If you spend any time in the world of entrepreneurship, you will very quickly realize that pricing is not only a super-hot, and often controversial topic, but also the bane of our existence. Most of us struggle with it and often end up paralyzed when it comes to setting prices or raising our prices.
I am really excited to jump into today’s content – I really do believe this is a huge issue for tons of entrepreneurs and more specifically female entrepreneurs as we tend to have more hang ups and limiting beliefs about money. Before we get into it though I just wanted to take a quick second to ask that if you haven’t already, you could hit pause and leave a quick review? It makes a huge difference in the ranking of the Updraft Podcast on Itunes, Spotify, or wherever you are listening and obviously those rankings help me out in a big way as well as helping other’s find the podcast as well. Thanks so much to everyone who has already left one – I have been reading every single review, and I am super grateful for the positive words and encouragement. It really does motivate me to keep creating the best content that I can.
Over the course of my business I have tried out many different pricing models and different price points. I have done packages, a la carte, only offered physical prints and products, offered digital files. I have literally worked for free, and I have had sessions that were paid out in the thousands. I’m going to be 100% honest and say that I STILL hate doing my pricing and I STILL get nervous every time they go up – which if we are still being honest just isn’t often enough.
Most of us have self-doubt in that department, or money hang ups that hold us back. We either convince ourselves that people won’t pay what we need to charge in order to make a living, we worry that people will view us as greedy (women are especially guilty of this one) or we feel we are taking advantage of someone by charging a decent wage. This often results in businesses failing, or the entrepreneur working for less than minimum wage but telling themselves that “its ok, because I get to do what I love!” Newsflash – that’s not an either or, you can actually have BOTH. You can make a good living AND do what you love. Or you can do what you love as a hobby and have a job that pays the bills. Doing what you love for less than you need to earn to be comfortable and live the life you want is a sure fire way to end up hating what you do. Don’t go down that road.
The starving artist thing is cute for all of about 2.3 seconds and then we realize that we have bills to pay, food to buy and life is honestly just no fun when we are stressed about where the next dollar is going to come from.
The first and most important step to figuring out what to charge is to look at your own cost of doing business, not at the other businesses around you, and make sure you understand ALL of costs involved. This means accounting for all of your time – not just the time spent dealing directly with the client, or creating the product, but also accounting for the time spent on client communication, dealing with training staff, creating advertising, building social media accounts, setting up/cleaning/preparing, and every other little moments that add up to hours over the course of a week. It also includes taking into account all of the little costs like web hosting, paying for products, office supplies, phone bills, monthly subscriptions for social media management software, CRMS, gas, insurance – there are so many little things that need to be accounted for in order to fully and completely understand the costs associated with your business.
Once you have a full and complete understanding of how much of your time is required – either by week or per client depending on your own business structure, and a full understanding of ALL of the costs involved in keeping your business running, then you need to take a look at how much money you need to earn each week or month, or transaction to make it worthwhile. This is where that “it’s always worthwhile because I am helping others” or “I don’t need money for it to be worth my time – I just love what I do” comes in. That’s cool. But how many people can you help when you are broke and end up having to take on another job to feed yourself which then ends up taking away from the amount of time that you get to do the thing you love? So let’s just set that limiting mindset down and keep going. How much money do you need to make in order to live comfortably, with the lifestyle you want? Once you have that number then you can break it down into an hourly wage. Decide how many hours per week you want or are willing to work, or how many jobs per month you want to take and then divide that into the number you determined as your desired monthly income. Now we know how much you need to make per job, or per hour.
Going through these steps will make pricing exponentially easier. You now know how much money you need to keep your business running each month, how much you need to make in order to live comfortably and how much that equates to as far as an hourly rate. So when you start trying to set your prices for appointments or for a product you are selling you can break it down easily. If you need to make $50 per hour and you do hourly coaching appointments then that is pretty straightforward – just charge $50.
If you are a photographer like me then it is slightly more complicated but still doable. I created a spreadsheet for myself where I can input my hourly rate, all of the costs for that session – the set, editing, the prints, the advertising, etc., as well as all of the hours that it would require to complete that session from first contact with the client right up to delivery of products and it spits out the cost required for me. For tasks like social media management and web design that are not client specific I would take the total amount of time required per month, divided by the number of sessions I plan to do each month and then tack that into the individual session time to make sure it is accounted for. Doing it this way takes any guess work and guilt out of the process – because numbers don’t lie. It is 100% a numbers game.
