Finding The Hidden Costs When Pricing Your Product or Service
When creating prices for our work, sometimes we overlook hidden costs in other areas of our work.
Maybe you base it off your old pricing when you were at your 9-to-5 job, however there are a lot of new costs to consider when you start your own business.
If you do not consider these costs within your overall pricing strategy, you won’t be able to make all your ends meet, which would have a devastating impact.
Pricing does not have to be as complicated as you think, and I have many years of experience in this field to help guide you through my tips. There were a few times when my pricing was not considering the whole picture, and I want to help guide you away from those mistakes.
When you open your own business, you must now consider your own living expenses as well as your operating costs.
For many business owners, they only consider their own personal financial needs and end up taking out loans or using credit cards for their business needs.
Of course, this can be disastrous with you having to constantly dig deeper into debt to build up your business instead of achieving financial freedom.
Here are my tips to achieving a pricing strategy to grow your business:
1. To start, you have to sit and add up everything that keeps a roof over your head and keeps the lights on for your business.
Start with adding up all of your home bills such as rent, electricity, internet, savings, and so on.
After you have that total, add up everything you need to keep your business operating. This might include website maintenance, ordering raw materials, cell phone, and so on.
Be sure to also calculate the time invested to create new business. This might include business meetings, networking events, creating content, and so on. They all matter when it comes to building your business and making sure you are paid accordingly.
2. Next, you must figure out how much you need per month, per week, per day, and per hour.
If you need to make $5,000 per month, that breaks down to:
$1,250 per week
$250 per day (working 5 business days)
$31.25 per hour (with working 8 hours a day)
This is the minimum you need to make every single day and hour to build your financial freedom with your business instead of digging into debt.
This rate remains important for all of your future decisions, rates, products, services and any other client or customer work.
3. The third step is to bridge the gap between the total expenses and the money you need to make every single day.
This hourly rate is important to calculate since it will be factored into almost everything you do.
You must include this number in all the projects you work on. If you are a consultant, you must include the travel time, planning time, and any other time you spend working on that client in the total pricing strategy.
For many of us, we spend more time than we think to calculate in trying to plan things for our clients, solve their problems, and researching ideas and strategies to implement. This is all work that should be included in your overall strategy.
This also applies to creating products. When you are deciding your pricing strategy, it is important to take into consideration your hourly rate, how long you plan to spend creating this product, and how many people you expect to buy it. All of these should factor into your price point.