Since I’ve started working with small business owners there has been a consistent thread that I found in all of them. Based on the title of this article; you guessed it, pricing! From restaurateurs, designers, to service providers they all struggle with how to price their products or services.
Pricing is almost always the first subject I go over with my clients and it will always be part of consecutive sessions. The numbers are just as important as the thing you are selling or doing. And you have to do them every, single, solitary, time!
For some reason it seems to be one of the most difficult things for people to do. Whatever you are selling, it is imperative you know what it costs you, and how much profit from start to finish. Despite how crucial pricing is, many of my clients seem to guess at their costs and pricing.
If you’re a designer, I know how difficult it can be to come up with a design you love. It’s work, and by the end of it you are either overcome with creativity and must create more or you’re exhausted and you need a little rest. Either way, you have not stopped to price your product or design. Am I describing you?
It’s really important to make time to go back and look at everything that went into making your product or service. Every tiny little bead, bolt, nail, ounce of paint, whatever components you use to make your product you have to quantify it and detail every possible measurable element. Time and materials are a must for that item or service; then you also have to consider your over-head which include things like electricity, rent, storage, all the things that allow you to make your craft or do your trade.
You cannot be serious in business until you get serious about your numbers. Believe me I know there is so much that goes into making and selling something, but if you neglect this critical piece of the puzzle, you may not know it, but you could be working for free or for much less than you think you are.
I’ll give you an example of something that happened to me, and why pricing matters so much. I designed these killer earrings; they were made with maybe a foot or more of really nice 14K gold filled chain, PER earring. So for a whole pair we’re talking nearly 3 feet of expensive materials. I delegated the costing out to one of my employees at the time. She turned in the component costs; I then calculated my wholesale and retail costs. We were getting ready for a big market and I just knew these were going to be a hit (which they were) By the grace of God I double checked everything and come to find out my employee only calculated for one earring! So my costs were literally half of what they should have been. Had I not checked I would have sold those earrings at a cost to myself! I would have been subsidizing the purchase of these really awesome and expensive earrings. No thank you!
I ended up selling hundreds of those earrings, but can you imagine if I had sold them and realized later, I’m only getting half of what I should be? That would have been a serious bummer! Don’t let something like that happen to you. Be meticulous and detailed in how much you put into something. If you don’t, no one else will.
Ideally, you should price your product soon after you’ve created it, that way everything is still fresh in your mind, and you probably have the components still at your fingertips. If you have staff that you can delegate to, let them do it; but do double-check everything. Don’t forget to include the time it took you to make it.