Episode 91: 3 Secrets to Pricing Your Creative Products or Services For Profit 2

Brad Dobson: Welcome to the Path to Profit Podcast with your hosts, Dr. Minette Riordan and Brad Dobson.

Minette Riordan: Hello everyone, and welcome to the Path to Profit podcast. I’m Dr. Minette Riordan here with my fabulous husband, Doctor, Mr. Brad Dobson.

Brad Dobson: Still haven’t got a doctorate.

Minette Riordan: Still haven’t got a doctorate, maybe it’s aspirational, maybe you’re going to go get a doctorate at some point.

Brad Dobson: Yeah, go back to school.

Minette Riordan: Back to school, you’ve talked about it over the years. Anyway, welcome, we’re delighted you’re here to Episode 91. It’s just blowing me away.

Brad Dobson: We love doing this.

Minette Riordan: I know, going through these episodes-

Brad Dobson: It’s fun. Sometimes it’s hard to get set up and we fuss, and we worry about what we’re going to talk about and then, inevitably, we get all smile-y when we start talking. Maybe it’s just because we like to talk. We hear our voices-

Minette Riordan: We should just live our whole life with that record button on, it’s like we get motivated.

Brad Dobson: I think there’s a story in that.

Minette Riordan: Anyway, welcome to April! April, we are doing a couple of fun things. Our next couple episodes are going to be all about money. As the founders of the Path to Profit Academy, we’re kind of passionate about money and profit. So, today, we’re going to specifically be sharing three secrets to pricing your creative products and services for profit.

Brad Dobson: Three secrets.

Minette Riordan: And we’ve got a couple of great examples to share as well. Do you want to start with a quote?

Brad Dobson: I do. This is from someone called Stuart Wilde, who I’ve never heard of.

Minette Riordan: Me either, but his stuff is really cool.

Brad Dobson: “Learning to charge properly is a vital key to abundance. Affirm that you will never devalue yourself by charging less than what you feel you are worth.” Just sit there, dear listener, for a second, and actually affirm that you will never devalue yourself by charging less than what you feel you are worth.

Brad Dobson: It’s important to be able to say, and we’ve seen that a lot with our clients-

Minette Riordan: And ourselves.

Brad Dobson: And ourselves. I guess especially women, but I think it’s true for everybody. We have a tendency to just go get the work, but women particularly I think struggle more with a lot of the self-worth type of things, we’ve certainly seen that.

Minette Riordan: Yeah, absolutely. And I’ve shared the story before, I don’t know if I’ve ever shared it on the podcast, about when I first started my coaching business. After 11 years of selling advertising and being really comfortable selling advertising, making the switch then to selling coaching felt so different. It was really challenging. I didn’t know how much to charge, I was scared to ask for the money, Brad can tell stories about listening to me on sales calls, hearing the little break in my voice when I would get to that moment where I had to actually ask for the price.

Minette Riordan: And it’s hard when you feel like you’re selling yourself or when you’re selling your art, and it’s like something that you have personally made. We do have so much emotion caught up in our business and in the work that we’re producing, but the truth is, that pricing doesn’t have anything to do with emotion. It’s actually really practical. So we want to share some of the practical tips as well as the mindset strategies for creating pricing that you feel completely aligned with, so that when you do ask for the sale, you ask for it with confidence and without your voice breaking.

Brad Dobson: Yeah. And you actually ask for a number that makes you a profit and doesn’t just make you money.

Minette Riordan: So can you talk a little bit about the difference between making money and making a profit?

Brad Dobson: Right. So, let’s say that you paint a painting. So you drove to Michaels, and you bought a canvas, and you bought some amount of paint materials and brushes-

Minette Riordan: Brushes and sponges and texture-makers.

Brad Dobson: We’re surrounded by about half of Michaels’ supplies here at the studio office.

Minette Riordan: Shh. You’re giving away my secrets.

