I guess nearly every women 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 know it’s a big issue because I get questions about it every week on my Facebook page www.facebook.com/thegirlsmeanbusiness so let me help. Let me share what I teach my clients about pricing so you can get a better feel for where to start and how to make a profit.
Pricing Starts With Knowing Your Costs
It’s the only place to start, because if you don’t know what it costs you to make a product or provide a service, how can you possibly know if you are covering your costs at all, let alone making a profit?
I know lots of women who really struggle with this side of things because they are scared of the numbers , so if you feel this way you’re definitely not alone. However, I’m not letting you off the hook. Time to put on your big girl knickers and get brave, face the numbers and get some clarity in your business
What Are The Costs In Your Business?
In my business my costs are heat/light, electricity, my equipment (computers/phones, tablets and microphone for podcasts), my support team (website lady, designer, business manager, virtual assistant), my coach and advertising, specifically Facebook advertising.
I don’t have premises, so no rent, rates or taxes to pay there.
Now look at YOUR business. What do you pay out every month or every year?
Some will be direct costs, meaning they are directly related to producing a product or service. These might be:
- Staff time
- Your time
- Travel / fuel
- An hourly venue rate if you hire premises by the hour
Other costs like
- vehicles …
and other things that you need to pay but that are not directly related to producing a product or delivering service still need factoring in. Speak to your accountant about how best to do this for your business but a simple way would be to work out roughly what this would cost you in a year (as best you can) then divide it by 12 so you know roughly how much per month you need to make before you have sold anything. These are your overheads.
Ok, you are doing brilliantly so far. It’s not so scary after all, and even if you don’t have exact figures an educated guess based on the information you have is much better than doing nothing.
Now you need to work out what it costs you to produce your product or service.
If it’s a handbag, you’ll have fabric, components such as the clasp, thread and your time.
If it’s an hour of coaching, you need to factor in your preparation time (there’s always some, even if it’s just revisiting the notes from the last session) and the time delivering the coaching/training plus travel time/costs.
How Do I Price My Time?
If you’re a maker/crafter/artist or you sell your time you’re going to have to put a price on it. Where do you start? Well a good place to start is by looking at jobs – if you were going to take a job what is the minimum hourly rate you would be comfortable with? £10 per hour? £20 per hour?
Whatever you’d accept, start pricing your time in YOUR business the same way. As you get more confidence you can increase your hourly rate but if you’ve been pricing bad
ly and not factoring it in up until you, this is a good place to start.
What often happens is that we do this and then get a HUGE shock because 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 we’ve been charging. And that sets off the mind monkeys in hour head who tell us no-one will ever pay that, who do we think we are?
The trouble is, if you’ve been under-pricing, which is usually the case then you’re kidding yourself. You’re not running a business; you’ve got an expensive hobby. That’s a wake-up call, if ever you needed one.
You Can’t Un-know It
Once you know what it really costs you to make or deliver your product or service, you can’t un-know it, which means you HAVE to put up your prices.
Now before you go and hide in the cupboard with a tub of Ben & Jerry’s, don’t despair. You’ve already made a huge leap by getting clear on your costs – loads of small business owners never get that far. Stop worrying that nobody will ever pay your new prices and start working on your Super Customer (there’s a BLOG here all about that – if this is all new to you, I suggest you pop over and read it now).
Why Am I Telling You All This?
Because YOU can do this in YOUR business. It’s not rocket science, it’s getting clear on who the best fit person is for your business, your Super Customer and then spending time getting inside her head and figuring out why she should care about you and how to get her attention.
If you’re struggling, brainstorm with a friend. Even better, ask a Super Customer.
Why Super Customers Are Important In Your Pricing
OK now you understand the concept of Super Customers, let me explain why they are so important in your pricing.
You know now that you have to price properly which means your prices will be higher than the hobbyists and the uninformed out there – rest assured they are losing money.
You also know who your Super Customer is. Now you need to work out why they will happily pay more for what you sell.
Let’s look at some examples:
When Chloe was a baby I spent a FORTUNE on prams, on all sorts of equipment (most of which I never used) on clothes – I always got the best I could afford, even when money was tight.
These days I don’t value that stuff at all. If you GAVE me a £1000 buggy I would have no use for it. I might give it away or sell it but I certainly wouldn’t keep it or value it because it’s not important to me now.
