What if You Raised Your Prices by 20% ?
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?
Wow. So true and such a good idea! And if EVERYONE did it- wow!
AMEN! I raised my prices last year and booked MORE business. My clients assumed I did better work because I charged more for it. Yay for more money, more free time and happy customers who think they’re getting the absolute best!
Thanks Michelle — it’s easy to just maintain the status quo sometimes instead of thinking how small changes here and there can add up to big differences.
I’d love to know which vendors only have $500 in expenses for every wedding (including labor, materials, overhead and all the marketing that went into securing that client). What an awesome cost/income ratio! I’d venture to guess that most of us fall more in the 50-75% cost range as opposed to 13%. I know mine are definitely higher than I’d like!
Anyone else?
Hi Laura,
Costs are costs of goods (or services) sold… NOT overhead. We want to think of our profit margins: sale price – cost of goods/service = profit margin. Then, those profits cover our overhead expenses (advertising, marketing, salary etc.) Check out our Accounting 101 series for the difference: http://www.sageweddingpros.com/category/finance/accounting-101/ … feel free to send me an email for more help with this.
Michelle
Great post, I’ll need to give this some thought!
Reading your blog just excites me. Always such simple, but insightful information. How do you do it?!
Perfect post!
I agree! I would also add that as one who does not “lowball”, I still often feel that I’m not getting paid for my time. While always giving 100%, sometimes that feeling of “I’m not getting paid for this time” is frustrating. By charging more,and doing fewer events, I believe that all vendors would feel more at ease, less stretched by the number of events, and more inclined to give 110%, and grow their businesses through the kudos!
So Insightful! Thank you for this confirmation!
Thanks Michelle! Yes, when you define your costs only as costs of good sold then your numbers certainly do make a lot more sense. Thanks for clarifying!
Sure!
This is a VERY VERY simplistic example. The $50k is gross profit… so you would still have to pay all of your overhead/admin expenses from it. You could set the gross profit goal to $100k (instead of $50k)… and allow for more to cover the expenses. But, the numbers still work the same. A price increase is a price increase… and little changes add up to a lot.
Great post as usual. I think it will make a big difference in many businesses. I asked a few clients how they perceived businesses that were more expensive and they said that in general they think they must be better. Further, if people are not getting booked anyway it can’t hurt to try this approach.
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I did it after Sage Wedding Pros – will keep you posted as to how it goes! Love this post! Thanks, Michelle! xo
Struggling with this right now…sigh
I like it!
I love the idea of making the same amount of money, but doing a slightly less work, and being able to have the time to focus more on the business than just trying to catch up. Great advice!
L-O-V-E- this article. I COMPLETELY understood where you were going with the artcle & I wholeheartedly AGREE! Thank You Ladies for helping us to feel “compfortable” with asking for more now we ALL need to demand & apply it! 🙂 Have a FABULOUS FRIDAY ! 😀