Strategy for Creatives: Business Minus the Bullshit

Are You Making These Pricing Mistakes?

July 26, 2022 Sasha - Business Strategist Season 1 Episode 37
Strategy for Creatives: Business Minus the Bullshit
Are You Making These Pricing Mistakes?
Show Notes Transcript

Pricing is often an uncomfortable subject for women in business, especially women who create businesses they are passionate about. When you pour your heart, soul, and time into building a business, attaching a price feels like an emotional decision. It's not.

Pricing has nothing to do with emotion and everything to do with business strategy. If you want to make an income from your business pricing is paramount. We need to separate your heart and your self-worth from the business you create. In this episode, I'm diving into pricing mistakes you may be making and what to do instead.

Episode Transcript

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Sasha:

Welcome to Strategy for Creatives: Business Minus the Bullshit. Whether you're new in business or find yourself in a season of change, get ready to build a strategy, create an action plan and crush those goals. I'm Sasha, host a strategy for creatives. And I help female led businesses grow their brands in authentic, measurable and meaningful ways, without the stress. There's no sugar coated here, I'm serving up real tips and actionable steps you can take to help get you organized, get off the path to burnout and grow your brand like a boss. So go ahead, pull up a chair, grab a notepad, and let's talk business. Welcome to Strategy for Creatives: Business Minus the Bullshit. I, of course, am your host Sasha. And today we are talking about pricing. It has been a while since I've talked about pricing, and I did a whole episode last year about how to price your worth. And so if you want to get more of a mindset about why you need to be pricing based on your worth, I encourage you to go back and listen to that episode. It is very early on in the podcast episodes. It was like one of my first five episodes, but it has really good information that is still relevant. But today I wanted to talk about pricing mistakes that you actually might be making for your business. And if you are making any of these mistakes, I want you to take a listen and kind of figure out why you might be trying to do these things and whether or not your pricing strategy needs to change. Now a lot of us when we're first starting out in business, we have actually no idea how we should be pricing anything of what we're doing. We tend to look at other people. We don't even ask questions, we have no idea who our target market is. And so it can be hard to figure out what we should be charging in our businesses. This is especially true if you are a handmade business. Normally, I talk a lot about service based businesses. But if you are creating products, and you are taking the time to make things with your hands or with tools, it can be hard to figure out what you should be charging. It's easy enough to figure out how much things cost. But how do we figure out how much we should be making on top of that? That challenge is even greater when it comes to service based businesses. Because for a lot of service based businesses, we don't have a lot of costs, there aren't a lot of things that we count as expenses. And so it can be hard trying to figure out what we should be charging, which is again, why I suggest that you need to go listen to the pricing your worth. Because a lot of times we aren't charging what we are worth, we're trying to cater more towards what we think people will spend. And that is actually one of the first mistakes that you might be making. When it comes to pricing in your business, you're assuming that your target market is price driven. Every time people say that they are afraid to raise their prices, because they don't think that their target is willing to pay more or they can't afford to pay more, they are making a determination about what they think their target markets willingness to buy is. Everyone assumes that most people are buying based on price. But that's not true. There are a lot of things that go into people's decision making when it comes to spending money, especially when it comes to spending a lot of money. And price is just one of those factors. People take into consideration what they are getting. What is the value for what they are spending? People take into consideration the time commitment, they take into consideration whether spending a certain amount of money is giving them something in return aka more time or less stress. And so there are a lot of steps that go into a buying decision. And price is only one factor of those. And so if you are constantly getting clients or customers that are complaining about your pricing, that are saying it's too expensive, or no one is going to pay that, then you've actually attracted the wrong type of people. Because there are people who will buy at any pricing level. It depends on how you are marketing for that pricing level. And so when you start hearing that people are complaining that you're too high, you might have to reevaluate what your marketing is instead and why people are assuming that. It's probably because you aren't communicating the value of what you're offering for the price that people are spending. A lot of times we also make the pricing mistake of trying to compete against the big guys, aka people who are ahead of us in business, or if you are a product seller, places like Amazon and Target. Those people will always have a very different target audience than you when it comes to trying to compete if you're in the handmade business or on the product based business. If you're trying to compete against places like Target and Amazon, they have the ability to market lower prices. It's because their items are mass produced, aka they have the ability to have