Perhaps the biggest insider tip I can give about price is that it’s got more to do with psychology than math. When I tell people that, they often think I’m a little nutso, until we start to get into it and then they recognize how true it is. So, if you’re trying to figure out how to work the numbers and land on the perfect pricing formula, the good and bad news is, you’re wasting your time. There is no perfect pricing formula! The math you absolutely need comes down to these few things:
The biggest advice I can give you about the math is not to leave out all the costs that may not make it into your business bookkeeping. Most specifically, depending on your legal structure, your salary and taxes on your profits. Utilizing this information, you can figure out your:
Ok, that’s pretty much the math stuff. So, what about the psychology? Apologies in advance for all the links included, but I’ve covered a bunch of these things in the past and to a greater extent than I can possibly do justice in one email.
The last thing I’ll say about pricing as it relates to your business model (for now) is that it needs to make sense when you consider your target audience. If you’re charging more than your audience can afford, you either need to change your price or change your audience. (Check out last week’s message, Is the Price Right?, for more on that.) I sincerely hope you’ve found this business model series of help to you and that you now feel confident to implement changes to your business strategy to meet the year ahead and beyond. As always, if you have like to talk over any aspect of your pricing or business model, book a session with me. P.S. — Two breakdown calculators to check out: SBA Breakeven Calculator, BPlans.com Breakdown Calculator. Your success is our strategy! No longer want to receive my newsletter but don't want to miss my special offers and announcements? Click here. |
I help entrepreneurs leapfrog over the typical potholes that derail most small businesses with inspiration, motivation, education, and support across a wide range of business topics drawn from over a decade of running my own business, teaching entrepreneurship for the City of New York, and coaching and consulting privately with dozens of women and minority small business owners. Honestly, why go it alone when help is an email away?
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