Yesterday, my feature was about pricing for photography services.  How do you factor “YOU” into your pricing?  We so often set pricing on so many factors, but we haven’t taken into account the actual TIME it takes to do the work we do.

Hop on over to Resolve and read my post:

Pricing: How to Factor for YOU

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There is one thing I want to counsel you on today:

Do NOT lower your PRICES.

I could go on and on about pricing… and how you need to price according to your value and your service and your experience and your market.  (You can go back and read all of our posts on this topic.)

Today, my message is simple…

IS IT WORTH IT?

If you do lower your prices… to accommodate for people’s budgets or client pricing constraints… then, what does that leave you with?

It leaves you with a whole lot of work for a lot less money and quite possibly an unprofitable and unsustainable business.

So, why do it?  Why lower your prices?  Why offer discounts?  Why sacrifice the future of your business?  Just so that you can have more “jobs”, more “sales”.  Well the number of sales you have doesn’t equal dollars in your pocket.  And, let’s be honest… this work is too darn hard to be doing it for free.

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This week we are playing “what if”.  (I’m feeling CHEEKY.)  Yesterday, we pondered the “what if” possibility of slashing our advertising budgets.  Today, let’s try another one…

What if you RAISED your PRICES by 20%?

(Imagine that!)

Now, my theory is that a majority of businesses in the wedding industry are under-priced.  Even if you are appropriately priced (which means you are not “low balling”) you are most likely not pricing at level that is in line with the quality and value of your service or produce.  So, I often ponder, “What if everyone in the wedding industry priced according to the real value of what they do?  What if people raised prices by 20?  What if people were confident in themselves to ask for what they deserve?”

Let’s do a little math (no, don’t turn off that browser… this is where it gets REAL):

Let’s say the average price of your service is $3000. And, let’s say your costs are $500.  So now, your profit on each wedding is $3000-500 = $2500.   And, let’s say you want to make $50,000 as your annual income.  You will have to do 20 weddings (or $50,000 divided by $2500.)

Now… let’s raise those prices by 20%:

A 20% increase in your price would be $3000 x 20% = $600.  Not too bad.  Not too much of an increase.  I think the customer could handle that.

So, now your average price is $3600. Your costs are still $500.  Now your profit is $3600-500 = $3100.  You still want to earn $50,000 for the year. At this pricing, you would have to do 16 weddings (or $50,000 divided by $3100.)

WOW!  Do you see how powerful that is?!

By raising your prices by only $600, you would have to do 20% less work… 4 LESS weddings… to achieve the same earning as before.  What does freeing up your time by 20% allow you to do? Grow your business in other ways.  WORK ON THE BUSINESS, not just IN THE BUSINESS.  Or, hell, take a vacation!

We are all working too hard for too little.

A small increase in price can have a huge effect on your earning potential.

Wow… what if we increased our prices?  WHAT IF?

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This week, we’ve been discussing the perils of pricing too low in the wedding industry.  Yesterday, I shared a little pricing formula…  I call it the “pricing recipe” because instead of math, it’s more like a cake, made with only the best ingredients.

Today, let’s assess your pricing.  I want you to examine: “Am I priced appropriately?  Am I priced in a way that is fair?  Am I price in a way that is sustainable to my business?”  Below, find some questions that will be helpful in determining whether you have the RIGHT PRICE.

Questions to ask yourself in assessing your pricing:

• How are others priced in your market?  Where do you fall?
• Are you priced low solely in order to compete?  Are you matching prices with people at the bottom of your market that are under-priced themselves?
• When you analyze how much time you spend on the client, what is your hourly rate?  Is this a decent wage?
• Are you solely capturing your cost of materials and not the actual labor?
• Are you charging for your art?  For the artistic value of what you do?
• If you were to hire someone in your place, could you afford to pay them?
• Can you earn a decent living?  Do you have a sales plan?  Do you know how many weddings you have to do (at your pricing) to earn a decent living?
• Are you scared of raising your prices because you believe your sales will decrease?  Are you inherently attracting people who don’t value your work, but are only looking for “a good deal”?
• Do you believe you are worth it?

Ultimately, it comes down to 3 things: price appropriately for your market and your product or service, price according to the value you give the customer, and price at a rate that will allow you to earn a decent living and have a sustainable business.  Otherwise, you do a disservice to the industry, to your business, and to yourself.

Any other helpful questions in assessing whether your price is appropriate?

