Talk It Out Tuesday: Coffee Chat
A Profitable Business: From Covering Expenses to Scaling for Growth
Grab your dark roast + join us as we chat about all things profitability within your business from walking you through what you should be making each month to cover expenses to scaling your business for growth!
EPISODE 33 COFFEE CHAT REPLAY
Episode 33 Podcast
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Lauren Dragon-Cook: Welcome! If anyone else having a day that just feels totally like its supposed to be a Monday? I am.
I want to dive right in and not take up too much of your time. I so appreciate the fact you are here with me. I know how valuable time is. Especially for the momma’s who this is the first day of school. How many of us are drinking bloody mary’s or mimosa’s right now? Hell yes.
We are going to be talking about pricing for profits. Pricing is absolutely one of those topics that I cover with my one-on one clients within the first two sessions. It is something that about 90% of business owners are completely out of alignment with. They aren’t in alignment, congruent or balanced with what they should be charging and what they feel they are worth. That has a lot to do with underlying issues that again, I always uncover with you. You’re not just making these superficial changes to your pricing. It is one thing to say you’re going to restructure your packages and charge this this and this… but in reality often times that is not taking care of the problem.
My clients think that just changing their pricing will make shifts happen. If you do not feel good about your own pricing or feel you are worthy enough to be charging that… then its not going to work. You will fight it and struggle with it. It won’t be congruent across the board. That is what I like to work on with people. If you do not feel good about yourself or you are not truly that worthy or valuable, then it doesn’t matter if you change every structure and cost of goods sold and time… it doesn’t matter.
Cost and Demand
Let’s dive into the actual meat and potatoes of stuff. Pricing is a formula. It is not just a guess. There is a strategy that goes into it. You have to carefully combine the cost and the demand. You have to weight he products that all clients want with your total cost. That is also known as the cost of goods sold. If you are a service based business then you are still factoring in your time. Right? That is still a major cost of everything. You have to make sure you are including that in what you are packaging up your services or products.
Time is absolutely what people underestimate the most when trying to price out services because they are just looking at what they want to make. They aren’t factoring in their time, they aren’t factoring in mileage, they aren’t factoring in your lens or camera body. So many things! At the end of the year they sit back and look “well that didn’t work”. And then they can’t figure out why.
Pricing is a very careful combination of cost and demand. Many creatives fail to factor in the time they spend in their work. YOU… I am looking at you. You are the most valuable cost of your product. And in order to feel filled and valued by your product you have to have an income. You have to pay yourself first. If you aren’t actually making something at the end of the day, there is no point. That is one thing so many people fail to do.
Another thing I want to point out is the only way you can change the price of your product is one of three different ways. You can’t just raise the pricing just because you feel like it. There is a strategy to this. You either have to change the expense of the product or service or you change the amount of time you are spending or you are changing how much you are paying yourself first. Those are the three different ways you can change the price of your service or product. Increasing the product price should eb based on those three things.
I see this happen a lot… you have to ignore your competitors pricing. You do not want to begin to compare or copy anyone else’s pricing. I would even go so far as to suggest, don’t even both at what they start at… guess what1? You don’t even know if they are making a profit. So why on earth would you want to look at that if you don’t know if they are making a profit to begin with? People can put on a really big façade and make it look like they are making money, but that doesn’t mean they are. That is one of the biggest mistakes I see time and time again. Creatives begin to collect pricing from all their competitors and they start to analyze it and make their own price list to be this better version of all of those packages they collected, but it is so much less important to be conscience of what your competitors are doing around you. Just use your efforts and time by doing your own thing. Just do you! That is another thing, you won’t feel worthy about charging triple times what you would’ve initially charged. It will never sit well. Your clients will pick up on that and pick up on the misalignment. If you do not feel you are worth $2,000… they will pick up on that and then they won’t book you. You will have this problem of “why isn’t anyone booking me?”. It all starts at the root. It all begins and ends with you.
