I’ve been mulling over writing a post about pricing creative work for a while, but it seemed especially appropriate to write it on “Time Travel Tuesday” since the problem with prices, for most people anyway, probably started back when their business started. When you’re first starting out as a business owner, it can be tough to sit down and compose a price list. First, you may not have any idea of how long a job will take. Second, you may not be conversant with the prices your competitors are charging, or the costs of purchasing supplies. Most likely, you haven’t yet heard the tired tropes of “do this small order for cheap and I’ll bring you a huge order”, or “if you do this cheaply for me, my husband, club president, soccer league etc. will give you tons of work”. Finally, when you’re just starting, you may be so unsure of your work’s value, and so eager to bring in business, that you’ll do work at almost any price, simply to be doing the work.
Doing the work is important, but even more important is doing the work at a price that makes you a profit. If your shop is constantly busy, but you’re struggling to keep the lights on and the bills paid, then your pricing structure is not doing you any favors. There are always going to be people who will tell you your prices are too high, who will ask for a favor, who will trot out the tired “do this for me and I’ll bring you orders bigger than you ever dreamed”, who will expect a friends and family discount, something they would never ask for at the grocery or the hardware store. There will always be people who say decoration is a hobby, not a business, who will think that the time and effort you put in to making their shirt or bag or quilt shouldn’t cost them anything. There will always be people, and that’s the important thing. The trick is to find the people who understand what you do and are willing to pay for the investment of skill and effort and time you make to do it.
So, if you’re new to the business, or even if you’ve been in the business a while, but have realized your pricing structure isn’t where it should be, here are some things to consider when setting new pricing.
- Calculate what you need to bring in not only to keep the business open, but to pay yourself a decent salary. Make sure you calculate all your costs, business expenses like machine leases and maintenance, electric, supplies, education, as well as personal expenses like mortgages, food, clothing, car payments, entertainment etc. Don’t forget to set a value on your time as well. Get a clear picture of what you need to make to have the sort of lifestyle and business you want.
- Do some research on what your competition charges. Some of that can be done on social media, following your competition can be a marvelous source of intel. Don’t rely on what your customers say your competitors charge, try to get info from as close to the original source as possible. Customers may sometimes embellish the truth to try and gain an advantage.
- Next, spend some time figuring out what makes your shop special. What skills do you have that your competitors can’t match? Do you offer superior customer service or exceedingly fast turn around times? What makes it worth doing business with you and why will customers be willing to pay the prices you’re going to set? Make sure you preserve this list in writing, because you will, at some point, most likely use it to explain why you charge what you charge.
- Finally, set your prices. Keep in mind you want to find a balance between fairly compensating yourself and pricing yourself out of the market. Make sure you’re clear on why your setting your prices at the levels you’re choosing, and make sure you also set a rock bottom price beyond which you won’t go. Once you have your prices set, sit down with a friend or family member and explain why your prices are what they are. Do a little role play, and have the other participant in the discussion throw some common pricing objections at you. The idea is to be able to concisely, clearly and smoothly explain what your price structure is and why, without hesitation.
Setting pricing is as much a matter of belief, in yourself and in the work that you do, as much as it is a function of supply and demand, or the marketplace. If you take the time to figure out what you need and want, and take the time to understand why your work has worth and what that worth is, you’ll be prepared the next time a customer asks incredulously “That’s your price”?
You’ll know why your price is your price, and that there’s really only one answer to that question.