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Finding the “pricing sweet spot” is a challenge that all business have.  No matter how big or small, how much experience or new to the game, pricing is a continuous question.  Businesses with more experience have history to guide them in setting prices.  But, when it comes to increasing prices, even seasoned business owners have to go through the same process to determine appropriate pricing.  Today, let’s talk about setting the RIGHT price, and ensuring that you’re not priced too low.

So… WHAT is the RIGHT price?

There is no secret formula to determine pricing.  I wish there was!  I would be a gazillionaire.  For now, let’s make a pricing recipe.  This is what your pricing should include…

THE PRICING RECIPE

• What are the costs to produce your product or service?  These are the actual COSTS that go into producing one wedding or one packaged product.  (These are NOT your administrative and overhead expenses: rent, website, advertising, etc.)  This is typically the cost of your product, raw materials.
• What is the labor involved with making your product or delivering your service?  Even though, for now, it’s just your man-hours, what would your business look like if you replaced yourself as the lead planner, lead photographer, designer, etc?  What would you paying someone to do comparable work?
• What experience do you have?  I don’t care if you’ve only been a planner for a year, or if you have only done corporate events.  This is valuable experience.  Make certain to price accordingly.  If you’ve never produced a wedding in your life, get some experience before setting your prices.  (This is the equivalent of someone going to school to get a Masters degree in order to get a better salary.)
• What is your education in your field?  Have you studied your trade?  Do you continue your education by attending seminars and conferences?  How do you ensure you are up to speed on your craft?  Are you educated in ways that ensure that you run a solid business?
• What does the market demand in your region?  What do others price in your field?  I don’t want you sneaky-calling and emailing competitors.  I want you to be smart about this.  Meet someone in your field for coffee and have an open discussion about business.  Find out the price range in your area and price accordingly.  Keep in mind that some people are terribly under-priced and they should be considered outliers.  Do not use other under-priced professionals to base your pricing.
• What value does your product or service bring to the consumer?  VALUE… what is that?  Your product or service is bringing something worthy to that person’s life, to their wedding.  You offer something of value.  What is that value?  Do you relieve someone of the stress of putting together a HUGE life event?  Do you record their event, preserve it in time?  Do you make their day beautiful?
• What about the quality?  Are your reliable, trustworthy, honest?  Do you deliver in a timely manner?  Are you exceptional with emergency situations?  Is your product flawless?
• What is your niche?  What is it that you do different and special?  What is that one thing that you offer that no one else does?

Delivering your pricing with CONFIDENCE…

After you spend considerable time considering these pricing factors and set your price, it’s time to deliver with CONFIDENCE.  Yes, it can be scary to ask people for money.  But, this is one thing that you MUST become better at.  GAIN CONFIDENCE.  Stand strong in the service you offer.  Stand strong in your artistry, in your craft.  There will always be customers who “shop around”.  Be true to who you are and the value you offer.  Confidence is an important part of the pricing recipe.  It’s difficult to demand a price unless you truly believe you are worth every penny.  And gosh darn it… you are worth EVERY penny!

Tomorrow… we’ll take a look at whether your pricing is working or not.  Ultimately, you need to ensure your pricing can sustain your business.  More on that on Thursday.

Did I miss one?  Any other factors we should consider when developing a pricing strategy?

Here are some of the thoughts behind the low pricing and my counterpoints…

Note: These statements are purely to educate and not make judgment.  I’ve been guilty of some of these thoughts early on in my business.

“When I got married, I couldn’t find anyone offering affordable options.  I started my business to give this to people.”

I applaud these noble efforts.  But, there are few people who are doing this well.  One example of someone who is offering affordable yet value-filled wedding options is The Broke Ass Bride.  Dana’s website and blog is full of lifestyle tips on having the wedding to FIT a very specific niche.  It is well-thought out and planned.  And, she is satisfying a niche in the industry.  But many people with low pricing aren’t strategically trying to fill a niche, but solely trying to compete based on price.

A few things to consider:

• Do you offer a service or product that TRULY fits into the budget category, or are you under-pricing?
• Does the cost of materials (or the cost of your time) get covered by your pricing?
• What is your profit margin?  Is this sustainable for your business?
• Have you done the math?  What does it take to break-even?  To earn a living?

“I’m New.  It’s OK if I lose money for a couple years.”

