Pricing Strategies: 5 Key Factors for Profitable Business Pricing [Ep. 207]

Michelle (: 00:01

Hey there. Okay. We're diving into pricing today, which is to me, one of the most controversial topics in the online space. All right. Or just in business ownership in general, I think pricing, there are so many freaking opinions about it. All right. And so I'm hoping as always to give a slightly different perspective on this. All right. So one, there's, we're going to do two things in this episode.

One, I'm gonna give you straight up truth and facts of what needs to be considered and when you're pricing your products or offers, okay? Like there are some cold, hard factual data points that need to be considered. Then there are your other variables that are a little bit more fluid, right? You've got some fluid variables, just some different like your goals and different things and like your vision for your business and the strategy around it.

also play a role, okay? So, I think you might need pen and paper for this one. And if you don't have it, like just come back and listen to it again, okay? Save this one, share it, because truly this to me is gonna be one of the best episodes. I talked about it a little bit in the last episode, diversifying your income about different product and pricing streams, but we're gonna get into all that, okay? So number one, let's talk.

Factual data points, right? Because there are certain things that you just have to consider. And to me, there are five considerations that you have to make sure that you are keeping in mind when it comes to pricing your products so that you are pricing them for profitability, right? So that you are actually making sure that your price points that you set your pricing up at is actually going to net you a profit.

Right, I don't care if your product is $10,000, if it costs you $15,000 to execute it, you have now given yourself a $5,000, you've put yourself $5,000 in the hole. Right, so that's what I mean by factual information that has to go into your pricing. If you're gonna charge $10,000, you wanna know that there is a level of margin, depending on what you want your pricing margin to get into, and I'm not gonna get into all of that, but let's say you wanted a 20%

Michelle (: 02:22

profit margin or 50% profit margin. If that's the case, then you need to have $5,000 invested into your product price at a 10,000 to have a 50% markup. Right? So five variables, maybe four. I'm trying to, I'm looking at my list here. It might be four. Number one is time. This to me is the one variable that every single person, especially service providers, especially solo entrepreneurs, especially skilled professionals.

because what I see most of my clients are skilled professionals, right? They are very, very skilled at one thing. They've never typically been a business owner. They've been a skilled professional turned business owner. And so their time is not something they ever track, right? So they're either in a time for dollar trade saying, okay, I wanna make $25 an hour, $50 an hour, and they're in a time for dollar trade, which ideally we'd like to get out of, because again,

most of the time you're not billing for all your time, right? And so the time spent with, to actually execute the product or the offer, right? So that needs to be taken into consideration is what time do you have to spend, right? So like if it's four calls a month, that's an hour, but does it take you 30 minutes to prep for each call? Is there any type of review that you're doing in between?

What does it look like? How much time be accurate? And maybe for in the beginning, you don't know. And for the most part, we don't. We always, always underestimate our time. And so when you are especially with a new offer, what I always encourage my clients to do is track their time. I'll give you a really great example of this. I had a client who created a new offer. And oh my God, do you hear that? Like side note.

pause. Anybody that had COVID have this long COVID symptom where like your throat gets super sore when you talk all the time and then you feel like you're out of breath? Anyway, it's so friggin annoying and nobody will tell me how to change it. Like I cannot figure out how to get rid of it. Anyway, timing. I had a client who had a new offer she created. She did it one time. She just kind of picked a number based on like what she thought it was going to take.

Michelle (: 04:47

I think she priced it, it was like, I don't know, $1,700 or something like that. And I said, okay, when you, now that you sold this one again, I want you to actually track the amount of time. Cause I could tell that she had put a lot of time into this that she had not accounted for. She came back to me and she said, Michelle, it took me 32 hours to execute that. So.

That was without even like really that many calls to the client, right? Like that didn't even include face to face time with the client. That was just to execute the actual project, the behind the scenes. So 32 hours into a $1,700 offer really was not profitable. Right. And so we used it. We use that. And now she actually decided that offer. She has to put too much time into it to actually be able to price it at a point where people will purchase it. And so.

