3 Things To Consider When Pricing Your Product or Service

3 Things To Consider When Pricing Your Product or Service

 

Setting the prices of your products or services can come with a whole bunch of baggage. This is because often what we end up charging can be a reflection of how we see ourselves as opposed to what our product or service is actually worth. We worry pricing too high makes us look indulgent or arrogant but pricing too low won’t allow us to pay the bills. Essentially it doesn’t matter what others think of your pricing as long as it makes sense to you, but equally finding that sweet pricing point for profit, marketing and a whole host of other factors can be a really hard task to endure. Not least because you don’t want to get it wrong. Here are 3 things to consider to get you started…

 

How much…

Asking yourself how much you need and want to earn in a year is a great way to begin breaking down the process of pricing your products or services. Once you’ve come up with a figure, you’ll then need to ask yourself how much you want to be working. For example, you may be happy to work 9-5, 5 days a week but you may also want to take Friday afternoons off (because why not as a business owner, right!?) Remember to take into consideration any holidays you want to take or any time off you may need. If you then divide this number of working days or hours by your yearly salary target, you’ll be left with the minimum amount you need to make per working day to hit it. This is a really useful insight to keep in mind when you’re pricing up.

 

 

How long…

When you respond to someone asking for a quote with an hourly or daily rate, you can seriously undersell yourself. Working solely by an hourly or daily rate can be a bad idea not only because it doesn’t help your customer (they’ll get all sorts of anxieties because they don’t know how long it usually takes you to do the work, alongside worries of you going deliberately slow) but also because it means you aren’t considering all the other factors that should come into your pricing, such as expenses. Setting an hourly or daily rate for your own reference however, is great for determining how often you’ll need to work in order to meet your desired yearly salary. This also comes into play if you’re a product based business because you’ll need to know a rough estimate of how long it takes you to make your products. 

 

What else…

Including your expenses in your pricing sounds like a given, but so many of them slip through the cracks without us realising. That petrol used to take you to pick up supplies? That monthly Adobe bill or website domain charge? They should all be considered when you’re pricing up your goods. I would advise making a list of all of your monthly expenses so you can come up with a total monthly cost. Then varying on how many products you sell on average per day or clients you work with in a single month — that number should be divided by your monthly overall expenses. You should then have a figure, which even then only doubled, should be the absolute bare minimum to which you should include within your product or service fees. 

 

Money will always be a tricky subject to manoeuvre, but you can’t let your fears dictate what you do or do not bring to the pot each month — that’s the real risk. Asking yourself the above questions will ultimately help you feel more confident in your pricing because the numbers haven’t simply been plucked out of thin air, they’ve been carefully deliberated in a way that supports your business’ overall wellbeing.

Esme MarshComment