Now the most common thing that I see new businesses doing is look at what other businesses are doing and then copy them. To some degree, and in some businesses this is relevant, but in a lot of cases that equates to the blind leading the blind. Sally saw that Pam was charging $25 for her cakes, so she said “cool I will charge $25 for my cakes too, so I am competitive with the local competition”. Except Sally didn’t realize that Pam hasn’t got a clue either, and didn’t realize that it actually costs her more than $25 to MAKE the cake, and her business isn’t at all profitable. So now after a year Sally and Pam are BOTH out of business, and they have left a wake of confused clients behind who are wondering why super successful Jenn up the road charges so much when Sally and Pam were both doing it for half the price. Or maybe Sally sees that Pam is charging only $25 for her cakes and tries to match it not taking into consideration that Pam doesn’t have to pay for daycare because her sister watches the kids and she gets all of her eggs, butter, flour and milk from the grocery store at cost because her Dad owns it. So for her, $25 IS profitable, but for Sally who doesn’t have the same connections she is going to be losing money and wondering why she can’t make ends meet.
Being competitive in your market does matter, but being profitable and staying in business matters more and there are other ways to be competitive. Maybe you can’t compete on price so instead you compete on quality. Personality. Over the top customer service. Creativity. There are so many ways to add value instead of only focusing on competing on price. And you may lose clients to Pam down the street who charges way less, but that is OK. There are different clients for different businesses. Stay in your lane, focus on what makes YOUR business special and stand out and then be 100% confident in it.
And I can hear people already saying “how can I be 100% confident in my prices and what I am offering when someone down the street is offering it for less”. You are going to be confident because you are going to focus on, and learn to understand what you offer that they don’t. Not everyone is focused solely on price. There are lots of people that don’t want cheap. In fact many people won’t buy a good product BECAUSE it seems too cheap or easy. It sets their BS meter off. Have you ever heard about what happened when instant cake mix was first put on the market? No one would buy it. They felt like it was too easy, too lazy, low quality or a scam. Guess what the companies did to make it sell? They made it so you had to add water and eggs. THEY MADE IT HARDER GUYS. Look at cake mix now… it’s everywhere. (And now I want cake) My point is that different people want different things, and lots of people value quality over things being super easy or cheap. So if you have someone in your area that is targeting low budgets then your solution may actually be to go high end, charge more and offer an amazing experience or luxury product.
Another thing to consider is how can you bring costs down or simplify your process so that you can be more competitive while still staying profitable. Often times we feel the need to have something for everyone and to offer a huge variety or products or services tailored to each and every potential client. This actually tends to alienate more people than it attracts in most cases. It causes paralysis. The client gets overwhelmed by choice, can’t figure out what works best and then inevitably gives up leaving with nothing or clicking away to a different site. If they do end up making a purchase they may be more likely to suffer buyer’s remorse, thinking about the other options that they didn’t choose. It also makes your life harder because it makes it so much more challenging to put effective systems in place or because you have a higher overhead in order to provide all of those options and choices. Consider streamlining your offerings to make it easier on both yourself and the customer.
I have seen super successful photographers that only offer 1 package. This is the price, this is what everyone pays and this is what you get. There is no second guessing, no hemming and hawing, it is just a super easy and streamlined process. I personally offer a little bit more choice and after trying out TONS of different pricing models from all-inclusive where the session fee covers both the session and all of the digital files that were created, to an IPS (in person sales) model where their fee only covers my time and talent as a photographer and then they choose products to buy after they view the images, I have found that my favourite model is to offer 3 packages to choose from. The dream package, the package I want them to choose, and the cheaper package. Every single one is profitable. If they book the lowest package that is totally fine – and honestly they often end up upgrading later. It helps to bring in clients who are unfamiliar with me and my brand, or who aren’t comfortable committing to a bigger purchase right out of the gate. The Dream package is larger, offering the client everything but the kitchen sink, and giving you a great sale as a result. These two bookend the middle package which is where you anticipate the bulk of your clients to fall. The “cheap” package makes it look more luxurious while the Dream package above it makes it feel more reasonable. This set up makes the client feel more confident in their choice, knowing exactly where they stand.
