Pricing

Your pricing is not something you have to get right from the beginning. It's an ever-evolving process, and loads of psychological junk comes with it and needs to be dealt with. This is where all your self-worth issues and misunderstandings about business raise their ugly heads, so let's start confronting some of that.

The majority of new entrepreneurs undercharge. Some of them think they have to undercut the competition in order to get a foot hold. I suggest you take yourself out of the bargain bin and compete on either the value you deliver, or focus on your USP. (Unique Selling Proposition. Be you, be the special little snowflake that your biz is.)

Many people base worth of something on the cost. Cheap prices equals cheap product or service in their mind. "You get what you pay for." I don't think any of us want to be known for being the cheapest source. Let's be known for our quality, our attention to detail, our caring, our personal touches, or the results we get.

Some entrepreneurs fail to realize the cost of doing business. This is especially rampant in a service-based business. "I have no overhead! All I have to charge for is my time!" 

What many new business owners fail to compensate for is all the stuff you do that is not directly related to building product or your clocked time with your client. There is maintaining your website, posting to social media, blogging if you do that, spending money on proper software, website hosting, advertising, and the other myriad of things you do to be successful. What about the time and expense gaining all your expertise? If you think you should be making $25 per hour, an hour appointment with you might therefore run a person $75. We have a spread sheet to help you figure out the math.

A bottle of flower essence costs me about $2 to produce. I sell it for 22.95. Now, I'm a little bit on the high side of things, but it is well worth the 22.95 to the customer. In fact, they have no problem paying me $55 for the same size bottle when it's custom. If you’re offering value, and the benefits a customer will receive outweigh the financial cost you want them to invest, then everyone will walk away happy, and your business can continue to grow.

There is also quite a bit of automation built in to running Freedom Flowers and I pay for it, which is cheaper than hiring an actual person.

With Supernatural Business, your payment is predominantly for my expertise, the time spent in creating this course, responding to you personally, and to be leverage. If you're paying something that hurts just a bit, you'll be less apt to blow it off. You'll actually want to get your money's worth so you'll do the work. I have no interest in a bunch of people in here at $20 a month doing nothing in my class. I want motivated people. So should you if you do anything like this. Set your prices to recruit people who will put their money where their mouth is, show up fully and give it their all. Admittedly, we are priced pretty low compared to other similar programs.

Another reason for undercharging is low self-esteem. If you do not have a whole lot of personal interaction with your customers -say you're selling via website or something, then fake it. Let us help you get your prices up where they should be, get some help writing your copy, and when you get some sales, you'll feel better. If you have to sell yourself, either in person or over the phone, this won't work unless you're a great actor/salesman. In this situation, you're better off with the rule of 7.

The Rule of 7
On a scale from 1-10 what price point would give you a confidence level of 7 that a client or customer will say yes? (1 being no confidence at all, and 10 being a sure thing.)

This will give you a little bit of stretching, yet still allow you enough confidence that you can actually speak out your price to someone without flinching and acting undeserving. You can work on raising it from there.

When you raise prices, you can, if you choose, apply it to only new people going forward. This is tricky in a product based business, but in a service, it's a piece of cake to do.

Religious Spirits
If you're in this class, you probably are a Christian. With that seems to come a bunch of issues over money, and we went over some of them earlier in class.

"I want to keep prices low to bless people and not be greedy."

Sounds very noble, but I have some concerns. Are these prices going to allow you to grow your business, or just tread water? Can you be effective with those prices? If your business blesses people, you need to be taking it to as many people as possible, and that generally requires resources.

"Freely you've received, freely give."

Yes, I hope you are using your God-given gift in business. And for the record, I don't draw any lines between sacred and secular. An ability to fix cars is every bit a gift from God as is prophecy or healing anointing in my book. Every good and perfect gift is from above according to James 1:17. You don't get the short end of the financial stick because your gift seems more spiritual than others. The proponents who quote that verse as an excuse to enslave gifted Christians generally fail to read the very next verse where it says that the workman is worthy of his wage. If you do not charge, guess what? You're gonna have to go wait tables somewhere which really cuts into your time of doing what you've been empowered to do. If you can work a job that fulfills that, awesome, but I bet that's not why you're here.

You might read Tammy's "Crossing the Line" post.

Buy your own thing.
Buy from another business, the type of thing you're selling. You'll see the value in it if you yourself are benefitting. In other words, if you're a coach, you need to invest in being coached by someone else, if you're an artist, buy something painted by someone else. Love what another does and be happy with your purchase. You'll feel more justified in charging what you're worth.