Brad Dobson: So you bought all those things and then you drove back home in your car. And it took you 2 hours to paint it, or 20 hours to paint it, whatever that may be. And then you came to me, or Minette, and you said, “Brad, Minette, what should I charge for this? Should I charge, I don’t know $49 or $69?” And we actually went through this with a client recently-

Minette Riordan: Yeah, we could show Rebecca’s endo house.

Brad Dobson: A physical product that she made. I kind of looked at her askance and sort of said, “Are you kidding me?” The point of this little story is that you need to add up, well how much was the canvas, how much were the paints, how much did you pay to have your car used in business to get you to Michaels and back. And add those up and then give yourself an hourly rate. At least find out what minimum wage is. So say you made $15 an hour and it took you 20 hours, that works out to $300.

Minette Riordan: I’m glad you could do the math fast in your head.

Brad Dobson: It cost you another $50 for supplies, so that’s $350. And then you came to Brad and Minette and you said, “Oh I want to charge $49 for it.” Well, then you operated at a net loss. You didn’t actually make any money. You want it to operate at a profit and so you want to charge more than that $350 for the cost of time and materials that it took you.

Minette Riordan: So that’s one great example, but I want to back up just a little bit. So even before we get into the nitty gritty of pricing products and services, a great example of pricing a product, and you have to look at what the market will bear, and you look at are you selling the original or are you selling prints, right. There’s so many factors.

Brad Dobson: Well, and that’s for physical items.

Minette Riordan: That’s for physical items. But I want to back up even above that, and you, for me, miss the key thing to start with, is that you have to get really clear about how much money you need to make in your business to run your business, right. You’ve got to start with what we call, affectionately, your bold money goal. What’s that big annual number that you need to make in order to pay yourself, to pay all the costs of running your business, and still have money left over? That’s what profit is, after you’ve paid everything including yourself, it’s what’s left over. And at the end of the day, we all want to have money left over because that’s where true financial freedom comes from, is when then you have money to invest, you have money to save, you have money to contribute to the lifestyle dreams that you’ve had of maybe taking your family to Thailand.

Minette Riordan: So it’s so important to first start with that bigger goal of, “This is the exact number.” And it doesn’t matter at all if that number is $10,000 or $10 million, you still have to know the number because then you can work backwards. So, when it comes to pricing for profit, it’s a combination of what Brad shared so beautifully. You can do that off the top of your head so fast. So what Brad shared about each product that you create or each service that you offer, not only has to include your time and the cost of doing business, but also the cost of running your business, like the car was such a great example. So, the car, the camera you bought to take great pictures of your art so that you can sell it, the time that it took to post it on Instagram where somebody saw it and said, “Hey, I want that,” right. So there’s so many factors that contribute to pricing, so it’s essential that you fall in love with your numbers and get to know them really, really well, so that you’re not having magical thinking about your pricing.

Minette Riordan: I’ve had 2 clients that loved the number 11. So one was only charging $11 for some things and the other wanted everything to add up, magically, to 11. And no judgment around the number 11, it is a great number, but it’s not practical. So it’s okay to have magical numerology and astrology built in your pricing as long as those numbers are also grounded in reality. It’s that combination of what really matters to you and is important to you with the real world, “This is how much I need to make to make this business really go.”

Brad Dobson: Yeah, and I want to underscore that with it’s okay to have a hobby, and it’s okay to be a not-for-profit organization, or a volunteer organization. Those things are fantastic. Want a hobby? Get a hobby.

Minette Riordan: Yeah, you can see my hobby. All those trips to Michaels? They’re in the hobby category.

Brad Dobson: Do you want to be a non-profit and be that type of service to the world? More power to you. That’s wonderful. But you’re not listening to this podcast, called the Path to Profit podcast, because that’s what you’re looking for. You’re looking to make a profit and you really do need to price your products and services so that you make a profit. It’s not just about making money, it’s about making a profit.

