The Price is Right! Or is it? Is Your Pricing Actually Driving Profits?

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This must be the summer of nostalgia. First Barbie, now The Price is Right. In August, we lost famous host Bob Barker at 99. He hosted the Price is Right for thirty years, and in that time, the format has changed very little. In each show, contestants guess the price of everyday household products, and the most savvy nail it every time. So, in Bob's honor, let's stop the guessing and start creating pricing with confidence.?

It's All In the Numbers?

Last month, I posed the question, you provided the insights, and now I'm sharing the results! In a previous LinkedIn poll, I asked, "Are you considering raising your pricing? What might be driving that decision?" Based on the results, an overwhelming majority of you are feeling the pressure to raise your pricing, not just from competitors but from inflation. This is important as we enter Q4 and plan for 2024.

We're all feeling the crunch and watching our bank accounts rapidly shrink as we pay more for the same products and services (groceries, Windex, garbage bags, you name it) we did a year ago. Today's Price is Right contestants have their work cut out for them.?

So what's a business owner to do??

Raise prices to keep up with the rising costs and potentially alienate clients or take a hit to our profitability. I am a huge proponent of raising pricing for the right reasons, and now is as good a time as any. Before starting, do you know if your current rates drive profit today?

It isn't easy to establish pricing when you first start. Most of us, myself included, selected an hourly rate based on three questions:

1. What are my competitors charging??
2. What will clients pay??
3. What am I worth? (I hope that the third question was actually the FIRST.)

Then, we test and adjust over time. Maybe you set a rate and added a percentage to hit a profitability goal, say 15% or 20%, which is the most typical. Many of you might be using a much more sophisticated model. But can you clearly define your break-even rate vs. profitability or how you cover your overhead expenses within your hourly rate or price, especially if you have a team?

I find that my clients are using pricing models that trick them into thinking they're profitable when often they're underpricing their services all along. There's a better way.

This formula is going to change your LIFE!

Meet the Fully Burdened Hourly Rate - (Hello marketers, this name needs a Glow Up!) It might be early for math but take a look below.

The top formula is the standard pricing that we typically use. The "burdened hourly rate" differs because it includes additional factors such as benefits, overhead, capacity, and utilization. Using these levers when calculated annually gives you a much better view of your pricing and addresses these hidden costs you need to cover in your hourly rate.?

It really works. It completely changed my business and every client I have introduced this concept to have transformed their revenue. But don't take it from me. Here is a client's perspective:

"Setting pricing for a business can be a real challenge, striking the balance between competitiveness and profitability. Lisa's straightforward formula provided me with a new perspective. It revealed that, despite my belief in profitability, I was inadvertently shortchanging my business, essentially giving away money with every billed hour. I'm immensely grateful for the insight and data Lisa provided, allowing me to set my pricing with a much more informed approach."?- D’nelle Dowis Founder and Owner of Berry Interesting Productions, Inc.?

Let me tell you, THIS is the best way to raise your prices.

Not just because of competitors or external market forces but to guarantee you're making money for every hour you bill. Once you dial in your pricing, you instantly make more money that will actually show up in your bottom line. Now, that's what I'm talking about. Bob would be proud.?

I can walk you through this, and we can do it together for your business. book a one-on-one with me.

I have two events coming up that you don't want to miss. ????

First up is my LinkedIn Lieve event - Make More $$ in'24. It's FREE. Register here: www.smithcous.com/events

The second is The Fall Experience, created and hosted by Ready. Set. Pivot. (RSP) on Friday, 10/13

I'm so excited to share that I'm sponsoring and speaking at the Fall Experience Conference put on by RSP. This year's theme is transformation.??

The three-day event will feature keynote speakers, breakout sessions, and networking. Attendees will have the opportunity to learn about the latest trends in the industry and network with professionals from all over the country.

Check out the link to learn more ?? https://www.rspexperience.com/thefallexperience

Bio:

Meet Lisa J. Smith, Founder and CEO of SMITH co. She is the premiere sales consultant and coach for Female Executives and Business Owners. She believes true transformation occurs in your business or career when you shift your mindset about sales. She works every day through consulting, training, and coaching to create radical change and boost revenue.

Lisa launched SMITH co. June 2020 as a "COVIDpreneur." Despite the turbulent economic landscape, she reached six figures in her first year. Having spent 30 years selling professional services in every economic environment imaginable, she has gained a multitude of diverse experiences. Lisa profoundly understands her client's challenges because she's been there herself.