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.

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47 comments on “88.2% of Business Owners Should Double Their Prices

  1. Wayne says:

    Thanks. We struggle with pricing and have raised them over the years. When I see low prices on etsy I can only imagine how little people feel their time and talent are worth

  2. Stacey says:

    Oh, Tara, this couldn’t have been more timely :) I’ve been toying with the idea of raising my prices (again) to more honestly reflect the time and effort I put into my work. Based on my current pricing, I’m paying myself – after materials and shipping costs – around $3.50/hr. Ridiculous, I know… but all of the points you’ve made here are exactly why I’m about to raise my prices. Again. And properly this time :)

  3. Jenny Hoople says:

    Do you have a helpful formula for pricing, Tara? I’ve been using (($16 an hour x time + $ for materials) +10% ) x 2 for retail. If it’s something rare or special I mark it up more. Sound about right?

    • tara gentile says:

      Hey Jenny!
      Megan’s formula – which is the one I advise makers to use – is:
      Materials + Labor + Overhead + Profit = Wholesale X 2 = Retail

      I am working on a post that will address the “labor” cost issue. I believe a maker can’t charge less than about $25 an hour and hope to create a sustainable business. Also, profit, it should be noted, is a separate line item to labor. It’s the money you use to grow your business!

      Hope that helps!

      • jenny hoople says:

        Super helpful! Thanks Tara :) other advice I’ve taken from Megan was golden! I’m looking forward to your post on labor cost. I’m especially wondering whether the labor I figure into my prices should be only time spent making or should I add in photographing/social networking/listing online. Because it seems to me that the all the work I don’t have to do when selling wholesale is what’s getting paid for when people pay the doubled retail price. But I’d love to know your opinion!!! I’ll keep my eye on your blog for the post!

        • tara gentile says:

          Yup – that’s why your labor cost MUST be so high. You can really only “bill” for the time that’s hands on. That means your maximum time making in a week will probably be less than 20 hours per week.

          Overhead cost does account for some of the other labor… but it’s not really a true representation of your time.

          • Jenny Hoople says:

            Let me be sure I got it right: :) So you’re saying this is why I figure the price formula out at $25/hr. Because I can only bill for the hour it took to make the necklace and it takes a whole lot of work besides that? (this commenting back and forth feels like passing notes in the hall back in middle school: checkmark “yes” if you agree, “no” if you don’t! Hah!)

        • tara gentile says:

          Hm.. must have reached the reply maximum so I’m replying out of order!

          Yes. That’s what I’m saying. Haven’t done supporting math yet – but I really believe that a more realistic number is actually $50 per hour. Also depends a bit on whether you do the majority of your sales via wholesale or retail.

          With retail, the retail part of the price is going to cover your retail operations (social media, blogging, marketing, emailing, shop maintenance etc…). With wholesale, you don’t need to get paid that because someone else is doing the work!

          • Jenny Hoople says:

            Today was money-counting day and income was down. By about half. I’ll keep plowing ahead, but I admit that it’s scary.

      • jenny hoople says:

        perfect!! Thanks, Tara :D (I’ve got my business journal out to journal up a better pricing scheme!) ((I admit to still being scared of what will happen when I change the prices. Wish me luck!))

  4. Tammy says:

    I recently listened to an interview with Seth Godin where he discussed that we have two options, create a completely unique product that only we can give, or give it away for “free” until such demand is created for our services that scarcity (our ability to produce) pushes up pricing. I’m wondering if your speaking to those who have reached the scarcity point or to everyone? Clarification of when you should double your prices would be appreciated. :)

    • tara gentile says:

      I think I’m saying something similar to Godin but coming at it from a slightly different angle (since I was speaking directly to makers on Friday).

      Makers by definition have a certain scarcity in what they can create unless they move towards (micro)manufacturing. The trick is that not all makers are creating something truly unique or representative of their own point of view. I would encourage all makers — and service providers too – to challenge themselves to create as unique-to-you a product as possible. Then there is genuine scarcity despite an abundant market.

      That said, there is nothing wrong with having low end or entry level options. If you look around my business, you’ll see many! The point I really want to make is that any microbusiness is not sustainable on volume alone and that having offerings that are truly Profitable makes all the difference!

  5. Chantelle says:

    I am one of those people you have advised to double my prices. And I am one who went and did an incremental increase. (10%).
    I feel like it is a chicken or egg scenario. I need to make improvements to my business, to compete in a high end market, like learning to take better photos, and building my website, which I currently cannot do because I don’t have the time, I am too busy trying to stay on top of orders.

    • jenny hoople says:

      I’d say the fact that you’re too busy trying to stay on top of orders is exactly why you should double your prices! You’ll lose some orders, but you’ll be making more money and have more time to do the other stuff!

      • Chantelle says:

        Yes I think I am going to do it. It’s funny when Tara initially told me that I thought it was a crazy idea. But I have been thinking about it a lot, and reading this post really made me think some more. I feel like I need some time off production, and this way if orders come in I will feel like they are worth my time.
        thanks for the support jenny!

        • jenny hoople says:

          Hey, good luck, Chantelle!!

          At first estimate, it looks like I’ve got to do about a 30% increase, myself! Seems so scary to jump in and change prices even that much. I can’t imagine how it’d feel to double prices! Good thing Tara’s got our back… Cowabunga, dudettes!!

          • Chantelle says:

            I just did it! I feel a bit horrified looking at my listings. But my husband just came and told me it was about time, so think I am going to be okay with it. Good luck with your own increases.

          • Jenny Hoople says:

            (omg!) I totally just did it, too!! (I used the craftopolis edit express and just pressed the button and they’re changing even as I type!!)

            yikes and yay!
            Good luck!!