Minette Riordan: Yeah, we want to share another really practical fun story that we just watched happen in our creative business accelerator. So, actually, he had two awesome celebrations recently. One was that he finally launched his horror film community to a site called Patreon. And Patreon’s pretty cool. P-A-T-R-E-O-N.com, we’ll make sure it’s in the show resources. We should write that down so we don’t forget to list it. Where it is like a crowdfunding Kickstarter concept and membership site all rolled into one, where people support your creative projects.

Minette Riordan: So it’s a really great thing to do. And in order to make sites like that work, you have to be able to give generously to your community that’s supporting you, but not so generously that you go broke. So you have to really understand what’s involved in what you’re giving to people in return for their support. But the same videographer also pitched a job at $4,000, I think-

Brad Dobson: Ten?

Minette Riordan: No, it wasn’t. And then another filmmaker came to him and said, “That’s too much. Nobody will pay that.” Which, to me, made my heart go, “Whoa, I’m so sorry someone said that,” because he’s totally worth the $4,000. And so he said, “Did I do myself a disservice by then going back to these people and saying hey, we can do it for $2,500 instead of $4,000.” And so Brad and I helped him walk through the pricing strategy of how much time of his will it take. He also has to hire other camera operators. How much is he paying those camera operators for their time? How much time will it involve for all the editing that goes on after the fact to deliver a three minute trailer? So all the pieces had to be included.

Minette Riordan: And so when he looked at all the pieces, he realized that at $2,500 he was still going to make a profit. What he was most curious about was this impacting his mindset. And we said, “It’s really not about mindset. You know you’re worth it and you’ll get there. As long as you’re making a profit, it could be a great place to start.”

Minette Riordan: And the other thing that came under consideration for this particular project was it is going to create an incredible amount of visibility for this particular videographer. So the trade-off sometimes is about will it turn into more job opportunities.

Brad Dobson: Yeah, and that’s kind of how a loss leader works.

Minette Riordan: But it’s not a loss leader because he’s still making a profit.

Brad Dobson: Gosh, we’ve all been there before. If you think that there’s an ocean at the end of that pond, then you can-

Minette Riordan: Hop into the river?

Brad Dobson: Yeah, whatever it is. The analogy blew out of the water, so to speak. Anyways, you get the point. If you do have an opportunity where you can give someone something at a tremendous discount, but then see other opportunities down the road, or it’s worth it just to get the experience, well yeah, we understand that. You gotta do it to expand your business.

Minette Riordan: But at some point, you gotta stick to your guns and charge what you’re worth, right. Because if you don’t do the math behind the pricing, it’s too easy to get caught up in the mindset of, “Oh, they won’t pay for that,” or, “Oh, it’s great visibility,” and to always be running at a deficit. What Jacob did correctly was to realize that he could still make a profit at this particular price point and get the visibility. It was a win-win, and a win for the organization that would get his incredible services and talents at a rate that was more affordable for them as well.

Minette Riordan: So, pricing isn’t black and white. It definitely has some complexity to it depending on your business model. Yet, it’s not about mindset. It is about numbers. And it is about the payoffs, and it is about being able to make projections.

Minette Riordan: So we talked about you have to get clear about how much money you want to make, you have to get clear about the value of what you’re selling and the impact it’s going to have on the buyer, and then finally you have to be really crystal clear about how many do you need to sell in order to reach that money goal? So, Brad shared the example of a $49 painting, well if you want to make $50,000 this year, and you’re selling a $50 painting, that’s 100,000 paintings-

Brad Dobson: Lots of them. No.

Minette Riordan: Ten thousand paintings.

Brad Dobson: No, I’m sorry, a thousand paintings.

Minette Riordan: A thousand paintings. It was a lot. Don’t ask Minette to do math, that’s gross. Can you produce a thousand paintings? Could you give 10,000 or a thousand hours of coaching services this year? There are only so many hours in a day when you can actually be delivering your service or creating products to sell, especially one-off products. And do you have enough clients in place, or a clear system in place for generating leads to buy your products? So when it comes to pricing, you have to be realistic about how much you want to make and how many of those products or services do you have the capacity to create and sell as well.