That's why I'm saying it's such a variable that you have to consider because she would have probably continued to sell this thinking she was making money and she wasn't, right? Like she was actually completely losing her ass on this offer. So we just scratched it. Like, okay, we've been there, done that, we tried it, but there's no way for you to cut back on the number of hours just based on what it was. And we cannot honestly sell it for anything more than what we are currently selling it to based on her market. So scratch the offer.

All right, so that's what I'm saying. It's so, so important to track your time. The second variable is your administrative costs. And some of your administrative costs, sometimes you would call it overhead. But again, this I see is in the solopreneur space and the service space is we don't think we have a lot of overhead. Because when you think overhead, you think a building, right? Like a brick and mortar business has a building, they have employees, they have their...

all of their utilities and different things that go into that. When you work from home, maybe you have a laptop, maybe you're doing it all from your phone, I don't know. You think, okay, I don't have any admin time. But like if you have a VA, how much are you gonna have to pay your VA? Like how many hours does your VA have to put into this set offer, right? Do they do all the onboarding? Do they do all the offboarding? Do they have to create social media to sell the offer? Right, you can't.

Michelle (: 07:04

factor in all of your administrative costs because some of it is reoccurring. Some of your administrative costs just kind of roll over from offer to offer. So you don't want to include, you're not going to include your entire internet and cell phone bill into every single offer because that money is dispersed throughout all of your offers, but you want to take into consideration your administrative costs. So administrative to look into, mostly when I say admin is, A, is there admin time on your end?

which again comes into time, but we don't really look into the administrative side of it. Is there, do you have somebody else that is helping you execute this, right? So whether it's another coach, whether it's a VA, an OBM, something of that sort, do you have their time and their expense figured into this? And then is there like any administrative software costs, which is also moving into the next.

point is like, what are the costs associated? So do you have any software costs involved in this? Do you have costs to hire other people? One of my offers that I have or had, I mean, I don't really promote it anymore, but I still do it. It's still part of it. I just don't advertise it that much is that when somebody works with me one on one, like in my really high level, intensive like six.

I'm talking like three month intensive, not the rapid fire, but more of like that set calls every week. I will usually include, I have a set amount of money included into that offer that I've factored in to hire in other professionals. Right? So like if a client needs a marketing, like a full marketing strategy, like a digital marketing strategy.

I have a couple referral partners that I bring in that I will pay them to do like an hour session with or a copywriter. Like if we need a copy audit on an offer or landing page or something like that, I will include it. And so I include their costs to me in my offer and in my pricing so that the client doesn't have to pay extra. They just know that it's included in there and that it includes up to, you know, we can bring in whatever professionals we need in order to execute the strategy that we're trying to put into play.

Michelle (: 09:23

So if you have something like that, is there any other costs involved? Do you need other professionals? Do you have software? Is it like, if some of these softwares are like a per user thing, right? So like, do you have to have additional licenses? Like an example of that would be ClickUp. Like if you wanna use that as your project management tool with all of your clients, I think you only get five licenses per, for your, like with included in the one.

upgrade, right? So if you need more than five licenses, because you're now at 10, 20, 30 clients, right? Like what are the licensing fees that you have to pay or the costs there? Again, even if it's only $5, you may decide to wash it. You may decide like, okay, I'm just going to eat that. But you have to also understand like, if you decide to eat it, which is fine, it's going to cut into your profit margin. So there's that. Then the last one that I've got on my list here is your

Michelle (: 10:19

the market, understanding competitive analysis, your competitor analysis, understanding what your ideal client is willing to pay, like what is the actual market standard, right? And again, we all, that is something that is super controversial as well. But like think about it in this sense is like Starbucks, they're probably one of the highest in the market of coffee, right? Like they are so overinflated with their...

their industry. And so their profit margin on every cup of coffee is probably astronomical because they also know that their market demand will pay it, the market will pay for their brand. So they can charge a little bit more. But maybe if Starbucks wasn't Starbucks, they their market might say like, I'm not paying more than two bucks for a cup of coffee, right? Like I live in Southwest Florida with a bunch of retirees, I can tell you right now, I can't tell you like the amount of

retirees that complain when they have to pay $2.50 for a cup of coffee at a diner, right? Like they understand their market. They're retirees, they're living on a fixed income, whatever. So just because Starbucks can charge $7, your local mom and pop diner who has an average clientele that's in their 80s on a fixed income isn't going to charge $7 for a cup of coffee, right? So you have to understand your market when it comes to pricing your offers, okay?