Another reason to charge more is that you actually get better customers/clients. You bypass the "entitled" hard to please people, and you get some serious customers. Yes, you'll probably get less of them, but you'll work less hard for the money. You can run your own sweatshop and serve lots of people, or make the same amount of money and only serve a fraction of the people. It's easier to get a few good customers than a bunch of bargain hunters. Of course, your product or service has to be worth what you charge, and sometimes it takes a bit of time to work out what you can include in your product or service, or to develop your skill to the degree that you can charge a premium. Premium is what we ultimately want to work towards. Let's have a mindset of excellence, even if we haven't got it all in place yet. Always be sharpening your skills.

Ideally, if you compare your prices to similar businesses, you want to be on the upper end of the spectrum. Of course, you do have to be worth it. Your quality and results have to be justifiable.

When to raise your prices.

When your clients/customers are regularly getting good results

When they are very happy with the value they are getting.

When people are telling you your prices are too low.

When you don't feel good about the fees you're getting, or feel under-appreciated.

When you have upleveled your product so that it contains more value than before.

When there's an internal groan when someone buys a certain thing.

When I worked in a restaurant, it was when they ordered a milkshake. We all thought that was the end of the world because it was labor intensive for the cost. If your business has a "milkshake" then get rid of it or charge enough that you are happy to do it.

I got rid of one milkshake known as the flower essence lotions. I used to make natural hand lotion containing flower essences and essential oils. What a pain in the butt that was. I didn't think I could charge what they were worth, they sold like hotcakes and I was forever whipping them up in the Kitchenaid and slowly funneling nice thick cream into bottles. Then I had to get them to use it several times a day for good results. I was adamant that I wouldn't use a chemical cancer-causing preservative, so I used a natural one that really didn't have a great shelf life so I couldn't make large quantities. I probably should have raised the price, but honestly, I'm too busy to mess with it.

My other milkshake was the Custom Combos. I didn't charge enough, just slightly more than a Bouquet Blend. So I raised the price by $30, and nobody flinched. I raised it another $10. Now it's $80.

Practicals
Back up to your vision. What was that number figure you put down for income? Is your current pricing going to get you there? How many widgets do you have to sell per year to hit that? Is that even possible? I'm not saying you have to raise your price to get there, but you do need to know that what you currently are doing will need to change or be added to.

What about the money you need to live right now? What is that figure? How much do you have to sell in a month to be sustainable? Are you going to be ok with what you are charging/what your output is?

If you are service-based, there are finite hours in the day. Odds are you will need to develop other streams of income that are at least a little more passive. If you are making your own products, is it reasonable for you to be able to produce that much? What things would need to change to do that? Would you need to buy better equipment or a separate building to work out of?

Essential Homework:

With all this in mind, evaluate your current prices and post below your thoughts, changes you've decided on, etc.

To help you with the realities of what you need for an income, here is a spreadsheet for you to copy to your Google drive. You'll need to add up your yearly expenses (what your personal bills are), put that in Column B line 1, find or guess what tax bracket you are in for line 2, if you would like health care, that will calculate. If you are covered elsewhere you can set it to 0. Max hours per year is figured at 40 hour work weeks. If that is not realistic or what you want, then you can change that number accordingly. Keep in mind, this spreadsheet is tripling the numbers as described above where it's considering that not all your time is billable hours if you are service-based, or cranking out new products if you are making something. It's allowing you to work on websites, marketing, blogging, customer service tedium etc. It assumes 2/3rds of doing business is the extra crap you didn't sign up for. Set your vacation days, and you'll have an hourly rate! This is a ball park for what you need to charge clients, and what you need compensation for with making products after you deduct cost of materials.

Optional Homework:
Are you ok so far? Can we take it up a notch? I want you to start spending an hour a day doing thousand dollar an hour work. Now, before you shut down, it is ok if you don't see that return in two weeks. I want you to start thinking in terms of what actions you need to do in pulling your vision into your now. Thousand dollar an hour work usually pays off over time. It's the work you do today that becomes your foundation for income the rest of your life. Developing new products, developing marketing strategies, writing and perfecting sales copy, planning and prioritizing, working on your head trash, making decisions from looking at data, these kinds of activities pay dividends. Build the things that give you the leverage you need to get where you want to go.

Questions for Papa/God:

What do I need to set my price at?

What can I add to increase the value of what I sell and thereby increase my worth in the market?