Why, oh why, do new business owners set the bar so low for themselves?  Start your business with the GOAL of being profitable.  Create a business model that is self-sustaining and allows you to earn a living.  It’s much harder to reconstruct your business model after you’ve been operating on “broke” for the initial start-up  years.

“How could I possibly charge what XYZ company does?  They’ve been doing this for 15 years!”

Yes, it’s true.  Matching pricing with another business in your market with much more experience would be foolish.  And, quite honestly, you’re not there yet.  Your pricing has to reflect the value of your experience and expertise.  But, you must keep in mind what the range of pricing is in your market.  And, take into consideration the experience you bring from your “past life”.  These job experiences are highly valuable in getting your job done in your new business.  While over-valuing your services is a no-no, you want to get close to what the market demand is in your region.

“I can adjust my pricing, once I have more experience.”

It is nearly impossible to do this.  You will be able to raise prices every year by a certain percentage, but you won’t be able to jump pricepoint categories (from low to middle or luxury).  Once you have identified yourself as the “low-price leader”, people will continue to come to you for this.  And, it’s very challenging to adjust this reputation.  (You have been typecast!)  Start your business on the right foot.  Offer valuable products and services and charge accordingly.

Tomorrow… let’s chat about what is RIGHT pricing!

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Lately I’ve been talking with a lot of small business in the wedding industry about their pricing strategy.  I’ve heard the gamut of package options, pricing choices, services, and products.  What surprises me most in these conversations is the lack of confidence behind them.  “This package is $5500 (I guess).”  The wedding pro doesn’t actually say “I guess” but the tone of her voice makes it seem like she has.  {Note: I’m referring to “her” and “she” because unfortunately this is something that seems to plague the women wedding pros more than the men.}

You wouldn’t second guess pricing of someone else’s product.

I used to work for Coach handbags as a merchandiser.  When doing an installation in a shop, sure enough someone would always think I was a salesperson and would want to know all about the lovely handbags I was putting out on the floor.  “How much is this bag?  I love it!”  I would reply, “It’s $849.  Look at all the gorgeous folds in the leather and the rivets.  The details are out of this world.”  Done.  Factual.  No ifs ands or buts about that price.  It is what it is.

Now, why is it that when we present our own products and services we aren’t matter-of-factual?  Why is it that we second guess ourselves?  Why do we sound so unsure?  Are we unsure of the price?  Are we unsure of our ability to deliver?

Confidence and conviction sells.

Confidence is the one characteristic that sets apart someone with 10 years experience from someone who has been in business for 1 year.  Confidence is a competitive advantage.  It takes time and practice, like anything else, to gain confidence.  Work on attaining this characteristic.

How did I gain confidence?  Here’s some of the things that I did, over time:

• I’ve gained complete understanding of my cost components: raw materials to produce my goods, labor/time that it take to produce goods.  By knowing exactly what it costs me to produce my goods, I am better skilled at pricing.  It becomes less about a “feeling” and more about “knowing”.
• I am working for a profit. What good is it for me to produce invites for someone’s wedding if I’m not making a profit off of it?  I need to earn a living.  I’m not here to be the wedding fairy by doing jobs for free.
• I realized that many people said I was “inexpensive”. At my first bridal show in 2006, my booth was swarmed with people.  Many of these people were saying “Wow.  These prices are really good.”  YOWZA!  RED FLAG!  If anyone says that… if they admit it openly… then your prices are tooooo low.
• I closed in on a narrow niche. By having a specialty that no one in my market does and by knowing exactly what I’m good at and what I want to do, I’m better able to identify the clients with whom I want to work with.  Having a solid niche brings strength to your pricing.
• I learned to “shut up”. Saundra Hadley made an EXCELLENT point last week at Eventology.  When giving a client your pricing, do not make excuses: no “ands” “ifs” or “buts”.  Do not say, “This is $5500, but…”  You would NEVER say that about a Coach handbag.  Why do you shoot yourself down before the client is able to respond?
• I learned how to pitch myself better.  Sometimes it’s not about the product or service, but it’s about us.  We aren’t confident in ourselves.  I was a member of Business Networking International (BNI) for a couple years in Seattle.  Each week, I had to give a 1-minute speech about my business.  By perfecting these speeches, I was better able to present my to the client with confidence.

Becoming confident is something you MUST achieve

Add confidence to the list of things you must learn how to be.  Work on this every day.  It takes time to perfect, and practice is the only way to get there.  Do the 6 methods I described above, until you can meet with that client and speak with conviction.