That is what works for me, and it took me quite a while to settle on where I felt comfortable, and what my clients reacted well to – but everyone is different. You need to look at your own business model and see what works for you, and all importantly what works for your ideal client. Not every random person on the street, but your specific, targeted client. Some people are amazing at sales, and only want to take on a few high ticket clients. Their ideal client is someone who values service and luxury, and is willing to spend money on that. This sales person also believes strongly in the value of the service or product, understands luxury and can easily sell that confidence to their clients.
Other people prefer a higher volume business – taking on lots and lots of clients, creating a buzz in the community where they are getting tons of referrals and doing a much quicker turn around with less face time, and less frills. They are both fine as long as they are profitable. There is room for both in the market as there is a huge variety of clients to go around. There are people who would never spend more than a set amount for a set product or service – no matter how fancy, luxurious or amazing it may be. It just isn’t what they value spending their money on. There are also people who won’t hire you or buy your products BECAUSE it is cheap and that person feels more confident investing in high end products. I may take a bit of heat for suggesting that there is room for both, especially in the photography community where this is a super-hot button topic, but my biggest concern is that you are profitable and the reality is that that looks different for everyone based on their own specific circumstances. What is the point is having a $5000 price point if you don’t have the sales skills, passion or belief in your services or product required to make sales? Especially if you could make lots of sales at the $500 mark and that would still allow you to generate a great profit!? And if you DO have the sales skills, passion and value your service or product enough to sell it successfully for $5000 then why on earth wouldn’t you!? The important part is recognizing which camp you are in, making sure that you are profitable and then striving to get better and better so that you can increase that profitability and life style over time.
If absolutely everyone you talk to books you or purchases from you, there is a good chance you are priced too low. If no one is booking and you are panicking because there is zero income coming in then that is a good indicator that you are targeting the wrong people, you aren’t confident in your offerings or the price is out of line with the quality of the product or service that you are offering – in which case you need to take a good look at all of the variables and make some adjustments. When someone calls to inquire about your services or products and you hear “What?! Why so much?!” or “Well Pam down the street only charges XYZ” don’t let it stress you. If you are priced well there is a very high probability that this WILL happen, and chances are that person just needs to be educated on the value of what you offer OR they are NOT your ideal client. And that is ok. Who knows, maybe when Pam down the street closes up shop because she wasn’t profitable then that client will come back to you and hire you after all, or maybe they will find the next “Pam” because there is always someone knew and experienced popping up and happy to undercut the market. That’s just part of doing business. Not everyone is the right client for you and you are not right for everyone. Even the big companies like McDonalds, Walmart, or Coke don’t win everyone, and chances are your market is far more niche than theirs. Stick to what works for YOU and by that I mean what provides you with an income and keeps you profitable NOT what keeps you busy and makes you feel like you are slaying it while staying ignorant to your numbers. Be in it for the long haul, know your ideal client, how to target them and how to keep them happy and your business will continue to grow.
Remember to revisit your prices and profitability often. You can hire a book keeper or accountant to keep you informed and on the right path or if you are just starting out and are comfortable with numbers you can tackle it yourself. The key here is to make sure you are consistently aware of how profitable you are and keep making adjustments to your pricing, overhead, and offerings accordingly. Make sure you know which options are the most profitable, and notice when a certain product or service is dragging the bottom line down. Be sure to account for taxes, so that you aren’t having a great year, increasing your lifestyle and getting slammed with a tax bill that you don’t actually have the money to pay for at the end of the year. Been there, did that, it SUCKS. Be sure to be reevaluating often enough that you are aware and can make adjustments when the ingredients required, programs used, or other overhead items increase – because that will mean you need to find another source or increase as well to ensure that you are still profitable. In this arena knowledge is DEFINITELY power and will help provide you with the confidence to charge what you are worth and stand behind those prices.
If you want to chat more about pricing, creating packages that work or anything else Updraft related come join us in the Updraft Insiders group on Facebook. It is growing day by day and there is an amazing community of women developing who are all committed to help each other rise. Just search Facebook for Updraft Insiders and you will find us!