November 21, 2018

Are you charging enough ?

 

What is enough for you? This leads from the question ‘why are you in business?’ This week I had a client who greeted me with the comment: “Every year when I drive over with my books, I tell myself I really ought to put my prices up”.

She provides her services mainly to the elderly in care homes with limited incomes. Her children have both left home and the second one is now going through university. Her main reason for working was to pay for their education, but she also enjoys her work. Do you think she should put her prices up?

Pricing is not all about making the greatest profit you can, it is about understanding the figures so you can decide what is appropriate. Do you want to price yourself out of the market, or just appeal to a small niche? Someone I worked with a couple of weeks ago had just taken an order for a dining table at £35,000. That is not a typo. I can confirm that I will not be placing a similar order.

In order to ensure you make a profit, you do need to understand what costs are involved, both in the delivery of that particular sales and in the running of the business. If you don’t have precise figures available, just jot down what your overheads are in a year divide, by twelve and realise how much you need to make in a month before you even consider the costs involved in a sale. This is why you cannot afford to work for free. By all means give a sample or taster away, but make sure your customer knows this is not the norm.

If you feel that you need to talk through your pricing structure please get in touch

Comments

  1. Great topic Penny, one that I have with people several times every week. There are lots of reasons why people don’t charge as much as they should:

    1) They don’t know how much they should charge
    2) They’re embarrassed to charge more
    3) They don’t know how to increase their prices and are afraid they’ll lose customers

    You’ve covered the first one, and I think you’re right on track when getting people to ask themselves why they’re in business and what they want to achieve? Also hitting the nail on the head when highlighting that a lot of people don’t even know how much they would need to charge in order to break even, let alone make enough profit. They NEED to know their numbers and if they don’t know how to manage their books I’d always advise getting a bookkeeper. I doubt you’d argue:-)

    The second point is all about emotion and our beliefs. This often feels harsh to hear, but the bottom line is that we charge what we believe we’re worth. If we’re under-charging, it’s likely to be because at some fundamental level we just don’t feel worth it. This is one of the most satisfying things I work with clients to address.

    The third reason is a mix of FEAR (False Expectations Appearing Real) and knowledge of the practical steps to implement an increase. Without exception when clients have implemented an increase they have lost almost no clients at all (and those they lose are the ones they really should have turned away!), and had typically no complaints. In fact the reaction from good clients is most surprising – they often say “about time”.

    Business is not all about making money, but it should involve providing a product or service at a fair price. And fairness works in both directions.

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