quantity buys, they can purchase in the 1000s of quantity, which is going to bring down their pricing. You can't compete with that, if you're selling products as a homemade, handmade business. And so you don't want to try to compete with that. You want to focus your marketing on why your products cost more. What is it about them, that makes it so that they can cost more? Is it that you're using better materials to make your product? iI it because it takes you X amount of hours to make your product? is it because they're handmade and they're personalized? Things like that. That is how you compete, aka and I'm using quotes compete against the big guys, because in reality, we cannot compete with places like Amazon, and Target and Walmart and places like that. It's just not going to happen. So you have to figure out how you can market differently. When it comes to services and you're trying to compete against the bigger people and offering services, you have to remember that people are on different business journeys. And again, a lot of it falls into how you're communicating your pricing. And what your worth is, you shouldn't compare yourself to the top people in the industry who may look like they are, you know, booking two clients a year and yet making $200/$300,000. Because the reality is they have a whole team behind them that is handling a lot of what they are doing. And they have to pay a lot of people. And so you aren't at that level yet. And you might not be able to be at that level for a while. And so you want to be able to communicate how you are different from those people who are offering those types of things. Maybe your your service is more personalized. Maybe you have a higher touch point service. Maybe it's one on one and not group. You want to think about those things that differentiate your services against the big guys and not just make it about pricing. Another common mistake that people make when it comes to pricing is that they're asking the wrong people how much someone is willing to pay for something. Asking your friends and family is not how you determine pricing. Asking random strangers in a Facebook group is not how you determine pricing. Putting a poll up on Instagram is not how you determine pricing. When you ask that question, you are often going to get people answering who are not your target market who have no immediate need for what you are selling, and don't know anything about your brand. So you don't want to outsource your pricing, you do not want to pull everyone in anyone about what you should be charging for your pricing. Be let me make this very clear. Your pricing has very little to do with what people will spend. Because what you think people will spend what they tell you they will spend does not take into account what you are offering, you have to be able to show your value to back up your pricing. And not just ask people what they think you are worth, you are worth what you are worth point blank period you are worth what you are worth, you should charge what you should charge based on your expenses, your skill level, where you are at in your business, your price is your price. But you need to make sure that you're communicating the value in your pricing. And so don't pull people and ask the wrong people what they think that you should be charging, when really nine times out of 10 their opinion should have no bearing on what you should be Another common mistake that people make when it comes to pricing. pricing and this goes back again to my episode that I did about pricing your worth, is that you have tied your self-worth into what you are selling. You and what you are selling - your services and what you're selling and your self worth are very different things. Pricing is based on things like overhead costs, your expenses, the time that it takes for you to do something, the time that you put into clients, the skill that you have. And it has absolutely nothing to do with the value of your work and what you are as a person. A lot of people think that because if they're newer, or because they don't have the confidence in their business, or that they're competing with so many people that they have to charge lower prices just to get their name out there or just to start booking people, and it's coming from a place of insecurity in their business. They don't know whether they have the skill sets or whether they should have their own business. It makes them charge less. They don't have that confidence and they don't value their self-worth as a business owner in order to charge more. You need to break the ties that you have between your self-worth as a business owner and what you're selling and pushing in products and services. The two have absolutely nothing to do with each other. Another big pricing mistake that people are making is that they don't understand their business financials. I did, again, a whole episode on bookkeeping. And if you have no idea what money's coming in and what money is going out, you're going to struggle trying to figure out how much you should be charging. Don't avoid trying to understand the financial side of your business because you think it's complicated. Or because you have a bookkeeper or even accountant, you need to understand the basics of what money is coming in and out of your business. How much it costs to run your business, how much it costs to market your services, how much it costs, to get higher education or continued training. You need to understand the costs and the expenses of what it takes to run your business in order to accurately price yourself, your services and your products. That is especially important for things like what the current economy is doing. You've been hearing probably a lot of talks about things being more expensive, inflation is higher, there's threats of a looming recession, costs for business owners are of course, going up. If