I have a 9 month old Jack Russell /Chihuahua cross puppy called Meg. Rather than buying cheap dog food, I always get really good quality dog food from places like Lily’s Kitchen. It’s NOT cheap, it’s blummin expensive but it’s important to me to get good quality because I’ve committed to looking after this little dog for life. I value her welfare. Where Meg is concerned, money isn’t really an issue. Before I had a dog, you could have given me £1000 worth of Lily’s Kitchen dogfood and I would not have valued it.
The things I value change over time, depending on my needs. When something is important to me, I spend as much as I can afford on it. Price is less of an issue than VALUE – how well it meets my needs.
Do you see? You just need to work out who VALUES you and price becomes a secondary issue.
When have YOU spent MORE on something (even when it was a real financial stretch) because it was IMPORTANT to you?
What do YOUR Super Customers value about your products / services and why?
- What will make them happily spend more with you?
- Is it your quality?
- Your service?
- What is it about what you sell that makes people come to you rather than other (possibly more convenient) suppliers?
I know I’m making you do lots of thinking but I promise it’s for the right reasons because when you know what it costs you to produce something AND you know you have people out there who will happily pay the right price (i.e. a price that easily covers your costs and gives you a profit) then it’s happy days.
How NOT To Price Your Products or Services
Have you ever wondered how your competitors price their products/services, especially if they are way lower than yours?
Well, what usually happens is they look around to see what everyone else is charging, then they figure out where they are in the pecking order (better than HER, not been around as long as HER) and they pitch their price somewhere in between, usually at the bottom end.
The trouble is, everyone they are looking to for pricing usually set THEIR prices the same way. So nobody has costed out their time, they are all running at a loss and the only way they can drive more business is to drop their prices AGAIN, making even more of a loss.
Do you see now why that is a bad idea?
If you price this way – by looking around and deciding where you fit in the pecking order, rather than looking at where you ADD VALUE – there is nothing that makes you stand out. People don’t look at your value, they are shopping around on price. When your only selling point is price, the only way you can compete with other businesses is to CUT your prices. And if you haven’t been costing properly, it won’t be long before you are PAYING customers to take your stock. Hmmm.
When you price your products or services like that, based on what everyone else is charging, you are not factoring in your ME factor. You’re not looking at your Super Customers. You’re not looking at value.
So, that’s a long answer to a short question but it’s important you understand this. Start pricing properly NOW, look at where you add value, look at why your Super Customers come to YOU, love you and value you (read my blog if you’re struggling) and before you know it your attitude to pricing will have turned on its head. You won’t care what others are charging, you will be able to charge a good price and make a good profit and your Super Customers will be happy as clams.
Try it, I think you’ll like it.
Love, Claire xx
Most mornings you’ll find me being dragged through wet grass by a small, noisy, hairy thing that occasionally stops to poop. It’s one of my favourite parts of the day!
I love it because it gives me time to chill after a (usually) frantic school morning. Meggy and I wait with Chloe at the bus stop, wave her off and then we head for the river.
This morning I was laughing at my crazy little puppy.
She LOVES the long grass so instead of sticking to the path, I always head for the ‘ruff’ off to the side (did you see what I did there?).
Meggy’s favourite thing is to run off to one side, chasing butterflies, birds, imaginary rabbits until she runs out of lead, then turn around and run and jump through the grass until she reaches her limit at the other side.
This goes on for an hour! She’s a happy puppy and travels about four times the distance I do, so she’s good and worn out by the time we get home.
This morning, watching her chasing through the grass, it reminded me of you!
Every week on my Facebook page, on Twitter and on my website I get questions from ladies who are struggling with their business. They tell me what they do and guess what? It’s not too much different from my puppy.
They Chase Any Opportunity, Willy Nilly
They chase around after opportunities, never really stopping to think if it’s a GOOD, RELEVANT opportunity that will help them build their business.
They aren’t picky, just like Meggy they get distracted by something flying by and they feel compelled to chase it.
Then they run of out steam, stop for a little while and then get distracted by something flying past in the opposite direction, so off they run again.
No wonder they are tired out!
[Tweet “Be picky about which opportunities to chase, or you’ll wind up exhausted and empty-handed!”]
They Have No Focus
Now I’m not sure Meggy would know what to do with a bird or a butterfly if she caught it but rest assured, she never will.
She has no focus.
She wouldn’t spend time trying to catch any one thing, she just runs after the latest thing to catch her attention.
Does this sound familiar?
