By The Rebel School CEO, Simon Paine.
There are lots of different factors with pricing and often there isn’t one easy way to get there across different sectors, but this post will help you think it through.
Here are 3 of the biggest mistakes people make when they are pricing what they’re selling.
Mistake #1 – they don’t charge enough.
Mistake #2 – they don’t charge enough for way too long.
Mistake #3 – they don’t tell people the price confidently.
So this post is all about helping you to not fall into these traps. Here’s a few things to consider to help you get closer to that the price that you’ll be happy with.
1. How much is it going to cost?
You don’t want to work for free! You need to take into account the hidden costs of producing the product or service. Things like training, trips in the car to buy equipment, the contribution towards Internet and mobile phone and public transport for meetings.
Once you understand how much it costs to deliver what you’re selling, then you can work out the profit that you can make, and from there you can figure out how much selling you need to do to create the income that you want. But before we get too far ahead of our skis, we need to check in with step two.
2. Know the market!
What is the going rate for what you do? This step is all about the research to get an understanding of your market. What is the going rate for the thing that you’re selling? How much are your competitors charging? I like to think of this as the pricing scale; who are the most expensive and who are the cheapest? What are they charging and how does the quality of your product or service compare?
Are you the artisan, luxury or fancy end or are you at the simpler, cheaper, faster budget end or perhaps somewhere in between? Use these prices as a benchmark to figure out what your price needs to be.
3. What’s the comparison?
Sometimes people get stuck with pricing because they tell me that their product or service is unique and there’s nothing like it. If that’s the case for you, the thing to think about is what and who are you competing with? For example, if you’ve made something using your creativity and crafting skills and there’s nothing like it, then consider this: if someone wanted to buy a piece of handmade art for their home what other things might they buy? How does your product compare with candles or crochet art or a dried flower display etc
Then you can use these alternative products as your benchmark. Do you think someone would pay more or less than some of these items for what you’re selling?
4. What’s your hourly rate?
This is a really good step to sense check how many hours of work you’re putting in to deliver the thing that you’re selling. But you need to take care on this step. Just because it’s taking you two weeks to make something that doesn’t necessarily mean you can pass all of that cost on to the customer. This is a good figure to know, but understand that the “market“ needs to be able to take the price that you’re selling at. But it’s so worth doing this when you realise how many hours you are putting in for what price! I’ve known artists in creatives working for less than 50p an hour! Use the answer to this to guide your pricing and what sales activity you need to put in.
5. Goldilocks price - best price that is just right for you.
Remember Goldilocks and the three bears? The first bowl of porridge was too hot, the second too cold, but the third one was just right! The Goldilocks price is the price that is just right for you. What would be the price that you’d be really happy with? Not too much, not too little, but just right! Use your Goldilocks price to sense check what feels right.
6. Add value!
Adding extra value (sometimes called factor trading) helps you to price what you’re doing, really buoyantly. For example, things like a next day service, adding coaching, support, servicing, gift wrapping, hand delivery, locally sourced features etc. All of these things can help you to either boost the price or defend your price if someone tries it on for a discount! What could you do to enhance what you’re selling?
7. Deliver with confidence.
Customers want certainty. The reason they’re buying something from you is if they know you, like you and trust you. If you’re not certain in your price (especially with your tone of voice) then they won’t be certain that the thing you’re doing is any good.
Tell people your price confidently, assertively and then don’t speak. First one to speak loses.
8. Pricing leverage.
It’s really good practice to take some or all of your payment from your customers upfront. Unexpected things happen, people change their mind and the world changes. But if they’re already locked in with financial commitment, things are less likely to change. Many times in the past, I’ve offered a discount in exchange for payment upfront info. So you can leverage your price to get the money in quicker. You just have to make sure you do what you say you’re going to do once you’ve been paid! Under-promise and over-deliver!
So, get out there and get selling! If you think that you don’t know how to sell or you are afraid of sales like fire, join our course and make the first sales during the course, like hundreds of Rebels.
Here is the LINK to our upcoming courses – https://therebelschool.com/events/
As with all things at Rebel running a small business is about running mini experiments. See what works, what doesn’t and what you learn and adjust as necessary.
Simon started the Rebel School (formerly Pop-Up Business School) with Alan in 2011.
As well as helping start-ups realise their business dreams, he has coached, trained and facilitated senior leaders from some of the world’s most famous companies including Microsoft, British Airways, and Thomson Reuters.