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The Art of Pricing Your Work as a Solo Professional
The document provides a comprehensive guide on pricing strategies for small businesses, emphasizing the importance of understanding costs, competition, and perceived value. It highlights methods for determining pricing, including calculating costs, assessing market competition, and improving customer perceived value to justify higher prices. Additionally, it warns against being a low-cost provider and offers strategies to increase pricing through quality improvements, branding, and customer service.
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The Art of Pricing Your Work as a Solo Professional
- 1. The Art ofPricing Your Work The Art of Pricing Your Work
- 2. Jackie B. Peterson BetterSmarterRicher.com Yoursolo business journey starts here.
- 3. How do youprice your products or services? What you have to know: • Your costs • Your competition • Your break even • Your expenses (business and home) • Your future plan: Profit to grow and invest
- 4. Pricing Pricing must behigh enough to: • Cover costs • Cover expenses: overhead and taxes • Create profit • Pay off loans • Pay owner • Allow some reserves for growth
- 5. Pricing Range • Thelow range is just enough to break even • The high range pushes the envelope-the customer may refuse to pay or finds an alternative • If the customer complains about the price AND your price is reasonable, you have not clearly articulated your value strategy!
- 6. Pricing Message How weprice says a lot about us. • If we price at the very low end…….. • If we price at the very high end…… • Why is it that so many small businesses are reluctant to charge enough for their product or services?
- 7. Pricing Competition How tofind out about the competition • Web site • Price lists • Visits to their locations • Call and ask • Ask customers • Pay attention in the market place
- 8. Pricing Wisdom Small businessabsolutely cannot afford to be the low cost provider.
- 9. Pricing • Pricing ispart of your brand • Pricing positions you relative to your competition • Pricing positions your product and your company in the marketplace • Pricing is where actual cost and perceived value come together
- 10.
- 11. Elements of aPrice • Direct costs of product • Overhead or Costs of running your business • Non starvation costs • Your commitment to your household • Taxes • Planned profit (also debt service and reserves) • Customer perceived value
- 12. Calculate the Price Addup all the elements of a price • Get an annual total • Divide by 12 for a monthly total • How much money do you need each month? • Divide by how many units you can sell in a month • Result: minimum price per unit
- 13. Calculate Your Price Mydirect costs My overhead: Non starvation add on: (i.e. health insurance, retirement, college fund, vacations) Share of household*: Taxes: Planned profits: Total All Costs* * give me your card and I will send you work sheets
- 14. Check Your Price •What are others selling for? • Is your calculated price much higher? • Can you justify it with quality or differentiation? • Is your calculated price much lower? • Explore • Check the competition
- 15. How Can IIncrease My Price? • Better Experience • Minimize Risk • Create New Client Opportunities • Upselling • Save the Customer Money • Branding • Help Customer Achieve Goals • Problem Solve Increase perceived value
- 16. How Can IIncrease My Price? • Improve your quality • Know that quality often means customer service • Don’t settle for “good enough” • Don’t aim to be the low cost provider • Price for value then work like crazy to support that value (increased skill, education, benefits)
- 17. How Can IIncrease My Price • Never sell by the hour • Create packages of products and/or services • Offer a payment plan • Take Credit cards • Look at your pricing regularly (at least once a year) • Never go lower than $50 per hr.
- 18. How Can IIncrease My Price? • Customers buy value! • Vustomer buy benefits, not features • Always be ready to talk about what they get when they buy from you • When they ask price, answer with value • Ask questions, listen to what they want and need
- 19. Selling Time • Ifyour business is a consultancy, training, or some other offering that is time only, you will not have a gross profit margin like those selling a product. • Instead, make an assumption about billable hours. • There are 173 hours per month (40 hours per week x 4.33 weeks)
- 20. Selling Time isDifferent • Assume that of those 173 hours, you will only have between 40-65% as billable time (69-103 hours) • You must earn all your money and cover your expenses in those 69 hours • You cannot survive freelance billing less than $50 per hour at a minimum
- 21. Managing Costs • Clearproduct specifications • Excellent design • Shopping well (combine orders, look for new suppliers, buy in larger quantities, watch for storage or perishability issues) • Reduce Waste • Increase labor efficiency • Be ready for the work to be done
- 22. Managing Expenses • Budget •Compare budget to actual • Delegate responsibility to others and hold them accountable • Contracts-get it signed • Keep your financial records current • Control waste • Comparison shop
- 23. Let’s Do aProblem A graphic designer: Annual costs: $30,000 (does not include a salary) (including rent, phone, travel, auto, marketing, insurance, office administration, office supplies, legal, bookkeeping, etc.) Target Income: $40,000 (taxes will be $8,000. Plus $10,000 to reinvest in the company cont. ed, trade show, advertising campaign, new computer) What should be the minimum billing rate?
- 24. If You DoNot Charge Enough • No money to hire “waterbug” outsources help • No money to renew and replenish yourself • No money to take a vacation • No money to invest in retirement • Besides: People Think You are Not Any Good!!!!
- 25. If You DoNot Charge Enough People will refer you: “Hire Mary, you can really get a deal!” The referral you want: “Hire Mary, she is spendy, but it is worth every penny.” Do not be the low cost provider!
- 26. Quote a Price/Closethe Sale • Know the price: Know your own bottom line • Practice dealing with any objections • Practice what you will say • Feel confident • Decide how much you want this project
- 27. Other Strategies • Ifit does not sell, raise the price • Package things together • Offer smaller bites • Ask your customers for feedback and input • Consider the “soft” elements such as: Customer service, delivery times, selection or variation, time of year, lead time
- 28. Other Strategies • Alwaysfollow up • Ask Closing Questions: • Are you ready to get started? • Would you like to schedule an appointment? • Shall I draw up a contract? • Shall I finalize the details? • Do we have a deal? • What is the best time to deliver?
- 29. Other Strategies • Learnto talk with a pen in your hand • Always say “Thank You” • Make sure all documents are signed • Only offer to reduce your price as a last resort… and then only as a one-time discount You can always go down but never go up.
- 30. Learn more aboutJackie’s programs and products at BetterSmarterRicher.com Your solo business journey starts here.