How often have you sat down to get something done and been distracted by social media, texts, emails, a neighbour, in fact anything that is going on around you when what you NEED to do is focus on one thing and get it finished.
[Tweet “Distractions will wreck your business – you can’t build a business if you never finish anything”]
They Go The Long Way Round
I told you that Meggy probably walks 4 times as far as me, by the time she’s run backwards and forwards and out to the side, criss-crossing my path 100 times at least during the walk.
Talk about the long way round!
How many times have you gone the long way round in your business?
How many times have you had to re-learn something because you didn’t write it down the first time?
How often have you redone something several times because you didn’t plan it out before you started?
How much time have you wasted overthinking when you just need a clear vision and targets, and it would be obvious what you need to do?
[Tweet “Are you going the long way round in your business? Time to get clear on your goals!”]
So, my puppy and your business might have more in common than you think.
In Meggy’s case it’s a great thing that she tires herself out during our morning walk but for you, not so good!
You need to put your energy and attention into the thing that will make a difference in your business – the things that will take your business forward.
You don’t have surplus resources to waste chasing after ill-thought-through opportunities, being sidetracked by distractions or taking the long way round.
My challenge to you today is to learn from my puppy and do the OPPOSITE – leave the puppy approach to marketing to others who don’t know better!
If you loved this blog, I’d love to hear from you. Are YOU guilty of the puppy approach? Do you see other people doing it? Share your thoughts in the comments.
Love, Claire xx
Hands up if you have more than enough time for marketing! If you do, then you’re one of the fortunate ones because most small business owners I speak to seem to be desperately trying to find time but failing. In fact, time– or rather, a lack of it – seems to be the single biggest thing that we women business owners stress about!
There is so much that I could write on being productive, on being focused, on being a super-admin ninja but actually, in real life, it’s not like that. Life is happening and we have to build our business around it.
For some of us, it’s down to having kids.
School runs, after school clubs, weekend activities, not that we begrudge them, it’s just really tricky to get a good stretch of uninterrupted time to work on the business. And then there are sick days, school holidays, inset days, aaaaaaaaaagh – no wonder the time seems to flow through our fingers like water.
For some of us, building a business is something we’re doing around holding down a job.
The dream is to ditch that job and earn enough from our business to not have to work for someone else, but in the meantime we spend every spare minute (and they are a rare thing) getting stuck into the business, doing what we can with our meagre work time.
And there are so many variations on the above – there are women out there doing both of the above at the same time, lots of them! There are women who are battling chronic and serious illnesses while building a business, using their ‘not feeling too crappy’ moments to do their best to make their business dream a reality.
Time is a precious, precious resource.
So how on earth, with all of these challenges, can we make the most of our precious time and make every spare second count towards building our business?
Well, first of all, you need to get really clear on what success looks like. Sounds easy? Have you done it, yet? What IS your version of success? What are you aiming for? When will you know you’ve made it?
Because, if you don’t know what success looks like, how will you know if you’re heading in the right direction? I’m asking this because one of the best ways to waste time is to paddle around in circles, not knowing where you’re headed.
So if you’re struggling to answer that question (and I’ll bet you’re not the only one) then now would be a really good time to get clear on it.
You can’t afford to waste time on directionless busy-ness – you need to be really clear on what you’re aiming for – what you want to achieve, by when, how much money, how many sales, how many customers. What’s your goal? What does your ideal work life and work day look like? Who do you want to work with? Who would you love to sell to? Who is your perfect customer?
Knowing what success looks like, having clear goals and targets, these are a great way to unlock precious time and free up energy to spend on your business.
Instead of thinking ‘oh, I must get my website done’ or ‘oh, I must write these blogs and e-newsletters’, give yourself a break! You’re already doing a great Wonderwoman impression but you’re not a magician. Think about what you CAN achieve in your slivers of time. Can you plan out a few Facebook posts? Can you scope out a press release? Can you draft out a flier or poster? Little steps. Baby steps. Add them together and big things get done. Break things down into tiny steps that you can do in 10 minute chunks, and tick them off your list. This will stop you feeling totally overwhelmed and incapable of action and you’ll get tons done, without even realising.
Be kind to yourself. Realise that you’re going to go slower than other people you might be watching. Know that you’ve got a life to lead, a family to care for, responsibilities and pulls on your time. Stop comparing yourself to others. Run your own race, as slow as you like.
The thing is, all the time you’re comparing yourself to others or feeling so overwhelmed that you’re paralysed into inaction, you’re not getting anything done.
