When it comes to pricing your products or services it can be a ticking bomb of emotions, mindset issues and so much more.
Because pricing, is never really about the price.
It’s about all the things that come up for you associated with certain numbers. The stories of how you’re not good enough or that people would never pay you for your talent, and next thing you know you’re a mess.
On the flip side, every so often, someone has a skewed notion of what they’re worth and they are liable to price themselves right out of business.
Which is why I’ve got a different way for you to think through your pricing that goes beyond “charge what you’re worth”. This is advice I received from coaches and mentors when I first started building my business. It sent me into an emotional tailspin!
And it’s wrong. Dead wrong.
I personally struggled with this direction on an emotional level, because I know I’m worth millions, baby! But I’m not quite there yet. Today, I’m not exactly in a position to charge millions for services, time or experience.
Don’t let the question of what to charge hold you back from doing the good work! No need to spend months on the mental aerobics of pricing going in circles.
Pricing needs to consider the costs involved. Charging what your worth as a pricing strategy doesn’t take into consideration the costs associated with running a business. The charge what you’re worth approach is purely emotional and doesn’t factor in the need to make a profit.
– Ludwig Von Mises –
Why You NEED Profit
Making a profit may seem like a no-brainer, but you may be surprised at just how unprofitable many online-based businesses actually are.
It happens for a lot of reasons. First and foremost, running an online-based business has a lot of hard costs related to systems and tools that you wouldn’t necessarily have running a face-to-face freelance or consulting business. One of my clients went from a successful freelance biz to moving online and she found that her cost of doing business went from less than 5% of her annual revenue to as high as 20%.
Then there’s the costs of marketing, adding a team and so on. Not to mention training, coaching and much more.
It’s easy to rack up the costs, especially if you find yourself feeling like you need to keep up with your online version of the Jones.
While I don’t knock the need for any of these things, if you continually do it at the expense of actually paying yourself a reasonable salary and making a profit, you’re going to burn out. If at the end of every month you’ve got very little to show for your hard work, it’s easy to feel resentful and it’s pretty hard to justify all that time you spend working.
For most of us, profit issues tend to come from spending too much or charging too little.
Understanding the cost of running your business and pricing accordingly can make a critical difference. Which is why picking random prices out of the air and hoping it works isn’t good enough.
Dealing with Your Money Mindset
When you’re sitting down to price your product or services, it’s primetime for money mindset issues to come up. We’re conditioned from a very young age not to talk about money and beliefs grandfathered down to us from our parents and those that came before them. Knowing this, I’m working to change my daughter's money story. We literally play with real money to shift the relationship my girls have with money from an early age.
Money mindset can do a lot of damage to our business without us even realizing it. If you’re always thinking “no one would pay for that” or “I’m not worth it” – Then that’s going to come through in your pricing. You’re likely to undervalue what you’re offering which sets up a chain of events for your business – Needing to sell more, impact on your profitability and so forth.
If you have money mindset challenges, chuck the charge what you are worth methodology and look at the facts. Charge what you’re worth layers in emotion when there’s an easier way to set prices. By removing emotion from the situation, and focusing on using a pricing model instead, pricing can be done based on pure facts.
In next week’s post, I’m going to break down some specifics on how to actually price things using proven business models around revenue and profit targets. They’re easy peasy and you’ll be able to implement them again and again to grow your business.
