Pricing, value, offerings, whatever you want to call it, you have to know your worth. But it’s not easy and often small businesses waiver on price and feel embarrassed or stressed about their prices. You don’t have to be. You have to know your worth and own it.
There are several steps to knowing and owning your worth, it starts with mindset and understanding, involves a bit of maths, and ends with confidence!
Why You Should Price Properly
Knowing your worth begins with knowing why you should price properly. Self-worth begins with pricing properly and acknowledging your skills, expertise and the value of your time. If you price yourself below what you deserve, you are undervaluing yourself and therefore placing a lower value on yourself.
The next thing to bear in mind is market value. If the going rate for your product or service is £50 and you charge £25, your customers will ask themselves why. They may ask themselves why it’s so much cheaper than the average in the market, perhaps they may assume it’s of lower quality or is perhaps a scam! It also devalues the market as a whole leaving it difficult for anybody, including yourself, to raise prices in the future due to other factors. That’s not to say lower prices don’t have a place, if you’re brand new to the market you may wish to run introductory offers to build your portfolio or gain reviews, that’s fine as long as you explain why and keep it limited.
Think about the difference between budget and high end supermarkets. The advertising, the products, the clientele are all based around their pricing. There is a place for the cheaper end of the market but even these places have a healthy profit margin and own the level they price at.
The final thing to bear in mind is the value of your time. Every aspect of business takes time, time that you could be spending with your family or doing things you love. If you charge peanuts for your work and your time, it can leave you feeling resentful towards your work because the effort doesn’t equal the reward.
How To Price Accurately
Now you know why to price accurately, let’s talk about how to price accurately. This will depend on the industry you’re in but as a general indication, there are a few things you need to take into account, here is a few of them:
If we take the example of electronics, we can see how this applies in practice. These will be very back of the envelope simplified figures to show you, but it will give you an idea.
Say your business is selling MP3 players, you buy them in for £10 per unit including delivery and customs, it takes you 30 minutes to source 20 of them – 1.5 mins per unit. Your overheads include insurance, utilities, etc., these are typically worked out on a monthly basis and divided by the number of sales but you can use a rough estimate. You are charged say 50p in fees on selling and payment platforms, and 20% needs to be allocated for taxes.
To breakeven on this MP3 we’d do the following calculation:
- Materials – £10
- Time – £0.22 (0.015 x £15 hourly rate) for sourcing. Add on extra time for packing, etc.
- Overheads – £10 – (£1000 overheads divided by 100 sales per month)
- Fees – £0.50
- Taxes – 20%
You’d need to sell the MP3 player for £24.86 just to break even. This does not include profit! So you’d effectively be doing it for the fun of it. The markup will depend on your market but for the purposes of this we’ll use 35%.
Your MINIMUM price is, therefore, £33.50. Your profit enables you to pay yourself, invest back into the business etc.
These are not hard and fast rules or exact figures, it’s just to show you how complex pricing can be – and it will be completely different if you price services, but the principles remain the same.
Conveying The Value
The easiest way to acknowledge your worth is to convey to the customer why your prices are what they are – but not by justifying. Show them value without the cost even entering their mind.
Think about the experience of the purchase, the expertise of your skill, reviews, testimonials and case studies. Let your work speak for itself.
Apple is an example that springs to mind. They exude value in everything they do, right down to the experience of opening the box, their marketing, and the name of features they implement.
Handmade goods are notoriously difficult to convey the price of because non-crafters often don’t understand the amount of time that goes into making items. So show them, so them the luxury materials you use, do a video of making the product to give them an idea of time.
Stick To Your Convictions & Change That Mindset
Once you’ve worked through the tips in this blog post, you then have to change your mindset and stick to your convictions. Be unapologetic because you are worthy.
Remember to say your prices with confidence and without apology, collect your fees when they’re due with no embarrassment, don’t allow haggling, and don’t worry about turning off customers due to your pricing.
You can’t be all the things to all the people
Go forth and know & own your worth.