I’m going to walk you step-by-step through how to build a sales plan:

1.     The Basics

First, let’s talk about some of the terminology that is used in a sales plan, and give you some definitions so you have background knowledge before you build your plan:

• Break-Even Sales
  This is the minimum amount of sales you have to do for you to recover your business expenses.  For example, if you have $50,000 in annual business expenses, you would have to do $50,000 in sales to break-even.
• Targeted Sales
  This is the amount of sales you’d like to do in order to make a reasonable living.  I like to build a plan where you define the income you WANT to make and determine how you are going to get there.
• Average Sale Per Wedding
  This is essentially the average price that you charge for one wedding.  We’re certain that you have a range, so come up with the average for this exercise.  We are sticklers for understanding how to price appropriately and what can happen when you price incorrectly, so make sure you take this into account and incorporate our strategies into your numbers.
• Average Cost of Sales Per Wedding
  These are all of the costs that go into producing one wedding.  These are costs that directly affect the ability to produce the wedding; they do not include any overhead or administrative costs.  If you are an invitation designer, they would be your materials, the cost of assembly, and the cost of printing.  If you are a photographer, they would include the film, books, prints, labor cost associated with shooting and editing the wedding.  If you are a planner, this would include the labor costs associated with producing the wedding.
• Annual Expenses
  This is what we worked on yesterday, in our expense budget post.  These are all of your administrative and overhead expenses.  See here for the template on building this.

2.     Determining Your Sales for 2010

Now that you understand the above terms, you can input these numbers into a sales plan worksheet.  If you’d like a template where you can simply plug in the data from Step #1 above and have the opportunity to play with your numbers, we created an easy-peasy download you can use.  Sales formulas are already set-up in Excel and will auto-calculate for you. Or, you can of course create your own spreadsheet and play with the numbers that way.  Here is our Sales Plan template download available for $10… click on the image to purchase:

3.     How the template works

The template essentially has you work backwards to determine how many weddings you have to do reach your break-even sales amount and your targeted sales amount.  We call it “easy-peasy” because you don’t have to do any math.  You simply plug in the numbers we discussed in Step #1 and the template will auto-calculate the numbers for you!  It’s a great tool because you can play around with the numbers until you are comfortable with a) your pricing, b) your costs, c) how many weddings you want to work.

At the bottom of the template you are asked to define your “promotional activities”.  Once you have a sales number that you are comfortable with, you’ll have to figure out, “how am I going to make this happen?”  You’ll build a list of everything you do to promote your business and determine how many weddings you will aim to achieve with that promotional activity. Examples of promotional activities include advertising in an online publication, attending networking events, etc.

You’ll probably find that you’ll play with the numbers quite a bit – there is not an exact science or formula we can give you to follow as you build your plan since each business is so unique with their pricing and expenses…however, we can tell you that the more time you spend setting sales goals and understanding expenses, the more likely you are to be profitable and sustain your business.

With that,  voila!  A sales plan is born!

If you’d like more detailed information about the Sales Planning process, we go into these exercises in much greater detail at The Simple Plan workshop… we’re hoping to see you there!

We’d love your feedback on this!  Please post a comment as to how the template is working for you!

What happens when you are starting out and you want to build your portfolio?

Ahhhhh yes… it’s a true challenge.  And, I want to be realistic with you that are entering the industry.  The value of your education, expertise, and knowledge, along with market tolerance should define your pricing, but you may just need to do some jobs to get yourself “out there”.  This may be the case if you are a wedding planner and wants to have weddings featured in your online gallery.  (Having your own wedding on there is a big no-no!  It’s the first thing I look to see if someone is a rookie or not.)  If you are an invite designer, you may want to have styles in your showcase book.  If you are a photographer, you’ll want to have images of a few weddings.  How to do that?  And, how to do it in a way that’s fair to you and doesn’t mislead the customer?

