Upload
jackie-b-peterson
View
233
Download
1
Embed Size (px)
Citation preview
How do you price your products or services?
What you have to know:
• Your costs
• Your competition
• Your break even
• Your expenses (business and home)
• Your future plan: Profit to grow and invest
PricingPricing must be high enough to:
• Cover costs
• Cover expenses: overhead and taxes
• Create profit
• Pay off loans
• Pay owner
• Allow some reserves for growth
Pricing Range• The low range is just enough to break even
• The high range pushes the envelope-the customer may refuse to pay or finds an alternative
• If the customer complains about the price AND your price is reasonable, you have not clearly articulated your value strategy!
Pricing Message
How we price says a lot about us.
• If we price at the very low end……..
• If we price at the very high end……
• Why is it that so many small businesses are reluctant to charge enough for their product or services?
Pricing CompetitionHow to find out about the competition
• Web site
• Price lists
• Visits to their locations
• Call and ask
• Ask customers
• Pay attention in the market place
Pricing• Pricing is part of your brand
• Pricing positions you relative to your competition
• Pricing positions your product and your company in the marketplace
• Pricing is where actual cost and perceived value come together
Elements of a Price• Direct costs of product
• Overhead or Costs of running your business
• Non starvation costs
• Your commitment to your household
• Taxes
• Planned profit (also debt service and reserves)
• Customer perceived value
Calculate the PriceAdd up all the elements of a price
• Get an annual total
• Divide by 12 for a monthly total
• How much money do you need each month?
• Divide by how many units you can sell in a month
• Result: minimum price per unit
Calculate Your PriceMy direct costs
My overhead:
Non starvation add on:(i.e. health insurance, retirement,
college fund, vacations)
Share of household*:
Taxes:
Planned profits:
Total All Costs*
* give me your card and I will send you work sheets
Check Your Price• What are others selling for?
• Is your calculated price much higher?
• Can you justify it with quality or differentiation?
• Is your calculated price much lower?
• Explore
• Check the competition
How Can I Increase My Price?
• Better Experience
• Minimize Risk
• Create New Client Opportunities
• Upselling
• Save the Customer Money
• Branding
• Help Customer Achieve Goals
• Problem Solve
Increase perceived value
How Can I Increase My Price?• Improve your quality
• Know that quality often means customer service
• Don’t settle for “good enough”
• Don’t aim to be the low cost provider
• Price for value then work like crazy to support that value (increased skill, education, benefits)
How Can I Increase My Price• Never sell by the hour
• Create packages of products and/or services
• Offer a payment plan
• Take Credit cards
• Look at your pricing regularly (at least once a year)
• Never go lower than $50 per hr.
How Can I Increase My Price?• Customers buy value!
• Vustomer buy benefits, not features
• Always be ready to talk about what they get when they buy from you
• When they ask price, answer with value
• Ask questions, listen to what they want and need
Selling Time
• If your business is a consultancy, training, or some other offering that is time only, you will not have a gross profit margin like those selling a product.
• Instead, make an assumption about billable hours.
• There are 173 hours per month (40 hours per week x 4.33 weeks)
Selling Time is Different• Assume that of those 173 hours, you will only
have between 40-65% as billable time (69-103 hours)
• You must earn all your money and cover your expenses in those 69 hours
• You cannot survive freelance billing less than $50 per hour at a minimum
Managing Costs• Clear product specifications
• Excellent design
• Shopping well (combine orders, look for new suppliers, buy in larger quantities, watch for storage or perishability issues)
• Reduce Waste
• Increase labor efficiency
• Be ready for the work to be done
Managing Expenses• Budget
• Compare budget to actual
• Delegate responsibility to others and hold them accountable
• Contracts-get it signed
• Keep your financial records current
• Control waste
• Comparison shop
Let’s Do a ProblemA graphic designer:
Annual costs: $30,000 (does not include a salary) (including rent, phone, travel, auto, marketing, insurance, office administration, office supplies, legal, bookkeeping, etc.)
Target Income: $40,000(taxes will be $8,000. Plus $10,000 to reinvest in the company cont. ed, trade show, advertising campaign, new computer)
What should be the minimum billing rate?
If You Do Not Charge Enough
• No money to hire “waterbug” outsources help
• No money to renew and replenish yourself
• No money to take a vacation
• No money to invest in retirement
• Besides: People Think You are Not Any Good!!!!
If You Do Not Charge Enough
People will refer you: “Hire Mary, you can really get a deal!”
The referral you want: “Hire Mary, she is spendy, but it is worth every penny.”
Do not be the low cost provider!
Quote a Price/Close the Sale
• Know the price: Know your own bottom line
• Practice dealing with any objections
• Practice what you will say
• Feel confident
• Decide how much you want this project
Other Strategies• If it does not sell, raise the price
• Package things together
• Offer smaller bites
• Ask your customers for feedback and input
• Consider the “soft” elements such as: Customer service, delivery times, selection or variation, time of year, lead time
Other Strategies• Always follow up
• Ask Closing Questions:
• Are you ready to get started?
• Would you like to schedule an appointment?
• Shall I draw up a contract?
• Shall I finalize the details?
• Do we have a deal?
• What is the best time to deliver?
Other Strategies• Learn to talk with a pen in your hand
• Always say “Thank You”
• Make sure all documents are signed
• Only offer to reduce your price as a last resort… and then only as a one-time discount
You can always go down but never go up.