I held in my hands a bill from my attorney. I clenched my jaw and slowly opened the envelope, drawing out the folded paper inside, nervous to discover the total of the bill. I sighed with relief when I saw that the amount I owed him was less than I’d expected it to be.
Now, don’t get me wrong – I’m happy to pay my attorney for his guidance and help in setting up my businesses and filing the proper paperwork. He has a wealth of knowledge and experience and the amount I pay him for his help is minimal, compared to the fees and penalties I’d have to pay if I tried to do it on my own and end up filing something incorrectly. I’m happy to have a lawyer to turn to with questions about intellectual property protection, trademarking, etc as it gives me a sense of security.
That led me to think about makers, and how we often struggle to set prices on our products. My attorney knows how much he paid for and how long it took him to complete his education (and gain additional experience), he knows his expenses and best of all, he knows his value – the service that he provides and saves his clients by using his expertise versus the clients trying to handle legal affairs on their own. He sets his prices accordingly, and they are clearly stated.
We should be as confident and unapologetic with setting and stating our prices as attorneys, doctors and accountants are.
Compare a lawyer’s approach to a product maker. I can’t imagine an attorney apologizing for their fees, for bartering when there is not an even exchange of value, or for offering additional sales on top of bargain bin pricing. (Yes, many lawyers and other professionals do pro bono work, but this is after they are already profitable and it’s not the way they run their entire practice.)
Yet beauty business owners and other handcrafted makers price themselves out of business every day. They think:
- their current prices cover all of their expenses
- the way to set prices is to stalk their competitors and then price just a little bit lower
- the only way to gain new customers or repeat sales is by discounting prices
- no one will buy their soap at a higher price point
- they can’t afford to pay themselves a higher labor rate
But there’s good news! You CAN price your products well, with a balance of profit for you and value for your customer. A price point that you can state confidently and unapologetically, knowing that it is a fair exchange of money for the quality and benefits that you provide with your products.
Here are some tips:
- Cover your costs. I recommend the handy dandy Price-o-Matic software developed by Lela at Lucky Break Consulting. The software works on both PC and Mac and helps you get a crystal clear picture of your Cost of Goods Sold (COGS), labor, overhead and resulting profit margins. Most makers I know are surprised to see just how far off they’ve been when trying to manually calculate their expenses and use the Price-o-Matic software to finally set prices that make them money, not lose it!
- Know your audience. Your products shouldn’t be made with ‘everyone’ in mind – they should be targeted to a specific audience, one who will connect with your brand and the products you make. Your target audience will gladly pay for products that meet their specific needs.
- Check out the competition. Now, I say this with a big BUT. Check out the competition, BUT while reviewing their prices, evaluate how your products differ from theirs and how you can make the differences stand out. This is key to separating yourself from the pack and setting higher prices than others, which leads to the next point:
- Decide how you’re going to provide extra value. If your sugar scrub is more than a body exfoliator, it’s an aromatic experience combined with a 2-in-1 product of scrub and lotion, then you need to communicate that to your customers! You can command more for products that offer additional quality and value than ‘standard’ products.Some ways to demonstrate added value include ingredients, such as organic or fair trade, essential oils instead of fragrance oils, packaging, the detail in which products are wrapped for shipping, free samples in orders, upgraded shipping at no cost, and even a handwritten thank you note (not all value-adders need to cost additional money out of your pocket!)
- Practice stating your prices out loud, over and over until your presentation is calm and confident. If you stumble over your response when someone asks how much a bar of soap is, they’re going to wonder if you just pulled the price out of thin air and if that price truly represents the value they’re getting from that product. But if you are confident and excited and can easily convey the benefits and value, the price will become of little consequence to the buyer.
- If you have trouble believing that you’re worth more than minimum wage, then get to the root of that belief and crush it. Many of us have ‘money issues’ in one form or another – warped ideas about money, pricing, value and worth that may come from our family of origin, or were developed as a result of experiences we’ve gone through. Often these limiting beliefs around money translate into thoughts that we aren’t valuable enough or that we shouldn’t profit *that* much from our business. We then price our products (often unconsciously) in such a way that we’ll be crazy busy working, but not making any money.But we are in business to make money!!! If you struggle with a low self worth, or limiting thoughts about money, then do the (sometimes hard) work to overcome these ideas that will hold you back. It may take relying on your faith, posting affirmations where you’ll see them throughout the day, and possibly some counseling. But busting through the beliefs that are holding you back will help build confidence in your products, your brand and in turn, your pricing.
Do you struggle with pricing with confidence? Which of the above tips will make the biggest difference for you and your business?
Photo courtesy of adamr / Freedigitalphotos.net