this article originally appeared on Changemakers Unite as Pricing Matters: How to Price For Profit
In a world where time is your number one resource, you need to remove all barriers in your way of Freedom. Fewer barriers means smarter earning power.
Before you can earn a better living from your business, you need to have a defined mission, consistent personal income and a plan for personal Financial Freedom. Once your proverbial ducks are neatly in a row, rethink how you approach pricing.
Since most of us run coaching- or training-based businesses, time is literally money. If time is money, then why do so many of us consider pricing as an afterthought?
Pricing as an afterthought
Many Business Owners add pricing as an afterthought in the product design process. They first design a product from start to finish, then they assign a price to the product, based on what they think is fair. But the key to accurate and effective pricing is to consider the cost before designing your product.
Hit your profit goals by offering the right product at the correct price point. Meet your minimum income goals and exceed your dream goal by offering pricing consistent with the marketplace and your client expectations.
The path to Freedom is laid out for you in the Profit Pathway in MindShift.money’s business program: Cash Flow Cure. Four important steps will help you price a product to attract more clients, increase revenue and earn your Freedom
Step 1: Design your intentional life
While you should have goals for your business, goals aren’t your endgame. The purpose of Business Ownership is to add more choice and Freedom to your life.
The first thing you should consider when pricing a product is the effect on your personal life and finances. Remember how you like to spend your time, how many hours you currently work and how many hours you’ll need to work to meet your income goals. Outline how much time you’ll spend bringing on new clients and servicing existing clients.
Don’t skip this step. You want to price your products to serve you. Avoid becoming a slave to your sales numbers by prioritizing your needs first.
Step 2: Monetize based on product types
Time is money, especially for Transformation Business Owners. Consider how much time you spend on each type of product in your business. Is your business 70% coaching and 30% continuity, or 100% coaching?
Consider the product itself, product type, expected Cash Flow and revenue splits. All of these factors affect your profits and pricing decisions. I know standard practice is pricing a product ready to sell, but savvy Business Owners know pricing comes first.
Stop caring so much about what your business makes. What really matters is what your business keeps as a profit after expenses. Considering the product type and expenses while pricing helps you hit profit points and secure your Freedom.
Step 3: Value your time
If you spent 60 hours designing a product and bought a $300 software to support the process, your cost isn’t just $300. Your time is worth its weight in gold. Calculate your hourly rate and multiply the rate by the time spent creating the product. If your hourly rate is $50, your real cost for 60 hours of work is $3,300.
You can’t find more time. Time is the most expensive commodity of your life, so always price to include your time.
And price for what you need. Don’t entertain what a customer will pay for your product just yet. Address your needs first and foremost.
Step 4: Pick your Perfect Pricing
Once you’ve accounted for your personal needs and the nature of your product, work on setting a price. The Perfect Price creates enough value in the marketplace to retain interested customers, pay for business operating expenses, give you consistent Cash Flow and look after your financial needs.
Remember no business, no matter how small, runs for free. Even if you earn $100,000 from a product, you don’t all $100,000. Track your business expenses and account for having enough profit to pay off business expenses and handle your needs.
Look at your existing products, income targets and predict how many sales you need to meet those targets. Those variables are the key to Perfect Pricing.
But Perfect Pricing isn’t just about the numbers. How do you feel about your pricing? If anything feels off, or you feel uncertain or scared, take a second look. You need to feel confident to move forward, so don’t be afraid to adjust until you’re satisfied.
Pricing your products for Freedom
You’re in business to make money. And you need to use revenue as a tool to fund your journey to Freedom. So you’ll achieve Financial Freedom more quickly if you price your product correctly.
image credit: Bigstock/leaf
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.