So yeah, those would be the four main ones that I would really, really focus on, right? Is your time, your administrative costs, your administration, so meaning like other people, the costs involved, any type of like overhead costs, software, licenses, anything that would require you to pay money out in order to execute this offer, and then your market.

the market industry, the standard, your competitive analysis on that. So those are like your four key, like factual, like those are just, I'm sorry, it's just not, there's no fluffy pie in the sky. Like they are just factual pieces of information that you have to take into consideration when it comes to pricing your offers. Now, let's flip this a little bit and let's talk about

Michelle (: 12:44

your goals, your vision, the different pricing strategies, like what's the strategy around it, and communicating value, right? And how your brain works and whatnot. And so I wanna give you a story, a little bit of a story on this because, and I mentioned this in the last episode about diversifying your income, so if you haven't talked about, or if you haven't listened to last week's episode on diversifying your income, highly recommend you listen to that because half the story is in that episode.

Okay, so one of the things that I realized this year, very much so, was that I feel very, very strongly about where I want to keep my pricing for my coaching and strategic planning. And I know that I am worth more. I have been told that a million times.

I have been told that I have money mindset issues. I have been told that I don't value what I do. I have been told that I don't attract the right audience because of it. Okay, I get it. But I also have to know where I stand in my heart, right? Like, why am I doing this? Because why am I a coach? Why am I a business owner? Why do I put up with this? Like, why do I put up with the roller coaster of being an entrepreneur, right? And

I have a passion and a heart to serve. And I know that I can help a lot of people. And I get a lot of joy and satisfaction and fulfillment out of seeing people's passions come to life. I love when things work, right? Like I love getting that text that's like, oh my God, Michelle, this, I tried it and it worked, right? Like there is something so, so sad, like it just fills my heart with joy.

Okay, and I believe that every single person that is trying to pursue a passion and be serious and really treat their business seriously deserves to have a coach or a mentor or a strategist, right? Like, I really believe and feel very strongly about being a strategic partner in somebody's business. And I don't feel like it should cost $10,000 a month.

Michelle (: 15:08

I don't feel like it should cost $1,000 a month or an hour. I know people that do it and I know that they're not giving any more or better advice than I give. And I know that they don't have any more or less experience than I have. But in my heart, it doesn't feel good to me. It goes against everything I believe in. And so this goes back years ago. I was a hairdresser when I first started.

job. My first goal, my goal in my yearbook was to be a New York City salon owner. Like I wanted to have a day spa in the city. And but again, part of that, the issue I had in the salon industry, and why I had to get a job in addition to it was because I never charged people enough. Right? Because I don't feel like getting your hair done should be a luxury.

Because I know how much and how good it makes me feel when my hair is done, right? Like as a hairdresser for a lot of years, I had access to it, right? I had access to it. We were, you know, and I didn't pay for it. And I loved it. And I know what a difference it makes. Like right now, I don't feel like my hair really looks that good. And I don't like my haircut and then.

when your hair just looks like ass for my females listening to this, when your hair looks like ass or you feel like your hair looks like ass, like it just makes you feel like ass. Right? And like that to me was not a feeling I ever wanted people to feel. Like I didn't want that to be a luxury. Right? And so I kept my pricing low in the hair salon too, because I just wanted to help people feel good because I know what a difference it can make.

when you feel confident in your own skin, when you feel confident with the way you're presenting, when you feel confident in how you're showing up and like when you're having a good hair day, I don't care what anybody says, your confidence level is just different. And I wanted people to experience that and feel that. And I didn't want it to feel like it was get my hair done or pay for my kids extracurricular activities, right? Like you should be able to do both. And that's how I feel about being in the coaching space too. Like I do not feel.

