If you’re a fellow female business owner, it’s likely you’re a bit of a ‘juggler’. As women, we tend to be great jugglers of everything. We juggle our business, family, friends, and everything in-between. We’re biologically wired to be the caretaker and put EVERYONE else before ourselves.
You know what else we tend to do? Undervalue our expertise and undercharge for it!
As a Perth Business Coach and Mentor, I see this happen time and time again with both new and seasoned business owners, my coaching clients, and even MYSELF! I’ve come a long way to learn how to charge my worth and charge with confidence (it’s not an easy thing to learn). The mindset block around charging your worth is HUGE, and naturally, impacts female business owners much more than men.
Do you want to start valuing your expertise and charging your worth?
I’m here to remind you to charge your worth and empower you to charge with confidence.
Grab a cuppa, keep reading, and discover how.
Don’t be known as a cheap business
Unless you’re doing this as a hobby, the purpose of your business is to generate a profit, and the last thing you want is to be known as a cheap business. Understanding what your total costs are and calculating them correctly, is critical to your long-term business success.
Introducing, the basic formula to pricing your product:
Fixed costs + COG + Labour + Packaging + Optional extras + Delivery + Profit = Retail price
Let’s break these down:
1. Fixed costs
These are the costs you pay in your business, regardless of whether you make or sell a product. Some items that are fixed costs are: Insurance, Accounting software, Equipment, Website management and Advertising. An easy way to work this out is on a monthly basis. Let’s say you have a cake business and your total of $200 a month, and you make 10 cakes that month, it might be $20 per cake in fixed costs.
2. Cost of Goods / COG
These are the costs you incur to make your product. If you make cakes, these are your cake ingredients such as flour and sugar etc. Start with your basic spreadsheet of all the ingredients you use to make your product and list the costs of these essential goods.
3. Labour costs / Hourly rate
Your time is valuable, and you should be paid it. If you’re a cake artist, this includes the time to design the cake, shop for the ingredients, communicate with the client, bake the cake, decorate the cake, and package the cake. You need to put an hourly rate on your labour. The minimum place to start is $25-$35 an hour. Time yourself on making your products and communicating with your clients, so you understand how much time you are spending in the process.
Record this on your spreadsheet, then increase this hourly rate as you become better skilled and gain further knowledge and experience.
4. Packaging and Supplies
If you have a product, you’d want to package it up nice and pretty, so it’s important to consider these costs too. Add in the individual cost of your packaging and any other supplies to your spreadsheet. If you’re a cake maker, think of items such as: Boxes, stickers, thank you cards, cake boards etc.
5. Delivery cost
Do you deliver your product? It’s crucial to include this cost in your pricing too. 72c per kilometre (there and back) is a good place to start. This also includes your time to set up the cake when you get there (I would charge the hourly rate for set up).
Cake Price Example:
- Fixed cost $10
- COG $30
- Labour $20
- Packaging $10
- Delivery $10
- Total cost $80
- Add Profit + 60% $48 (Total $128)
- Add GST 10% $12.80 (You don’t keep this; it belongs to the ATO)
- RETAIL PRICE $140.80 (this is the minimum amount you sell that cake for)
Are you a service-based business? Introducing, the basic formula to pricing your service:
Fixed costs + Labour + Optional extras + Profit = Service price
Writing Service Price Example:
- Fixed cost $20
- Labour $100
- Total cost $120
- Add Profit + 60% $72 (Total $192)
- Add GST 10% $19.20 (You don’t keep this; it belongs to the ATO)
- SERVICE PRICE $211.20(this is the minimum amount you sell your service for)
Why should you add a profit to your products or services?
Firstly, the labour is your wage, not your profit. You need to be paid for what you do! You work hard to make your product or deliver your service, and you deserve to be paid.
The profit comes when you add that last line – % or a mark-up. When you make that profit, you have a successful business.
COSTS VERSUS VALUE – Price your products or services based on the value, not the cost.
FACT: You should be too expensive for some people!
Seriously! Your price should be high enough that it causes some people to walk away and that is okay. If you’re getting orders because you’re the cheapest, this is not a sustainable business.
How to handle requests for discounts
Firstly, it’s important to remember that not all buyers are your customers, and you are never going to be able to please everyone. In fact, there will be those who cannot afford your products or services and that’s okay. If a potential customer asks you for a discount, don’t take offence. This is the strongest buying signal and just before someone asks you for a discount, doesn’t mean you need to give it.
Really want to work with that particular person? Add value instead!
How can you add value? Offer an additional product at a lower price, or create a personalised package just for them (make them feel special) with an additional complimentary service attached.
Some responses to use when asked for a discount:
- “Thank you for being interested in my product/service. In order for me to give you the very best in quality and service that I am known for, that is the price I need to charge. Would you like to book in with me?” *Ask for the sale
- “If the price is your deciding factor when choosing your wedding cake (for example), unfortunately, I can’t be of service to you. If you would love a cake that your guests can’t stop talking about then that is my price.” *Ask for the sale
- “I can’t offer you a discount, but I can add in some delicious cookies just for you (an example of adding value). How does that sound? Are you happy to book in?” *Ask for the sale
How can you make more profit?
As I mentioned earlier, when you make a profit in your business, you have a successful one. And of course, the more profit you make, the more successful your business becomes.
So, how can you make more profit in your business?
Here are my 5 top profit-generating tips:
- Look at all the costs of goods and fixed costs. Can you get better prices?
- Review your labour cost. Are you taking too long to make your product or deliver your service? Can you streamline your production system? Could your service be better?
- Revise and check your prices. I suggest you do this at least once every year.
- Increase your prices until it slows the sales down. That is the sweet spot!
- Increase the average spend of the client order.
Your new business mantra – I HAVE A RIGHT TO MAKE A PROFIT!
I’ve come a long way to learn how to charge my worth and charge with confidence and I hope these tips will teach you how to do the same.
If you want to start valuing your expertise and charging your worth, implement the steps above and you’ll be well on your way.
Need help with your pricing woes? Want a pricing plan specific to your unique business?
During this 1:1 session, I can help you craft a plan to raise your prices, price your products/services, or gain the confidence to charge your worth. My Hour of Power session is a fantastic (and really affordable) way to get coaching from me, you will walk away with the confidence to charge your worth and a solid plan to raise your prices without the nerves. I can’t wait to help you charge your worth and add tax!