Why do you charge what you charge for your products or services?
This is a question that a lot of small business owners forget to examine on a regular basis. When you’re starting and then running your business, it’s easy to get overwhelmed by your day-to-day routine. Fast forward a year or so, and you’re just grateful to still be in business and moving forward. That’s great! But have your prices kept pace with your needs -- both professionally and personally?
As your expenses and customer base change, you need to reassess your rates. Otherwise, you won’t stay in business for long. Invest in yourself by keeping good data and financial numbers for your business. Having a comprehensive understanding of your current operating expenses will allow you to make good, fact-based decisions.
When you’re thinking about your operating expenses, make sure to include your owner’s salary or hourly rate. Paying yourself is just as important as paying the electric bill, and identifying that expense will help you to forecast how many sales you need to make in order to benefit from owning your business.
If you’re not sure how much you should pay yourself, keep in mind that most industries have salary surveys you can sort by region. That will give you a solid idea of what you should pay yourself -- even if that number is just a goal for now.
Bonus Tip: Know what your competitors charge. Wouldn’t it be great to know that you could raise your rate by 20% and no one would blink an eye?
Now’s the perfect time of year to make these assessments. 2022 will be here before you know it, so spend time now to understand your finances and make a plan for the new year. Once you know your expenses, you can work backwards and determine what your pricing needs to be and how many sales you’ll need to meet your goal.
One more tip before I sign off of this week’s blog post: Just because you’ve had a product or service since you started your business, it doesn’t mean that you need to offer it forever. During your assessment, if you find that there’s something you’re offering that’s not profitable, it’s ok to let it go. By eliminating that item, you can spend more time developing or providing a more lucrative product or service.
So, why do you charge what you charge? Is it time to make some adjustments?