Michelle (: 17:30

like coaching, mentoring, consulting, strategic planning, I do not feel like that should be a luxury. It is a necessity in order to grow your business. And I feel like everybody needs that opportunity and everybody needs that mentor in order to grow and really truly capitalize on what they're doing. And so I keep my pricing low. And it's lower than what a lot of my competition has, but it's something that I 100% finally feel like, nope.

damn it, this feels good. And I have a strategy in play to make up for the fact that I know that if I keep my pricing low, I am going to have a very difficult time scaling my coaching business, my one-to-one business, to over 250,000, right? Because that was originally the goal. And so I had to really think about like, okay.

Why am I feeling so strongly about this? Like what is the deeper strategy? And so my bigger strategy, I don't really, again, the whole story about diversifying my income and where that came from is in last week's episode, so go listen to that. But I created a pricing strategy that made sense for me. Like I know that now I can keep my pricing here and not feel bad about it and tell everybody else to go fuck off when they tell me I need to raise my pricing because I don't wanna raise my fucking pricing. And I...

know and I feel good about it and I know that I can help people and I want to help people and I have a strategy in play to help me hit my other goals for my life, for my family, for my business in other ways. Okay, so yes my pricing might look low to some people, but it's a part of a bigger plan and I really think that we, a lot of people.

need to really consider that. I had this conversation with somebody on a coffee chat the other day because somebody kept telling her to raise her pricing, raise her pricing, raise her pricing. She's a money coach, right? And I'm not saying that people that, you know, but she wants to help people that are in serious debt. She wants to help people leave legacy. She feels very strongly about her faith and all of these things. And like raising her pricing just felt.

Michelle (: 19:46

and quite honestly she couldn't sell it because she just didn't feel good about it. And so I was telling her my story, my conversation, and she was like, you know what? I appreciate that perspective so much because I've wanted to keep my pricing low. But here's the other side to lower pricing is I believe wholeheartedly in longevity. I believe very strongly in lifetime value of a client. Once you're in my world, I don't want you to ever feel like you have to leave, right? And so I don't wanna be a one and done.

coach, right? And she didn't want to be a one and done coach. She wants to help people create massive legacies like generational wealth. So in order to create generational wealth, you need to work with her for a long period of time, right? Because you're working on that really deep, like multiple generation wealth. And so the strategy, every time you hit a different level, the wealth strategy, the investment strategy, the planning all looks different. And that's how I feel about business strategy and growth and strategic planning too, is like,

every level of growth, okay great your first goal is to hit $5,000 a month, great that strategy looks different than hitting $10,000 a month, that strategy looks different than hitting $20,000 a month. And I'm not saying that sometimes you might need to move to a different coach, but my goal is always to be 10 steps ahead of my clients and I'm the one learning and so they can stay with me long term. Right? And so my pricing structure also looks at lifetime value of a client, not

one time value. That's where I'm saying like you're pricing, looking at the strategy behind it. I have a client that I've worked with for five years. The lifetime value of that client, which I actually did a case study, if you want to go back and listen to that episode, that's when Nicole, her and I have been working together for five years. And we started out on like a $75 program. But the lifetime value of our relationship

has far out seeded if I had charged her $5,000 upfront. And quite honestly, if I had quoted her $5,000, I probably never would have worked with her in the first place, right? And we wouldn't be where we're at, we wouldn't be best friends and blah, blah. So again, everything has to look at the overarching bigger goal. What is the bigger vision for this, right? And that's where you have to look at your strategy. There's so many different pricing models out there.

