I wanted to talk about something that I tell the stationer’s that I work with to do at least once a year — evaluate your pricing.
No matter if you’re just 1 year in or 11 years, every single year you need to set some time aside to dive deep into your numbers and your pricing. These need to be checked every year to make sure that they’re still where they need to be in order to reach your goals and maintain the profit percentage you need.
To start, I recommend going back through your books and running your reports to see what your numbers looked like. I’m not an accountant, so I’m not even going to attempt to get into the accounting jargon. But I do know enough that if your gross profit was $40,000 and your net profit was $7,000 — there is a problem.
That problem may be that you’re being too frivolously with spending in other areas, but more than likely it has to do with your pricing and your profit margin not being where it should for your projects.
Next, I recommend going back through all of your projects for the year and calculating your profit percentage for each project (I recommend doing this at the end of every project). You will calculate all of your expenses for that project (what you spent on paper, envelopes, printing, ribbon, wax seals, etc) and deduct that from the price you charged your client to determine what your profit percentage was. I recommend a minimum of 50-60%. Ideally, it should be 65%+. If it is regularly dipping below 50%, Houston, we have a problem.
Finally, I recommend going to all of your suppliers you use frequently and get new pricing from them. If it’s been a while since you’ve gotten pricing from them, odds are there could have been an increase that you aren’t taking into consideration. Has their minimums or quantities changed? Has shipping gone up? All of these things go into consideration when determining your cost on products.
Whew – that was a lot, but all three items are so important and play a role with one another when it comes to re-evaluating the pricing of your stationery products.
So now that you’ve re-evaluated your pricing and maybe you’ve decided to raise your pricing, I wanted to talk about a little hump that we often hit when it comes to raising prices.
This can often come into play once you’ve been in business a few years, you have learned some of the industry tips, tricks, and secrets. Found the perfect vendors who have baller pricing AND quality (#unicorn) and you slowly start to notice your expenses creeping down.
It is a great thing when you can operate a fairly lean business, which means that your profits are going up. So here is where often the guilt can set it.
“Wow, I found a great letterpress vendor who charges $xx less than my previous vendor. I guess I need to go in and re-evaluate what I am charging my clients and lower my pricing some since it’s costing me less”
That is the point of learning and growing in your business. Maybe early on your profit margins were only rocking 50-55% but with the blood, sweat, and tears that you’ve put into your business to find the perfect resources and vendors and workarounds, your profit margins are closer to 60-65% now. AND THAT IS OK!
And you know what else — it’s even ok to raise your prices while your overheard is going down. You know why? Because your clients are paying for more than just tangible products. They are paying for the experience, the service, and the talent that you have to offer.
I know, it is so tough and scary, but girlfriend – give yourself some credit! It’s ok to make a living doing what you love!
So no more pricing guilt, you are worth it!
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