Another thing, I see so many people just say “well I don’t have any clients on the books, so I’ll take whatever I can get”. How many people have said that? Part of that is it is okay to say “no”. It is okay to say no because what that is doing you are honoring yourself and your worth. IN the long run it will save you from trying to rebuild your own sense of value. It will help you stay in this place of valuing yourself and feeling worthy of charging what you are. I promise you, if you give someone a discount or you barter with someone against what your better judgement is telling you… those people will end up being not your ideal client. They will be pain in the ass clients too.
Do not base whether or not you say yes to a client on “well they have a fabulous network”. “They will bring me in a whole lot of future clients”. I will be the first to tell you… very rarely do people that ask you for a discount for your services or products very rarely do their people flock to you because chances are if they are asking you for a discount, their people will too. If they are not part of your target market, chances are their friends are not either. So many people will say “its fine, I gave them $200 off, but they have such a good network…” They think they will make it back in the long run. No guys. That is awesome positive thinking, but what you are trying to do is back track and make the decision that you made based on your value okay. That is not okay. That is why so many people struggle with pricing because (AGAIN) you do not realize how much your pricing has permeated your business… how much your perceived value of yourself and worth of yourself has trickled within your business. And then you start to put band aids on other areas of your business.
Pricing is where it begins and ends. You got into business because you were fired up. You felt a passion, felt a calling… whatever it may be. It is a business at the end of the day. You have to make money form this. You aren’t doing this just for the sake of humanity. You need to still love what you do, you need to not feel burn out… and how do you do that? With being paid what you are worth.
I’ll tell you a quick story. A couple months ago even though I have been doing this now since 2010, I forgot this lesson. My clients started to walk over me. I was busy all the time but I wasn’t making any money and I wasn’t enjoying what I was doing anymore. It was draining me. To be honest… doing things that weren’t my favorite or were coming from a place of passion for me… made me feel even more burned out. I have this need in myself to be a people pleasure. I would bend over backwards for everybody and anyone. Who ended up suffering because of that? Me, my family, my work, my soul. Everything began to suffer. Instead of being this badass entrepreneur, I took a step back and realized this isn’t how I want my business to look. I made the changes. This is the harsh reality of being an entrepreneur. We love what we do. We love people. We want to serve. However, if you aren’t serving yourself first, you aren’t going to be able to fill anybody else up from that cup., It is an uneven exchange. Then you begin to resent your business. When I sat down and nailed the formula for pricing my own work… I gained the clarity I needed to be able to say no to certain things. It is a process.
I am not cookie cutter. I am not your mainstream educator. I come at everything in life, in my business form a different angle than mainstream. I always have. I lead with my heart and my intuition and I am going to tell you the reality without sugar coating it. I don’t feel anyone out there teaches pricing quite like this. Here is the heart and soul of it.
How many of you have said…
“My clients are confused by pricing.”
“I don’t know how I came up with my pricing.”
“My pricing is heavily influenced by my competition.”
“My sales averages are lower than my goal.”
“I have products or services for people to see, but they are rarely sold.”
“My clients don’t buy the packages or services I really want them to.”
“I am nervous to discuss pricing with my clients.”
“I feel under valued or under appreciated at times.”
This is a universal formula, however you have your own influencing factors. You have things that will weigh heavier within that formula than say someone else who has 17 children.
If you can relate to any of those quotes, know there is a problem with not only your pricing structure but also your self worth. This again, will be the 16th time I’ve said it… this is a much deeper rooted situation than you realize. This is the type of thing, again, I work with people on. Anybody can teach anyone pricing. You go on google and you can look up pricing formula for blah blah blah. What you won’t find is someone who will sit there and tell you why and how to really get to the root of that.
Psychology of Sales
If you give people too many options. If you hop on a website or a restaurant and there are way too many choices, what happens? Decision fatigue. People do not make a decision. You are not going anyone a favor by having sixteen different. You are doing more of a disservice to people. The reason why many professionals will have three packages is because the psychology behind it says people will choose the middle package 90% of the time. They will choose the middle. I’ll tell you why…
Say your toaster breaks and you need to buy a new one. Hop on amazon because prime is life and you start looking at things. You are looking at price and reviews. You don’t want a $5 Walmart toaster because chances are it might blow up and then you spend even more money fixing your house. But on the flip side, you know in your head you do not need a $500 toaster. Unless it is buttering that toaster for you and washing your windows at the same time… you do not need it. Why? You value other things in life. So where does that lead you? Somewhere in between. You may not have a specific number in your head of how much you want to spend, but you have a range. Anywhere from $25-$60. You know you have a range. You are going to go with something within that range. What is going to help determine that? Most of the time reviews.
