Common Mistakes: Pricing
February 18, 2010
Example of a traditional centerpiece
This is, without question, THE biggest mistake I have made during my many years in business. Even today, I still consider it a work in progress. How do you put a value on what you do? And, most importantly, how can you explain to most (if not all) of your clients that you are in business to give great service and design beauty, but that you also need to make a living?
I have heard it all:
- “If you give me a great price, I’ll turn you on to all my friends.” Which, even if it happens, her friends may also expect a “great price.”
- Do my benefit with me for nothing. This is great exposure for you.” I believe in charities, yet I have learned to choose which charities I support and give to freely. When I first started, I did many charities for nothing and the problem was that, again, the clients I received from the exposure expected basement prices too.
- “I’ll give you the balance payment the day of the event.” This is a HUGE NO NO. I can not tell you about all the cat and mouse games I have played at weddings, trying to collect my balance check from some of my clients. What I am about to tell you should be non-negotiable: MAKE YOUR CONTRACTS STATE THAT YOU ARE PAID IN FULL AT LEAST A WEEK BEFORE THE EVENT. (This way the check can clear.)
Even though I have been mostly fortunate to always have clients, a few years ago I almost went out of business for my mistakes in pricing. I was lucky enough to hire a fantastic Comptroller by the name of Anne Crenshaw and a financial genius named Sean Low. (He started his own company, The Business of Being Creative, and you can read his blog here). Both of them helped me tremendously in running a profitable business.
Example of a non-traditional centerpiece, made out of paper
There is so much to share on the topic of PRICING that I’d like to bring you part two in next Thursday’s Common Mistakes, but this is the first part of what I have learned:
- Use the 50/50 pricing model. Spend 50, make 50. Make sure all your costs and expenses are doubled in your final price. By expenses I mean everything–your time (something you should establish a price for), hard goods (like flowers, props), etc…However, even if you are running a 60/40 (spending 60 and making 40) you’ll be still running a profitable business (though your ultimate goal is always 50/50).
- Your clients need to understand, in extreme detail, EXACTLY what they are getting. This especially applies to you folks that are planners since most of your business is selling a service. (This was another huge mistake I made in the past–not giving proper presentations.) For your clients, this is like buying a coat without seeing it in person.
- When I first started, I was so thrilled about getting a job that I almost wanted to give it away. Even today, I am not allowed to discuss money with my clients because I am only thinking of how I can create a great design. If it’s possible in any way, be the artist and designer that you are with your clients, and have someone else within your company discuss money.
Please tell me, what do you say to those who accuse you of being overpriced? (I say, “Baby, I’m worth it!”)