How I Price My Products: From Winging It to Owning It
Photo by Madison Kaminski on Unsplash
In today's post, I'm talking money. When I started The Educated Birth in January 2017, I was winging it. I set prices based on what sounded good to me, with little thought about the sustainability of my business, and the protection of my time and sanity. Today, I've made some baby steps, and some really big girl steps toward owning this part of my business. What I've learned, I'm happy to share with you now.
One. Use Accessible Professional Resources
I can't stress enough how important it is to talk to a professional about your questions. Now you might be saying what I was saying in January of 2017, "Well I can't afford to hire a professional!"
To my rescue — enter Thrive, a mentor network in my city (and there may be something similar where you are too!) full of generous folks, like CPA Nadia, who offer their time and expertise to small business owners for free for a certain amount of time.
When I met Nadia, I quickly learned that some of the things that applied to my self-employed friends' businesses simply would not work for me. Maybe because our businesses were structured differently, maybe because our audience size or types were really different, or maybe because the types of services or the prices of our services were different.
And when we'd reached the end of our free time together, we bartered! I offered graphic design work to her and she continued to offer her services to me. #accessiblesmallbizgrowth
Two. Learn the Basics
In some ways I'm still in this part of this process. When I started, I relied solely on Andi Smiles online resources (check out her FB group!!), and my All My Biz Pinterest board. Between those things and the contextualized information from Nadia I began to understand:
- How to track my income and expenses
(And in the most productive way that saves me time and stress come tax time)
- When to collect sales tax
(And how to pay it)
- How to save for taxes
(I started out saving 16% – forgot where I got that number from... but I'll find out what % I should save from now on when I get my 2017 taxes back)
Three. Get Organized. Smarter.
When I put my mind to it, I can be very organized (it's the moon in Virgo in me).
Every month in 2017 I made budget spreadsheets. I brought up my bank app on my phone and I sat down and I plugged in every single expense and income into a spreadsheet. I organized into categories that mattered to me at the time, like: "Shopping, Groceries, Eating Out, Business, Exercise & Medical, Gas & Transportation, etc." For a while I even had an extra category called "Expenses I Don't Expect Next Month," — and I took things from my main categories and copied them over into that column to get an idea of how much of my money went into things that were sort of "irregular" unlike rent and groceries and Netflix.
This year, I'm making some important changes to this process:
- Instead of transferring info from looking at my bank app to a spreadsheet, I'm downloading the spreadsheets monthly directly from my bank's website (eliminating some potential for human error and saving time).
- Instead of having one giant "Business Expense" category I now have all the separate ones that I will need to report for taxes.
- And while I'll still keep track of all of my expenses month by month, I'm also creating my annual totals for 2018 document now, which will show the totals of expenses and incomes throughout the year organized by category — again, helpful for tax purposes.
OKAY SO WAIT. WAIT. WHAT DOES THIS HAVE TO DO WITH PRICING THOUGH???
Four. Applying All of the Above to Pricing
Because I spent a year winging my pricing, I needed to know whether what I had been doing was working well or how it was not working well, in order to know how to change well.
- Talking to a professional about financials generally helped me know that I was on a good foundation to set my pricing.
- Learning all these financial basics has impacted how I approach the changes to my pricing.
- Getting organized in general helped me sit down and get organized in pricing.
A few days ago, I created a new document: The Educated Birth Print Shop Pricing, one page shown below.
In this document I outline how much it costs for me to print the posters that I sell of the infographics that I've created, from printing to packaging, to my time and skills, to shipping.
It costs $3.48 to print and package one poster. I pay myself $6.52 (I could write another post about how I got here, but I won't) per poster purchased.
My customer is charged $10, plus 3.75 in shipping (which is sometimes greater if the quantity purchased is higher — all that depends on package weight).
So in total, customers are charged $13.75 and I get make a little less than half of that.
My pricing decisions are pretty conservative. Pricing calculators I've used suggest that labor + materials x2 should be wholesale price, and x2 again should be retail. If I applied that to my shop that'd be:
$3.48 + $6.52 = $10
x2 = $20 wholesale price
x2 = $40 retail price
That kind of pricing just doesn't fit my needs.
Five. Stepping into Your Customer's Shoes
This is where I started and ended. When I opened my shop, I charged $7 per poster, because that was the kind of price I felt like I'd be attracted to as a customer.
But $10 per poster is better for my customers than $7 per poster. That $3 bump means that I can invest in this work that I'm doing to offer higher quality items, way better packaging, and things like the Spanish and French translations that I'm working on.
It means I won't run myself ragged, and I won't have vastly out of reach materials either. And discounts are always available too!
Bottom Line...
I went on a journey of understanding what was sustainable for my life and business in order to go from "this sound good" pricing to "this makes sense" pricing. Big girl steps!
Have questions? Thoughts? Stories about how you figured out what pricing works for you and your business? Leave me a message below!