you had no understanding of your business financials, you might think that you should keep your prices where they are, or you might be raising your prices when you really don't need to because you haven't looked at what your financials are saying. Maybe you have a healthy enough profit margin where you don't need to raise your prices, and you can afford to keep your prices the same as what they are. Maybe it is time to have an increase in prices, because your costs for a certain product or service or something that you use in your business has gone up. And so therefore, you need to increase your pricing as well. And so you want to make sure that you have a good understanding of where you are in your business financials to figure out whether or not you are actually making a profit and what type of profit margin you need to be making. And lastly, and this is a big one that I see all of the time, is that you are allowing competitors to dictate your pricing. Yes, you should be aware of what others and your niche are charging. It's a good benchmark for comparing your pricing. But you don't have any clue into the aspects of what they're doing in their business. You have no idea what their business financials look like. You don't know what their team looks like. You don't know what their skill level looks like, what their education level looks like. You don't know the back end of their business. And so you don't want to base your pricing on what your competitors are doing. It is a terrible pricing strategy just because your competitor is charging $300 for an hour long photo session with 5000 digital images that they'll give you doesn't mean that needs to be what you are charging. What are you doing in that hour? Are you providing makeup? Are you doing hair? Are you having styling? Are you giving branding techniques? Like what is it going into that editing process? What do people get from your price? Are you offering less images, but at a higher quality? What are people getting? You want to be aware of your competitors pricing, but that should not be the basis for what you are charging. We have a tendency to place our competitors on a higher pedestal than then where they may actually be in their business. People can put on Instagram all the time that their program is sold out or that they've sold X amount of packages to people or they made X amount of dollars this month. But we don't know if that's actually true. People can have 10,000 followers and that little blue checkmark. But how many of those people are actually converting to sales? We don't know those things. And so following competitors, when it comes to pricing is not the strategy. It actually can hinder what you're trying to do in your business, if you're just trying to essentially keep up with the Joneses when it comes to pricing. So if you are making any of those pricing mistakes, I encourage you to take a look at where you might be faltering in your business. And to do this instead. Decide what you want your future plans to be. We talk about goal setting all the time. Figure out where you want your business to be, what you're trying to offer in your business. And then how does that pricing structure fit into that? How does your pricing strategy line up with your future plans, you want to make sure that you are keeping accurate costs of whatever your expenses are. Think of using something like wave apps or even pen and paper. Take all of those receipts, all of those invoices - write down every single expense that you have so that way you know exactly how much it costs to run your business and what your profit margin should look like. Figure out what your time investment is in your business. A lot of businesses, especially service-based businesses, it's all about how much time you are spending on something. When it comes to service-based businesses, you might actually of course get faster at doing certain things. That's why you'll see a lot of virtual assistants, they have set retainer prices as as opposed to hourly. And that's because you should be charging based on how quickly you can do things and how much time you are giving someone back versus how long it takes you to do something because that is going to decrease in time. And what might take you an hour today could take you 10 minutes tomorrow. That doesn't mean that you should get paid less, because you're actually working faster. So figure out what your time investment is in your services or if you're making products. And then of course, make goals and track your results. Set sales goals every month, see how close you are to reaching those goals. See if you're being profitable. And if you're able to pay yourself. Track your expenses. Having financial information like that will allow you to make better pricing decisions and come up with a pricing strategy that makes sense for your business. We all make mistakes when it comes to pricing in our business. We've all charged way too little for what we are offering. But the important thing when it comes to running your business is learning and growing and understanding that what you charge has several factors that should be considered in pricing, aka the dollar amount is only a small piece of it. It there's a lot of things that go into pricing strategy. And so making sure that you're communicating your value is just as important as letting people know how much you cost. Are you ready to uplevel your business? Join the five day be your own CEO challenge. All the details are available on the website at www.by-sasha.com. If you liked what you heard, make sure you rate and review. It really helps other people find the show. And of course, following subscribe on your favorite podcast platforms. Want to follow me on social? I'm on Instagram and Facebook at Strategy By Sasha. Make sure you tune in next Tuesday for more business tips. Part of the Boundless Audio Podcast Network