The Pricing Problem

Pricing tends to be one of the factors that most people fear.

Am I pricing my services too high?

Will people buy at this price?

I want to make sure what I am giving is valuable, so is this valuable enough?

However, the way that most people price their products and services leads to them becoming burnt out and broke.

One of the things you need to recognize as a Leader is that revenue is like nutrition for your business.

If you don't feed your business enough, your business will starve and you will fail as a Leader.

So here are some factors you need to take into consideration:

➼ How Much Do YOU Want To Make?

Sounds silly, but most people don't price their products and services high enough for JUST the work they do.

Sometimes it is so low they can't even feed themselves based on it, let alone a team.

➼ How Much Do You Want To Pay Employees?

If there is work you don't want to do, you'll need to hire someone else to do it.

So whatever your pricing is needs to be enough for them AND yourself.

➼ Taxes

This is one many fail to remember, but taxes can get high if you aren't paying attention.

Not to mention they take a LOT of time and energy, so many businesses hire others to do it - which means the government takes some money AND you have to pay the employee.

You could also pay someone outside your business to do the taxes, but of course that will cost even more.

Plus, the more you make, generally, the more you are taxed, so are you taking that into account?

➼ Cost of Goods

Many businesses have material costs, so are those costs covered PLUS how much you actually want to make at the end of the day and everything else?

➼ Software/Hardware Costs

Every business requires software, hardware, or a combination of both.

Are you making enough to cover those costs?

You ALSO need to ensure you make enough that if something breaks/goes down/goes out of business, you have enough revenue to get a backup.

➼ Anything Going Wrong

We live in reality, so it is inevitable that something will go wrong.

Perhaps someone won't pay you on time.

Maybe a product breaks so you need to replace it.

Or a major piece of machinery breaks, so you need to continue paying your team during their downtime as the machine gets fixed.

Someone quits and leaves a TON of work behind that needs to be picked up by others who need to work overtime (1.5 times pay).

You get sick/injured and can't work for a few days!

There is a nearly endless list here, but your pricing needs to take ANYTHING into account.

If it only takes ONE straw to break your business, you are going to lose.

➼ Efforts To Expand

The goal for most businesses is to eventually grow, but in order to do this you need FUNDS!

If you are struggling to only pay for what you currently have, then you won't be able to grow.

➼ Indirect Work

Whether it is you, or others on your team, there is always "work" that doesn't directly lead to revenue.

Whether it is team meetings, emails, phone calls, research, etc., there is always some work that doesn't directly go into earning your main revenue.

So if your calculations depend on your time or your employees doing revenue-earning work 100% of the time, you have unrealistic expectations.

➼ Competition

There are MANY factors within this to look at.

Are you offering something of a higher/lower quality?

Is your competitor even succeeding? (Most businesses fail in their first 5 years, and many determine pricing on failing business models)

Do you have a competitive advantage you can take hold of?

Are you offering "too much" to overcompensate for not knowing?

Are you priced too low and making your services seem "cheap"?

These questions and more need to be taken into consideration as you determine prices.

This isn't an extensive list, but are many of the pieces that many people forget.