Brad Dobson: I wanted to go back to one thing about our secret number two about getting clear about the value of what you’re selling.

Minette Riordan: Yeah, we glossed over that one a little bit.

Brad Dobson: Well, just as it relates to services like coaching, there’s an interesting calculus there. You have a lot of people who are new to coaching, for instance, and they hang out their shingle and they say, “Okay, I’m going to start at $50 an hour or $100 an hour.” They hear about big name coaches that are making $500 or $1,000 an hour or whatever that may be. So, when you’re first doing that, I think it’s really important to understand if you get that initial price too low, you’re not valuing yourself, but people also see that when they look at the price.

Brad Dobson: People who are going to buy coaching, as Minette and I have done quite often in the past, they don’t necessarily want to buy the cheapest rate. They don’t want to do that because it doesn’t sound like it’s the best service that they’re going to get. So don’t feel like you need to absolutely be the cheapest. Now you’re not going to hang out your shingle unless you’re just full of confidence and have Buddha-level wisdom right out of the gate. It’s going be hard for you to charge a whole bunch per hour. But don’t really low-ball it. Start yourself off with something that’s a quality number and build from there.

Minette Riordan: I would actually do a comparative analysis of what you’ve made before in the past, whether you were a teacher, a nurse, a corporate executive, an executive assistant, people come in athlete, people come from all different careers into coaching and what happens is that, because they feel that they’re new at coaching, they discount the amount of experience that they’re bringing to the process. So making sure that you’re really valuing all the knowledge and information that you have as part of what you bring to a coaching experience that makes you incredibly unique and different.

Minette Riordan: This is true whether you are a graphic designer, or whether you’re a copywriter. No, you’re not going to charge as much when you’re new in business, but you’re not going to charge peanuts either, right. You’ve obviously invested time in education, you’ve invested in time in your work, you’ve invested time in your talents and your skills. That matters to people, and so you need to charge a rate that’s commensurate with your level of skill and experience.

Brad Dobson: Yeah, people were attracted to you and your message. They want you.

Minette Riordan: Yeah. And I think Brad has a great point about really understanding what it is that people want from you and what they’re willing to pay for, and that comes from you being able to clearly articulate the results that you create for them, the difference that you’re going to make in their life. Whether they’re buying a piece of art, or coaching, or design, or a book, it doesn’t matter. You have to be clear about the transformation you’re creating for them, because what they’re buying is transformation. Even though we said pricing is really practical, pricing is also relative to your ability to create transformation for people.

Brad Dobson: Yeah, good stuff. So what do we do? We said, you got to get clear about how much money you want and need to make. You’ve got to get clear about the value of what you’re selling.

Minette Riordan: And the impact it will have on the buyer.

Brad Dobson: And what was the last one?

Minette Riordan: Get clear about how many you need to sell to actually reach that bold money goal. And remember that your sales prices are always gross prices. They have to cover your cost of business and your salary and make you some profit all at the same time.

Brad Dobson: Definitely. And if you want to dig into this more, we have just some fantastic resources in our creative business academy and we can put links to that in the show notes.

Minette Riordan: Absolutely, we’d love to.

Brad Dobson: Cool. What are we doing next week?

Minette Riordan: What are we doing next week? Next week, dun dun da da, we’re so organized. We are going to Episode 92 after 91, like that’s kinda magical, right. We’re still talking about money, but we’re going to dive into five ways to improve your relationship with money. Money mindset hacks for creative entrepreneurs, because we can talk about pricing and strategy all day long, but if you don’t believe it’s possible for you to charge that much, or you don’t believe it’s possible for you to make money, or you have some other crazy stories around money like we all do, that money’s the root of all evil, for example, then you’re never going to get there from pricing. So we want to make sure that you get both sides of this equation. The strategy and the practical, tactical side of pricing as well as the mindset side.

Brad Dobson: Good stuff.

Minette Riordan: All right, we’ll see you on the next episode.

Brad Dobson: Thanks for listening.