Setting a price for your product or service is a difficult task, let alone thinking about increasing them. I see so many entrepreneurs searching for the silver bullet when it comes to pricing, but there’s so much mindset stuff intertwined with it all, that it’s hard to feel confident that we’ve set our price at the right level.
With the current state of the economy in Australia that has seen inflation on the rise, now is as good a time as any to increase your price.
But where to start? Firstly, please don’t:
- Crowd source your prices by asking in a Facebook Group what people would pay
- Live in your customer’s wallet
The reason being is that value is closely tied to price. So unless you’re asking the right people, you’ll never get an informed answer.
If I’m a time poor mum looking for a stunning cake to celebrate my parent’s wedding anniversary I’ll pay a premium for a gorgeous, unique cake delivered to my door far more than someone who loves to decorate cakes with plenty of time on their hands.
Similarly, if I’m looking for someone to take over the entire running of my Facebook ads so I can increase my email list and focus on my next launch, I’m going to value the service far more than someone in start up phase who doesn’t have the cash on hand to pay for the service or is still in the early stages of building their email list.
So, knowing that value is interwoven with price, how do you determine how to price your product or service?
- Know your costs
The first step to a profitable business is products or services that are priced to break even, or at least cover your costs. There are a number of dangers to looking at this in isolation (such as not assessing whether the costs are a necessary expense to run your business), but generally if you’re not even close to covering your costs, you’re making it difficult for yourself to build a profitable business.
- Know your time
How much time do you put into your business? Whether it’s marketing, administration, bookkeeping or social media, you need to take this into consideration when determining whether your current level of pricing reflects the actual inputs of your business.
- Know your competitor’s rates
Whilst I don’t want you to solely set your price based on someone else’s, it’s important to know approximately where you’re positioned in the market. Whilst your price is influenced by all 6 of the points here, knowing your competitor’s rates and offers will help you to see the possible range of what you could price at.
- Know your point of difference
We all have something special that separates us from all other businesses that adds to our ideal client’s perceived value of our service. What is that one thing that makes the way that you deliver your product or service different from everyone else out there?
- Know your profit per hour
Are you earning what you expect to earn on an hourly, profit basis? If it’s less that your ideal rate per hour, then it’s definitely time to increase your prices.
- Know your targets
How many sales of each income stream do you need to sell per month to a) cover costs and b) hit your profit target.
Bonus point here is to look at whether you have the time to deliver this. If not, it’s time to look at alternative scaling methods or change your offers.
Once you understand these key indicators in your business, you can set your price with far more confidence, knowing how and when you can increase your prices and your business income. And if you find that you’ve reached an income ceiling even with raising your prices, then your next step is to look at how you can scale.
If you’re wondering what scaling may look like for your business, then join my next workshop here. Inside you’ll learn the inside scoop on what scaling can look like for you (and the answer isn’t always digital courses) and how to work out if you’re ready for the next level.