  6. I agree with this — but I can’t do it to current clients. I think, though, the next one will be charged double my current hourly rate. thanks!

  7. Tara – love this post! Once again you are right on. I really relate to #3 and have struggled in the past with “making what sells.” I find that when I am true to my creativity, I am much more successful.

  8. Leah says:

    Tara, thank you so much! I read this post when I was struggling with my product pricing, which truly is double what I think I could sell for… then I came back and read it again, and something clicked for me. One of the reasons I was so stressed over my pricing is that I want to offer and what my product descriptions were reflecting totally clashed; one reads as an extension of me, and the other read like a generic catalog write-up. Ouch!

    I went back and rewrote my product descriptions to reflect what my original goal was when I opened my shop. Now I feel that they are more true to my vision for my business and myself. Thanks again!

  9. Brandon W says:

    You can be “pretty good” at “pretty good” prices, or you can be awesome and charge for it. The latter has less competition.

  10. Leigh says:

    Hi Tara, I would like to double my prices because I am having trouble keeping up with commissioned painting work. I am super busy like this when my work is published in magazines. But then when my work isn’t in magazines, it is much slower. So I am not sure if it is the right time to double my pricing. I’d love to know your thoughts for such a situation. Thank you for all your wise words.

    • tara gentile says:

      Hi Leigh! If you doubled your prices now (or at least raised them considerably), would you have less work and therefore more time to get the magazine features that bring in the great clients? Could you go after other media attention if you had a bit more time?

      If you raised your prices, could you only work during the magazine feature times and then take more time off when business was slower (while make the same or more money)?

      Business isn’t always about keeping things slow & steady. Sometimes, creating peaks & valleys — and profiting from them — is the best way to go!

      • Leigh says:

        Thank you so much Tara for taking the time to answer my question !!! I really appreciate all your advice. Keep up the great work, I am listening. all my best, Leigh

  11. Shannon C says:

    Hello Tara,
    I am not sure if this formula x 4 would apply to me or at least I am having trouble figuring out how my jewelry is worth it.
    You see I use handmade beads in my work, they are way more expensive than say, the glue on roses other use. So the cost of materials per piece is a lot higher.
    Consider the first necklace I made in this blog post http://formysweetdaughter.blogspot.com/2012/04/getting-my-copper-on.html it cost $19.55 in materials and took about 30 minutes to create. So with this formula this necklace should be priced around $97.00!
    What?!
    Help, what formula can I use because my material prices are higher?
    What can I do so I know I am charging correctly for what I am making?
    I am at a loss for what to do so I just have piles of jewelry sitting on my tables and in boxes that have no prices because I don’t know what to charge.
    I don’t want to price too low and loose money, I don’t want to price too high and have others think I am crazy.
    I do have big goals of getting “out there” wholesale, consignment, celebrity endorsements but I am stuck.
    Help!
    Thanks,
    Shannon

    • tara gentile says:

      What’s so bad about $97? If that number is shocking to you, it’s time to go to a jewelry store. Visit a shop that specializes in QUALITY jewelry. Even better if there’s a store in town that features artisan-made jewelry.

      Look at the products. Watch the people. Observe.

      Plenty of jewelry costs way more than $97. Why should yours be any different? You’ve already told me objectively why yours is better (handmade beads instead of mass-produced parts). Flaunt it. Having a price tag that matches the value is part of that.

      There is no other formula for pricing. Well, there are – but the good ones will all get you about the same price. $100 for a handmade necklace is a good price.

      If people tell you otherwise, they’re not your customers. Find the people who think $100 is a steal. They’ll love you forever.

  12. LORRAINE BERTRAND says:

    Do you have a formula for pricing. Do I have to double my price in calculating the hours I spent and the materials I take and some people told me to double my price for the boutiques and for the customers double price again. Thanks

  13. Maria Brophy says:

    I shop on Etsy often and have always felt that artists there are under charging. It’s become a place to buy cheap, which I don’t think is a good thing. I would happily pay more for the pieces I love. Raise the bar, artists!

  14. Naomi says:

    Thanks for this – only set up at the start of the year and pricing is a big headache – your words have confirmed what I was thinking, and am going to price accordingly – I can’t afford not to! I would love to have less orders for more money as I know it means I won’t have to rush my work, meaning the client gets a better quality product. Thank you!

  15. Natalia says:

    I am the definition of starving artist, and I feel a little silly, I think I have overcome the shyness of dealing with customers, selling etc. But I am at that point that I have sales almost daily, I can hardly keep up, have custom orders that sometimes take forever, but I need the money to pay the bills, I have some profit, but my biggest fear right now is that transition to raise the prices, I will still have my bills and I have no idea if I should just go for it, and my savings account is a complete other topic.. :)

    Thank you so much for all these amazing posts.

  16. isabel says:

    love the hair!!!!
    also your style and the double your prices- i am always telling others to do this and I will do this again…look forward to connecting…you look like the fun way to do business_ right up my street! Bella

  17. This is a great article. I’ve been struggling with price point since the day I opened shop, and its been said to me over and over that I am undervaluing my services. It is tough to understand, but you’ve written this post in a way that has me thinking differently, so thank you.

  18. Paul says:

    This is great, I was thinking about raising prices last night. I have a busy guitar repair shop, and I’ve been swamped. My average price for a set up is $49. The local stores charge $69 and do horrible work, and have long turn around times. I guess charging at least $69 is a no brainer. I have about 600 customers that constantly bring in repeat business. So should I DOUBLE the $49 and weed out the bottom feeders?

  19. violetkoncz says:

    Awesome blog post! I am often too afraid to ask for more money, why? I don’t know. I am forwarding this on though :) Thank you! And I’m curious as to how you came up with 88.2% :P