Michelle (: 22:11

There's the time for dollar trade. There's the deliverables. There's package rate versus contract, contract or retainer rate. Like there's all the different models that you then look into. So you start with, in my opinion, if you wanted to really figure out, okay, where are you at? Is number one is like, number one first and foremost always is connect, reconnect with the heart. Reconnect with the heart and how you wanna serve and how you wanna be known. Okay? Like I...

want to be known as the coach or strategist that always has your back and it doesn't cost you an arm and a leg to work with me. Right? And again, like these high ticket coaches, God bless them, that works for them. It will never work for me. And that's okay. That's okay. Right? And so I really just want people to know that like help

is available. Getting help and having somebody in your corner is not a luxury. It is something that you can do and you can have high level clients and quality clients that are very committed at a lower price point and don't let anybody else tell you that. I have clients that I've worked with for five, four, five, three, four, five years. Don't tell me they're not quality clients because I didn't charge them a fucking fortune to begin with.

So that whole like, oh, you attract better clients when you raise your prices. No, you don't. Sometimes you attract worse clients because now they're, they're like so invested and they have so much money invested into you that they expect fucking miracles because I just gave you $5,000. I expected to turn 10,000 overnight. Right? Like sometimes you get unrealistic expectations because they bought into this bullshit that if you pay more, you get better results. That's not true either. I have.

millions of stories of people that have invested thousands of dollars and gotten absolutely freaking nothing. So that again, you can tell I'm getting fired up because that's a freaking a hill I will die on. Higher pricing does not mean better quality. I don't care what anybody says. It just doesn't. Um,

Michelle (: 24:30

So anyways, thinking about really reconnecting with your heart, right? Reconnecting with your heart and understanding like what do I need this, what do I need to come from this? And really where does that and how do I need to do this? What is going to make me feel the best, all right? And that's where you start. Then you look into time, admin, costs, market, all of that, and you really start to look at is this a value-based, is it a time for dollar, how are we gonna?

package this, like then you look into the facts, like the actual data, the hard, cold facts and that are involved, and then the different pricing model. How do you wanna execute this, right? And then making sure it's all in alignment with your goals. And if it's not, do you need to diversify your income? Do you need to have, you know, what needs to happen in order to actually get you where you wanna go? But again, so many variables that are involved with pricing, and they all...

work. They all work. All right. You've seen the people that have told you they're making $10,000 on a $9 upsell, right? Okay, great. Right? Like again, it all works. One of the things I also really learned this year is that I, I prefer to do business one-on-one and through relationships. Like I love to have conversations. I feel like I'm having a conversation with each and every one of you on a coffee chat right now. That to me is what is so important. And that's how I want to do my

and that's how I want my business to grow. The whole sales funnel thing, really, I'm open to it, but it's not, it will never be my number one strategy as far as having a lean magnet, then having an upsell, then bringing them in. That to me is just not how I want to acquire clients. And so my pricing model just doesn't reflect that in having those different.

strategies and stuff, like it just doesn't work for me. I don't wanna do that. And it kind of, again, it goes against what I believe in and what I'm good at and what I'm naturally gifted at, which is connecting with humans on a human level and having conversations and knowing that those conversations are providing value to others. And that's how I want to build my business and that's what my pricing is based off of. And so all of that to say.

Michelle (: 26:55

take the time to really reconnect and do again what feels good. If you get to a point where like, you know you wanna keep your pricing low, but it's not gonna get you where you wanna go as far as your goals, go back and listen to the episode on diversifying your income, all right? And looking at, there's a lot of options there. And then really taking the time, anytime you create something new, if you're reevaluating your pricing because you're moving into the new year, if you're contemplating a price increase,

Right? Take into consideration time and administration, your costs and your market. Right? Really dive into that. Do a time study, go back through, go back through your calendar. How many, you know, the, oh, the other thing with administration, the key point there was like what, how many contacts does it take for, before your client converts, right? Like that's an administration, administration costs that you need to kind of factor in if you have that data available.

So like, if you know you've got to have three conversations with somebody, which I know there's other sales gurus that say you should be selling in your DMS, whatever again, it works sometimes. It doesn't, it's not how I choose to build my business. I like to have these conversations. I factor in the fat coffee chats into my pricing, knowing that I'm going to have at least a 30 minute chat with somebody. And that's okay. Right? Like I factor that in. And so I've got all of that laid out.