These are my suggestions for building your portfolio and gaining solid experience:

• Establish your pricing and have that available to share with people.  You may have this on a rate card, in a brochure, or providing it verbally with a range.  For example, “Photography commissions begin at $3000.”  Don’t forget the rules we talked about pricing last week.  Don’t short-sell yourself!
• Let friends and friends of friends know that you are growing your portfolio and would like to do some cheapies or freebies.  The first part of this message is REALLY important.  It’s difficult to admit to people that you are new, but it’s important in communicating the message that “hey, I don’t normally do things like this, but you can help me build my business.”  This will let them know that a.) it’s a treat to have your services for a discount, and b.) they shouldn’t get used to it.  People are also more apt to support a new growing business… they’ll often send more business your way.
• Offer to assist other people in the industry.  This is the BEST way to get experience and have something to show for it.  Some professionals may be a bit resistant to support a future competitor, but you’ll be surprised how open people in the industry are!  Photographers often need a second shooter… get your name out to a few photographers and let them know you are up to help them out.  And, planners can always use an extra hand… attend an ABC meeting and find some planners that are willing to help you grow your business.  ONE word of CAUTION: before you post anything on your site or in your brochure, please make sure to get permission from the person you assisted.  They own the job and it would be wrong for you to take credit without permission.
• If you have goods, make samples to pass out.  This can be cake bites at a not-for profit event or stationery sets for swag bags at a fashion event.  Think of great places to expose your work and go for it!  Charity events are a great place to start because they are often looking for donations.  Not only are they good for exposure, but also for the soul.
• If you are a photographer, ask everyone in the wedding industry if they want free headshots.  (Thanks to Whitney Elizabeth for that recommendation!)  Who doesn’t want an updated headshot?!  It’s a great way to meet wedding professionals.  Your photos make them look good and it makes you look good.  I know I ALWAYS refer the awesome photographers who’ve taken photos of me and my family.
• If you are a planner, talk to your local churches.  Kelly Simants of Sage Wedding Pros was working a “day job” years ago when she saw in ad for a wedding coordinator at a church.  This was a GREAT way to get experience working in the industry, meeting other professionals, and working with engaged couples.  She got her feet wet, got exposure, and added weddings to her portfolio.

Experience is a huge part of the pricing equation.  Build your experience.  Build your portfolio.  And, do it smartly!  Be strategic about how this plays into your pricing equation.  Catching up to where you should be pricing yourself is much harder to do later.

What are your tips for professionals who want to grow their portfolio?  (Post a comment below, please!)

Photo Courtesy of Eliza Truitt Photography

Last week we discussed pricing: the how-tos and the how-nots.  Pricing your products and services too low not only hurts you but the wedding industry as a whole.  So finding a delicate balance between what you are worth and what the market can tolerate can be difficult.  Equally challenging is convincing the customer that YOU are WORTH it!

Over the last several months, I’ve come across articles or stories on how the wedding industry is a racket.  And, how wedding vendors are “out to get you”.  These attitudes don’t help the impression of our industry and a poor economy doesn’t help.  People expect there to be lower pricing given the recession without realizing that costs have actually increased for small businesses and our service and quality has not changed.

So, how do we get around all this negativity?

This is where having a value proposition is extremely important.  The value proposition is essentially a promise to your customers that the product or service you provide is of great value; this value is equal to the price.  Equally important in having a value proposition is communicating it to your clientele.  AND(!) also important is communicating it across the wedding industry and to the media.

What does a Value Proposition look like?

It ain’t fancy folks!  It can be a statement.  It can be a list.  You can add graphics and pie charts, but that usually isn’t necessary (and can sometimes be confusing).  I like being direct with people and I like bullet points.  So, my value proposition would look something like:

Think of this as the vows you make with your customers!

How to Write your Value Proposition

Here are some recommendations for writing your value proposition:

• Talk to your clients
  What is it that your clients love about you?  Why is it that they chose you over someone else?  (Hint: this is a great thing to ask them when you survey them.)
• Talk to your colleagues
  Ask other industry professionals, what is that makes your product worth what it is?
• Revisit your niche
  What is it that makes your business different?
• Answer the simple question…
  How do you add value to your clientele?
• Keep it simple
  A value proposition should be easy to understand.  It should give potential clients a high-level understanding of what you are worth and why you are worth it.

Taking it to the Next Level

This really only works if everyone does it.  Our industry can only be as good as the message we communicate.  So, I propose to all of you:

1. Write your value proposition
2. Post your value proposition on your blog or website
3. Talk about it with your clients (make sure they know what it is – especially as you are negotiating your fees… HINT: add it to the bottom of your proposal!)
4. Use one form of media (at least) to communicate your value proposition (spread the word!)

And, if you want to share it with us and the world (ooo… I love this part!)…  Post your url in the comments below! YAY!

We’ll be doing ours in the next couple weeks… so be on the look out!