Home – New Forums Starting your journey Pricing and expanding your business- how do you do it? Help me!

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  • #987647
    ScarlettR
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    I need advice baaadly.

    I am ready to expand my business by hiring some people (designers). However I don’t feel my current pricing structure supports this, because by the time I take out what I feel I need to run the business, I don’t feel like I have enough to pay my freelancer.

    This comes down to trying to pay them what I think they’re worth, which leaves nothing for me, and by paying them with the remaining amount I get the guilts. Problem is I feel like I’m way under charging for my services- full stop

    BUT I’ve already doubled my prices in the past 2 years and I don’t want to give my current and past clients sticker shock.

    I don’t believe increasing my prices at 5% a year is sustainable, and I don’t know what to do. By only increasing at 5% a year will not allow me to grow the business to the strength and size I want to, even in the next 3-4 years.

    Any and all advice welcome!

    #1163679
    David
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    ScarlettR

    For all businesses there is an optimum price point. This is where profit is maximized (not necessarily revenue) allowing a business to reinvest and expand. At this price point the expansion comes from new markets / products / services and not by competing on price in existing markets. If expanding your business in your current market does not deliver suitable profit (or feel ‘right’) why would you do it?

    Maybe the way forward is to look at new markets or customer segments (even if this was simply different targeting) ie identify customers / market segments where you can tailor you service (add value) to the level where your required price can be supported. Not all customers / markets are the same and you can segment them even if it is on the basis of existing customers / new customers. This might help with your ‘sticker shock issue’. You could possibly use this to you advantage by locking in (ask for a upfront commitment / payment?) existing customers at a price point (based on lower marketing costs / different features etc) and applying a different price structure for the new market segment.

    Something that might help ‘test’ different scenarios is our Pricing and Breakeven Analysis Model . It uses break even analysis to calculate your current business break even point using revenue, variable, and fixed cost inputs and combines this with price elasticity (estimates for price and sales volume variations) to produce revenue and surplus (profit/loss) forecasts by price. The model determines the Optimum Pricing to maximize your surplus … It may provide a little insight?

    Regards
    David

    bizpep.com applications deliver unique business and investment insight providing solutions for 1000's of clients world-wide
    #1163680
    PineapplePear
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    Hi Scarlett

    That’s a tricky one! I guess you’ve got to asses all of your costs vs what you are charging for the designs. Taking a look at your site it looks like you charge a flat fee for your book designs, so it’s a matter of working out what percentage of that fee you can afford to pay a designer, and finding a designer that can work to that rate.

    I’d be happy to chat about rates etc if you are interested, I charge flat rates for most of my work, rather than hourly as it helps customers know what to expect, so would be happy to talk about a flat fee for each of your project types.

    (my site and emails are down today, sorry, changing to a new platform and it went down over night, so if you’d like to chat, just message me or my number is 0417 572 528). (work can be viewed on the facebook link whilst the site is down)

    #1163681
    The Hobbit
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    ScarlettR, post: 189424 wrote:
    This comes down to trying to pay them what I think they’re worth, which leaves nothing for me, and by paying them with the remaining amount I get the guilts. Problem is I feel like I’m way under charging for my services- full stop

    Your prices do seem quite modest. However, you may find there are capable designers out there who for a variety of reasons would be willing to work for less than you think.

    #1163682
    John Mason
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    The Hobbit, post: 189445 wrote:
    Your prices do seem quite modest. However, you may find there are capable designers out there who for a variety of reasons would be willing to work for less than you think.

    I agree, I have sent you a private message regarding this.

    #1163683
    Peter Watson
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    Make sure your prices are competitive. See what your competitors are charging. You sound like you are selling yourself short!

    #1163684
    MissSassy
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    You have a lot going on here and it is not a simple answer. The business, from what you have said cannot support hiring people as you are not charging enough.

    To start with you need to overhaul what you are currently doing and decide if the clients you have are even making you money in the first place. If you do a review of your costs you may find that you are not making enough and they are actually taking advantage.
    Clients like this are not worth having!

    I really suggest sitting down with a business adviser and going through everything. Create a budget, look at what it will cost to outsource etc.

    From here you can decide if you are expanding just for the sake of it or to actually build your business and ultimately make money. You are not a charity and a business adviser may just give you the push you need to realise that you deserve to be paid more for your talents.

    #1163685
    ScarlettR
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    Hi all,

    Thanks so much for your great advice. I agree that my prices are low for the value I offer, but that isn’t so much the issue. It’s how to increase the price without causing sticker shock, and being able to make a profit while hiring others.

    I’ve thought a lot about what you all said, and I also spoke with another business coach who got in touch with me and his advice helped immensely. I’m very excited to say I’m beginning to get a clear idea on where to aim next!

    Basically- for anyone else who may need answers- my current structure is based on product value, and I have a set fee per products offered. I need to change this structure to per-effort offered, so that I’m getting paid the money I need for the hours I’m working.

    So rather than offering 3 book cover concepts and 5 revisions for $350, I assess the brief on the technical/creative/concept elements and then assign it to a tier based on the amount of effort that will go into it. This definitely feels like something that is sustainable, and that is workable for the designers and freelancers I hire.

    #1163686
    thbeach
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    ScarlettR, post: 189424 wrote:
    I need advice baaadly.

    Hi,

    you need to set your pricing so that you can run a viable business.

    I use a simple 5 line model

    1. revenue
    2. cost of making or buying the product
    3. cost of selling/marketing
    4. cost of running the business
    5. profit

    Basically if I take your Bread and Milk package of $350 ( ex GST?) and use that as revenue above, it has to pay for 2. make or buy the design ready to print, 3, the cost to market and sell the package ( website, your selling/quoting time, phone etc ), 4. pay some of your business costs and 5. leave some for profit.

    And you are right, you should pay your designers well, they’ll look after you much better and won’t starve either.

    The ideal model above is 50%.

    Which means that of the $350 you pay up to $175 for your costs to make or buy the design – your time has to be included as well as the designer as you are collecting the brief and project managing the job.

    Hence you need to be really clear about what you are offering in terms of value. Probably no more than a couple of hours total on this job including graphic design.

    The balance, $175 then is allocated to the selling costs, running costs and profit.

    You may want to abandon the $350 package if you can’t make any money or have an online transaction paid via credit card and a very limited service.

    Use this to work out the other packages. You may be able to figure out just how much you will need to charge.

    But if your clients want the sort of work you do you will need to convince them that you need to live too, or you won’t be there to do such good work. Here’s where you will earn your sales/marketing dollars.

    I think the ideal revenue target for a solopreneur, if possible, is $100K which equates to $2000 pw, but this will depend on those costs to make or buy being kept to 50% or lower.

    Neat website too, very impressive – well done!

    cheers
    nigel

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