You’ve started your creative business, and while you’ve got an incredible product or service to offer, you’re uncertain how to price it. There’s an easy answer of pricing yourself smack-dab in the middle of your competitors – not the most expensive option, not the cheapest. But this simple solution can get you lost floating in a sea of mediocrity instead of excelling to the real potential of your business.
While it’s common practice for creatives to design budgets based on expected hours and rate cards, there are some unexpected benefits to a value-based pricing model you might consider.
Center your customer’s needs with value-based selling
Value-based selling works under the assumption that the modern consumer, though still heedful of prices, is more concerned with the value a product or service can provide than how much it costs. To have a successful value-based selling model, ask yourself who you help, how you help them, and what your help is worth.
- Who you help: understanding your customer is essential for getting value-based selling right. Naturally you’ll be considering your market as a whole – the average demographic you serve, the average requests or orders you’ll be receiving – but value-based selling also means treating each new customer as a unique experience. Whereas some people view sales as all about the talk, value-based selling is all about the listening: what do they want out of this experience? What are their hopes, their goals, and their requirements? When you take the time to understand the nuance of individual clients, you’ll also be able to identify patterns in the overall market and come away with a deeper understanding of it. Win-win!
- How you help them: this is the ‘value’ part in value-based selling. You want to show your customers that your service or product is helping them achieve a goal – whether this be preserving memories through photography, beautifying their home with your art, increasing their productivity, or so much more. You’re not just answering a question or solving a problem: you’re providing a high-quality experience from beginning to end that addresses specific wants and needs in their life.
- What your help is worth: With a clear understanding of who you help and how you help them, you’ll now be able to decide what your help is worth. Don’t be ashamed of setting a higher price point if you provide high-value help: if you’ve taken the time to understand your customer and their needs, they’ll have no problem meeting the price points you set!
Get your margins right
Simply put, your margins are the difference between what it costs to produce a good and how much it’s sold for. If, considering labour and materials, it takes me £6 to make an origami butterfly, and I sell it for £10 to my ever supportive mother, my margin is £4!
When it comes to margins, the name of the game is flexibility. The margins you set at the very start of your business shouldn’t be the ones you have six months, a year, five years down the line. Your pricing should flex and develop with your business, reflecting the current market, competitive landscape, your client pool, and the awareness and loyalty you’ve garnered for your brand.
A common pitfall new business owners face when they first set their margins is inaccurately calculating their expenses. They might underestimate the amount of materials they need to use for a product, or else don’t take into consideration the specialized equipment and programs they pay for, like an Adobe subscription for a designer. It’s also common to underestimate, and undervalue, the time it takes for your product or service. You’re good at what you do – great, even. Excellent! Your time is valuable, and this should be reflected in your expense calculations.
If you’re looking for more specific and tailored advice for setting your margins, consider reaching out to an accountant for assistance.
Consider pricing by the service instead of by the hour
Often, we have creative businesses come to us with a pricing sheet that’s based exclusively on the time it takes to complete a project or provide a service. This seems fair and logical: the bigger the project, the longer it takes, and thus the more it will cost. The same goes for a smaller project that takes less time and therefore costs less. As we mentioned earlier, this is also a helpful method for when you’re setting your budget.
There’s nothing wrong with hourly pricing. However, when you charge your customer for how long it takes to complete a project, you’re creating a relationship that’s permanently at odds. Your customer will want you to complete things as fast as possible – cut corners, forget care and consideration, embody efficiency and speed – whereas you value the quality of the end result.
When calculating your expenses, you can have a sense of how much time a project takes and how much you’re valuing your time for. Your client, however, does not need to be privy to this specific number. You could instead include it in the overall cost of the service you provide, as well as all the other things we’ve mentioned (materials, access, etc.) Pricing by the service, or project, rather than the hour, will help you have far more positive and mutually beneficial relationships with your customers.
Understand that ‘sales’ is not a dirty word
We know your creativity isn’t fueled by profit. You have a genuine passion for what you do, and making money from it seems like an added bonus! But your brand, your product and, most importantly, you are special, and people are willing to pay for something special.
Taking the time to appropriately price your products or putting effort into sales and marketing doesn’t make you a sellout. It makes you a conscientious business owner with a creative drive you want to do right by. Maybe money feels like an added bonus to living out your dreams, but it’s also essential to keeping those dreams alive.
Pricing advice and guidance is just one of the many services a quality accountant can provide for a blossoming business. At Raedan, we speak the language of creatives, and understand the unique position you’re in. Check out our How We Work page to learn more about how we protect your creativity.