88.2% of Business Owners Should Double Their Prices
Yep, that headline is not at all based on scientific analysis. But it is based on the day I spent at the Etsy Success Symposium on Friday.
I had the distinct privilege of talking business with 17 business owners. I did one after another, 20-minute quick-fire consultations.
Yes, yes I was extremely exhausted at the end of the day. Thank you for asking.
All 17 consultations were with makers or designers. I gave 15 of the 17 business owners the same advice:
Double your prices.
Of course, that’s not easy advice to give. And it doesn’t help that it’s most often met with jaws being dropped or a “but… but… but…” kind of answer.
I don’t give the “double your prices” advice lightly.
There’s lots of other information I want to know first. I want to know what kind of problems and pain points are perceived. I want to know what goals my client has.
I ask a few questions. I listen for key words. And then I make my diagnosis:
It all comes back to your pricing.
Instead of making this a post on proper pricing, I want to concentrate on how this problem is felt within a business and how it manifests itself on the outside of a business.
1) You create goals & expectations based on the market you think you’re in instead of the market you want to be in.
While Etsy sellers find themselves in a very distinct market based on the marketplace they’ve chosen, this problem can be seen in any industry.
I know you’re judging yourself & your work against others you see as competition. But who really is your competition — those who are at the same level as you now or those who are at the level you want to be at?
I would argue the latter. When I ask you to read my next book, I’m not asking you to weigh it against my peers similar work or offers. I’m asking you to compare it to Dan Pink’s or Malcolm Gladwell’s latest bestseller. That’s the bar I’m setting for myself. I want you to think of my work in line with theirs.
So are you going to create a competitive pricing strategy as compared to rookies and hobbyists? Or one compared to Jonathan Adler, Dwell Studio, or Kelly Rae Roberts?
Your pricing is one indication of quality to your customers. Your customers will use your prices to understand “how good” what you offer is. If your price means your product appears lacking in quality, you won’t get the kind or quantity of customers you want — regardless of how “affordable” your work is.
2) You wonder if you can’t earn anymore because you physically can’t produce any more work than you do now.
This is perhaps the easiest scenario in which to see the necessity of a price increase. But most often, business owners choose an incremental increase instead of a drastic price increase (like doubling).
Sure, an incremental increase might solve the problem for now. But what about 6 months from now or a year from now?
If you double your prices, you only need to generate half the sales to create the same amount of income for your business. You might cut your current workload in half!
Or, as I’ve seen over & over again, you might sell more. But that’s what we call a “quality problem.” In other words, it’s pretty great problem to have. In that case, doubling your prices means you can afford to invest in better tools, experienced labor, or more efficient processes to streamline your work. You’re not trying to grow your business on razor thin margins anymore!
But let’s say you start selling a good bit less. My advice is to take that extra time and use it to create a product that is leveraged. Something that can be replicated over & over again quickly. Something that has a very high profit margin. Something that gets you a lot of attention in all the right ways.
You need time & energy to create something like that with your business. You can create it by doubling your prices.
3) You choose to create things that you know will sell instead of what stretches your ambition.
All over Etsy, all over the blogosphere, all over main street, you see businesses spring up that are based on proven business models or popular trends. Their products are a guaranteed sell. Their customer base is easy to spot.
They will make sales. And those businesses will measure those sales as success.
But there’s a lot more to success than number of sales. Profit margin is one. You can make a bunch of sales but if you’re operating at a loss, you won’t last long.
Customer loyalty is another. When everyone is doing the same thing and offering the same kind of product, it’s very difficult to generate customer loyalty. It’s near impossible to gain business from word of mouth.
Longevity is yet another. How long can the same old thing last? The first few might stand the test of time. But copies of copies of copies are not long for this world. You don’t see many xeroxes in the Louvre.
Push yourself to the edge. Create something you never thought you could. Don’t do what you know you could do to make sales. Do what you dream of doing to make sales. And then dream a little harder.
Sure, the edge is an equally difficult place to survive. There is quite a bit of uncertainty. But its rewards far outreach the rewards of doing what’s certain.
To be sure, creating at your edge doesn’t always require doubling prices. But thinking about doubling your prices (or 10x-ing your prices) will certainly push you to your edge — and that’s a nice place to start.
Does this apply to me?
This is not simply a lesson for makers & designers. This is a lesson for all business owners. It’s an opportunity to challenge your assumptions about what you create, who you sell it to, and how you exchange value within the system.
While not everyone should double their prices, and yes, maybe not even 88.2% of business owners, it’s a worthy experiment in understanding yours & others perception of your business.
Does the thought of doubling your prices put your money mojo in a tail spin? Then you, my friend, need to understand that making money is beautiful. Intrigued? Check out my acclaimed digital guide, The Art of Earning.