First take a minute to write down all your business and personal expenses. Chances are, you may be running this business yourself, so it’s important to look at how much you spend. Keep in mind and write expenses that are both current and ones that may come up in the foreseen future. Also, discover what the expenses are monthly and yearly. By writing down the amount of expenses you need per month and per year, will give you a better idea of how much you need to make to be okay.
2 | Budget
Determine a budget for your business that works for you. This budget will and should include some of the expenses you’ve already listed. If you feel like you may be over your budget or don’t think you’ll be able to make enough right away, it’s a great way to identify and reallocate certain expenses. Maybe there’s a less expensive or free resource that will work until you feel more comfortable increasing your budget. Again, keep in mind, this is your money, and your business. You don’t need a huge budget to start in order to be successful. It’s okay if you’re resourceful when you’re starting out. Identify the items on your list that you really need and see how you can eliminate the rest.
3 | Financial goals (current + future) (monthly + yearly)
What are your financial goals? Both currently and in the future? How much would you like to make in a year or every month? I recommend making achievable goals when you’re starting out – it’s not very likely that you’ll become a millionaire after a month of work (but if you do, let me know, I’d love to hear how you did it). By writing down these goals, you’ll be able to backtrack your pricing to determine how much you’d have to sell at what price. For instance, if you want to make $50,000 and your service price is $1000, that means you’d have to work with 50 people. If that’s doable for you, great, if not, you have to adjust. Maybe you charge $2500 and work with 20 people. Again, writing and determining your goals will help you see the overall picture of how much realistically you’d have to sell or work you’d do for the price you set.
4 | Overall product or service expenses
Figure out what it costs to produce your product or service. When it’s a service, your cost will more likely be related to how much your hour is worth. But again, you should keep in mind your goals to determine how much you’d need to charge per hour to achieve that desired result. If it’s a product, it’s important to know how much it costs to make your product. Then you can actually know how much you need to sell it for in order to make a profit.
5 | Taxes
Don’t forget about taxes! Since I’m not a tax expert or accountant, I won’t elaborate very much. However, do some research, determine how much potentially you’d have to pay in taxes and add that to your list of expenses. I’d definitely over estimate because I’d rather have to pay less than more at the end of the year. Again, I’d recommend talking to your accountant or a financial expert when it comes to taxes but it is important to be aware of this as an expense.
Your turn! How did you figure out your pricing? What tips would you recommend others when it comes to pricing? Comment below!