All the time you’re beating yourself up for not achieving more, quicker, you’re not getting anything done.
Why not be kind to yourself and give yourself a pat on the back? You’re an entrepreneur. You’re doing the best you can to build your business around your busy life. You’re not going to be as fast as others, but they aren’t living your life. And however slowly you feel you’re going, there will be other women like you who are going even slower, because they’re doing their own thing at their own pace.
I know you want this to happen. I know you’re ambitious and you want freedom and choice and money. I know you want to feel like you’ve achieved this for you and for all the doubters. And you will. You can and you will. But you have to be realistic.
Slow and steady wins the race every time. Ten minutes a day spent on your business is better than a thousand minutes wasted on pointless worrying and comparison.
So, how to get over the ‘I Don’t Have Time’ dilemma?
Stop telling yourself you don’t have time, or you’ll start to believe it and it’s not true. You do have time. You have 10 minutes or 30 minutes a day. You can find them, if it’s important enough.
- Your job is to make every minute you spend on your business count.
- So get clear on what success looks like, so you know what you’re aiming for.
- Break down your big tasks into tiny chunks and tackle them bit by bit.
And be realistic about what you can achieve, by when rather than wasting time and energy regretting the fact that you’re not as quick as you’d like to be.
If you can crack these three, the rest will be easy!
OK brace yourself.
The marketing you do today will pay off in 3-6 months.
I know this probably isn’t what you wanted to hear but marketing rarely works immediately.
It can take 3-6 months for marketing to properly give results, and that’s if you’re marketing little and often.
Once Is Not Enough
Once is just not enough and yet many of us try a blog post, or an e-newsletter or a Facebook post and get disappointed and disillusioned when it doesn’t work. Some of us even give up when it doesn’t produce a flurry of enquiries straight away. Which is just silly.
The fact is that you’ve not even scratched the surface. You’ve not even done enough for someone to take notice of you – you’ve not put the work in.
One e-newsletter, one blog post, one campaign is never enough. It’s a flash in the pan. It will get missed by almost everyone. It will zoom down a Facebook timeline before you can say Jack Robinson. It will be gone in the blink of an eye on a Twitter feed. Once is hardly worth the effort, when it comes to marketing. Once doesn’t even constitute a test!
Put yourself in your potential customers’ shoes….
Would you buy from somebody you’d heard from once? From someone whose ad you saw once but then never saw again? Would you even remember who had posted it?
You’d forget about them or assume they’d gone bust!
A website with one blog, posted 2 years ago looks neglected. A Facebook page with one or two random posts over the last few weeks just doesn’t do it – you’re not fooling anyone! Anyone checking out your business will see mixed messages, inconsistent marketing activity and will probably wonder if you’re just playing at this business.
It’s happened to me loads of times.
I’ll be searching for a product on the internet and find a website that looks promising, at face value. When I take a look around I see that they last blogged in 2011, their news page hasn’t been updated EVER, the links to their social media channel (if they even work) take me to the equivalent of social media tumbleweed with sadly neglected Facebook and Twitter feeds. I don’t bother looking any further. If this is how they treat their main sales channels then how do they treat their customers? I assume that they don’t care.
Now that may or may not be true, but PERCEPTION IS EVERYTHING. That’s how it came across to me and you’re not there to put across your side of the story.
10 Minutes Every Day
And 10 minutes day or an hour a week of marketing could make all the difference.
You could do LOADS in 10 minutes a day. That’s enough time to write a week’s worth of social media posts. It’s enough to schedule those posts. It’s enough time to reply to tweets. It’s enough time to do a quick update on your website. It’s enough to scope out your monthly e-newsletter. And everyone can find 10 minutes a day – I don’t care how busy you are. If it’s important enough to you, you’ll find 10 minutes.
So Why Does It Take 3-6 Months?
Well, people need to see your messages more than once – they just do!
It takes time for relationships to build. It takes time for your messages to filter through all the noise.
It takes time for someone to see if you’re a good fit for them.
People are BUSY – and it takes time for you to capture their attention for long enough to do something about it.
And remember that your urgency is not their urgency.
If you keep marketing and talking to them and building relationships with your ideal customers, they will know where to come when they need you.
When they are ready to buy, they will buy – from YOU
But only if you’ve been marketing to them consistently and persistently.
So, get marketing today, to the right people, and in 3-6 months your business will truly see the benefit.
Do you agree?
(Feel free to share)