And so just create some type of reusable template that you can use that adds in, like, okay, how many hours did I spend doing this? Or what does the hours look like to execute this? What are my administration fees, like VA, other thing, administration, like VAs and your coffee chats, right? Your lead generation, anything of that sort. Your costs, do you have other costs involved? And then what is your market, right? Do some market research, look at some competitor analysis.

and really just kind of see what your market trends are there. And then you can figure out your different pricing models, what's your overall strategy? Is it a one-time cost versus a lifetime cost? There is nothing wrong with either one of them. There are huge, you know, you could have one-time project base, but repeat business, right? So you could have loyal customers with a lifetime value, but it's all very project based versus retainer based.

Michelle (: 29:18

I prefer to be on the retainer model, the monthly reoccurring revenue model. That's my pricing strategy, reoccurring revenue that gives me a baseline. And then I know where else I can fill in. Some people really enjoy project work, but they like for that project work to be repeat project work. Right? Again, lifetime. There's other people that like to just do one big project and then send them on their way and keep the churn going. Right?

influx of new clients and if they get a repeat business great, but it's not their pricing strategy right? Their model is not based on getting repeating clients right? Because then that looks at your offers and different things. So as you can see, that's why I say pricing is such a diverse topic and it's one that is so opinionated and there's so many people that just say raise your price, raise your price, raise your price, raise your price. It's the answer to fucking everything. Raise your price.

Well, it's not the answer to everything. Raising your price is not gonna solve all your freaking problems. It's not the be all end all to growing a successful business. It's not the be all end all to hitting your goals, right? Like it is not the only answer. And raising your price, but without ever knowing how much time you spend on it could still be putting you in the freaking hole. So really looking at pricing from a very, very strategic standpoint of

sidering a price increase for: 2024

I'm here for it, I love it. Go figure out what that price increase looks like based on all of these factors, okay? And then come up with a price that is one that feels good and also is going to get you where you wanna go, right? Hit your goals and whatnot. So, as always, if you have any questions, love to dive into pricing with you during a rapid fire day. We can absolutely do that.

Michelle (: 31:43

But also I'm getting super excited to really start, I'm like jumping the gun, I'm really like chomping at the bit to just dive into the new next year's Biz Plan program. I love this time of year, I love strategic planning. Next year's program, I sent out a little teaser email about it. If you didn't get it, you want it, hit me in the DMs and I'll just forward you the email. But the Focused Visionary, right? I love it. It's the Focused Visionary Mastermind is that,

12 month strategic planning, sales planning. We're talking all of these things, like what does it look like for you to hit your goals next year with a strategy? Everything's gonna have a strategy behind it. Everything's gonna give you all of that factual information. We're gonna be actually analyzing all of these things so you don't have to try to figure it out on your own. And I am so.

freaking excited about it. It's a 12 month program. I cannot wait. If you want to get on the wait list for the focus visionary. The reason I say wait list is because it is a business planning program for next year. So obviously I'm not going to have you pay for it now when it doesn't actually start. It starts in December though. So the focus visionary will kick off the first week of December. That's when we do our initial intensive reflection period like

really diving into the actual strategic plan for the next year. And then it's going to carry on with the mastermind component and all of the things. So if you want in on the wait list, like I'm so excited about this program and yes, it's priced low, but I don't care because I want everybody to be able to have that strategic planning piece. It is the piece I see missing in so many businesses. The piece of like, hey,

your business is telling you the story. The data, the answers that you're looking for is all there. It's just you don't know how to find it. And so the focused visionary is going to help you stay focused on your big vision and also make very, very data driven decisions that are going to catapult your business. I'm talking like one client last year hit her revenue goal in July based on the data that we found last year.

Michelle (: 34:04

and we went double down on and she hit her entire revenue goal in July. So that's what I'm talking about. So get on the waitlist drop, it's in the show notes. Get on that waitlist. I'm telling you it's going to be one of the best programs you will see in 2024 and yes I feel that confident about it. And I want you to have that same level of confidence in everything you do in 2024 as well. All right so I'll talk to you soon.