottom – and nobody wins.
Instead, focus on your value. Focus on your ideal customers. Price properly, make a profit, and attract the people who appreciate what you do.
Try it. I think you’ll like it.