Dear Women in Business,
What’s the point of being rich in likes and follows and poor in your bank account? It’s an all-too-common problem that many entrepreneurs face. Is it an inevitable consequence of the business journey or is there a better way? I want you to know that absolutely, there is a better way to do business and it all starts with your pricing.
Pricing is such a tumultuous issue for so many business owners and particularly, for female business owners. The problem is further exacerbated when you provide a service or if you are selling a product that you have made. But your pricing strategy is the foundation of increasing your income and being able to pay yourself more. I am going to share with you 3 simple strategies that big companies use so that you can fix your pricing and increase your income.
Step 1: Pay Yourself
I know you are probably thinking – huh? Yes! Pay yourself. Whether you have employees or not, there is a labour cost involved in running your business. If there were no human resources, there would be no business. The mistake that you are likely making is that you have not intentionally projected a salary for yourself for working in your business. No wonder your business cannot pay you. If labour cost is not in the expenses, then your prices will never pay you. It is that simple. Also, if you don’t make this shift to your prices, you will never be able to hire anyone and guess what, you won’t be able to scale. So, step one to fixing your prices – pay yourself.
Step 2: Pay Your Business Bills
I have been working with entrepreneurs and business owners across the Caribbean (Barbados, Grenada, Jamaica, St. Lucia, and The Bahamas) and in the US and UK. You’d be surprised what many of them have in common: an idea that the only expenses involved in running their business are the ones directly related to producing their product or service. So when we work through the issue of how they price their products or services and I ask the question, ‘what are your business expenses?’ they say ‘none except what I spend to supply my product or service”. Here’s what you did not consider other operating expenses like your subscriptions, your electricity, your internet, your rent, etc. These are expenses that help you to operate your business even if you are in business part-time or operating from your home. All businesses have operational costs and if you don’t cater for them in your pricing, it’s exactly why even though you are making sales, your bank account doesn’t look like it. Your business needs to pay for its operations.
Step 3: Price for your minimum
I know we all want to think of our business at the highest levels of our sales. But when it comes to pricing for profitability, it’s never safe to base your prices on sales figures from your ideal months. Peak months are rare for some businesses which means that if your sales projections are based on those peak months figures, you will rarely ever be able to cover your expenses including your labour and business overhead.
Set your prices based on the minimum number of sales that you hope to achieve every single week/month. I know this may seem counterintuitive but, here’s an example to see how it works. If you set your pricing structure based on a minimum sale of 50 per month, when you make those 50 sales, you have enough to cover your expenses, pay yourself and grow your business. However, if you base your prices on the premise of your maximum sales target of 100 sales, then in your off-peak weeks and months, you will never make enough to run your business. I know this example is very basic, but I know it will trigger something in your mind as to how you can change your pricing structure and increase your income. Here’s the bottom line: you are in business; I know your business is something that you are passionate about but your passion should produce profits. You see, your passion, purpose and self-actualization become secondary when you cannot pay the bills. So before you can even think about scaling your business, you have to fix your income. Today is a great day to start making some changes.