So again, your middle package is where most people will buy from you. They do not need to have all the bells and whistles (most of the time). But you also don’t want to just have bare bones minimum. Does that make sense to you?
If you want to be making X number of dollars on every single client, you make that the middle package. You make the package you want to be making the most sales with… the middle package. You want to show people there are other options, but the middle is where you want people to go. When you want to add additional packages, take away items from the bottom package and add it to the top. Your clients will gravitate towards the middle. The smallest package should be bare bones minimum. There is a psychology behind this.
People gravitate towards the middle because it implies a value and it is easy and convenient. People will also implicitly assume it is the most popular selection. It makes them feel comfortable to make that investment with you and knowing other people have made the same choice.
Factor in Costs
Here are some costs I want you to pay attention to. I’m not sitting here giving you the pricing formula you need to be using, because it looks a little different for every person. The structure looks the same. You need to factor in these costs to every job you take on. Are you accounting for your…
Credit Card Fees
Are you taking into account all for those things? Probably not. These are also costs you need to be accounting for. So when people come to you and say “you’re charging X for blah blah blah!?” Yes. This is my business. If you were going into a Target you can’t just expect everything to be displayed neatly on the shelves and not paying people to do it. That is part of it. You really have to be thinking about all of these things. Especially with planners or photographers or anyone who is just starting out… they are not factoring in that stuff because it begins as a side hustle and then two or three years into the business they aren’t making a profit and they wonder why. This is why!
What are you worth per hour? How long does it take for you to go from brand concept to finished product? Or editing photos? You have to think about these things. You are not just pulling a number out. It doesn’t matter what sounds good. You have to go through the motions.
I would suggest writing out all of the costs associated with your business. Write them all out. Then if it is a yearly fee, divide it by twelve. Then you have it as a monthly payment. From there you need to be figuring out how many clients it would take you to cover your costs. So in order for you to stay in business it will cost you $2,000, then okay you should probably have a bare bones package of $2,000 or something close to that. You need to be covering your expenses with only one or two or three clients. Anything above and beyond that (technically) is profit.
I would love to know if this is stuff you’ve put thought into. I also would like to know the answer to these questions…
“My biggest hurdle with pricing right now is…”
“My biggest hurdle with my current price list and my packages is…”
“My clients have given the following feedback on my price list…”
Are you setting aside money for taxes? When you start to make a profit with your business you need to be paying in taxes. Are you setting aside at least 30%? Qapital. That is my solution. Any time a check goes into an account, it can automatically take out 30% for you. I have managed to actually save a ton of tax money without having to think about it because it happens before you even realize it.
Wrapping It Up
So guys… what this helpful? I hope this chat helped. My sole goal from this chat was to show you that you are worth it! If your pricing or strategy for figuring out your packages and services… if you want help that is absolutely something I can work with you one-on-one.
If you are going to rearrange your packaging and pricing, make sure you are factoring your time and all the expenses we talked about. Write down your expenses first. Make sure you getting your money.
If you have any questions, let me know. So much love to you guys. I will be chatting with you in a couple of weeks. Have a great rest of the week.
Q + A
Q: How do you suggest raising prices? All at once? Small steps?
A: You can change the expense of the product or service. You can change the time you are spending on the product. Or change how much you are paying yourself. You don’t always have to jack up the number, maybe you just need to take a look and see how much time you are spending or how much you are paying yourself. I would suggest doing it across the board. I would do it within incremental steps within that strategy. If you change $1,000 and you want to jump to $3,000… that won’t sit well with you. Maybe first do $1,500. Do it in stages. Make sure you are actually making something when everything is said and done.
I’m Lauren, your wedding business visionary! I educate wedding pros on the behind the scenes of their businesses through practical knowledge and intuitive strategy. I incorporate my intuitive gifts with solid business strategy to maximize my clients' progress and success.