Want to make more money? Raise your prices.
Hi Friends, Stephanie here!
In case you might not know, I'm the Founder of Cleveland Flea, Indie Foundry and Creative Clubhouse! 3 businesses means I have a lot of knowledge in launching, running and growing creative businesses. And I have a lot of experience in not pricing things correctly– and fairly recently in pricing things correctly.
First, let's talk a little bit about how you establish pricing. I'm putting on my Business Hat right now (that's when I'm purely talking about facts, numbers and business with a capital B). Pricing is not created by your clients. It's created by understanding what your time is worth, what you want to get paid, how much it costs to produce something and how hard you want to work to sell something / what the market will support.
- How much does it cost to create the thing you sell? That includes your time in the production, selling, marketing and fulfillment of an item. For instance, our Vintage Vendors at Cleveland Flea factor the time it takes them source, clean, fix and price an item. The most profitable vendors don't just use the cost of buying an item in their formula– they create a number based on how much energy it takes them to get a certain item to market.
- What is your time worth? How much do you want to get paid? Do you ideally want to make $25/hour or $300/hour? That will dramatically shift the amount something costs.
- How much do you want to make off of each item? Also known as a margin. How much it costs to make this item and get this item to it's owner (all the steps involved) should be smaller than what you can sell it for. At the end of this post I'll share my tips for what I believe you need to do if you want your margins to be greater (ie, more money per item).
- How hard/smart do you want to work to sell something? Many small business owners who set up shop at markets just open their booths and put their stuff in it and hope it sells. That's not putting in a whole lot of effort into selling. If you look at the Fount Leather or Articles booths, you'll see that the teams are busy the entire day engaging customers and re-setting their inventory each time something sells to make sure each customer that comes by has a great experience that will lead to purchasing, signing up for a newsletter, taking a card, snapping a photo or at least engaging about their brand. They are working hard before, during and after each show to get people to buy.
And now for my Coach hat.
So, how do you know it's time to raise rates? Well, if you're reading all of this and you're thinking to yourself that you just don't have time to do any of it, because you're working so hard, you know it's time to raise rates. If you're so busy that you can't pay attention to the trajectory of your business, you're working too hard. You need to start working smart. Having more money buys you more time because you can invest in people or things that make you more efficient.
But what if you don't feel that you're doing quality enough work to raise rates? Step up your game. Charging more allows you to give a more quality item or experience to your customers. If you can't raise rates because you'll need to be better in order to do so, then get better. If you have more money you can hire a photographer or an assistant or upgrade your materials to give your customers a better experience which leads to better value.
What if you lose customers or clients when you raise rates? You will. Your best clients / customers will come with you and you'll gain a whole new set of people that didn't perceive you as high enough quality and now they will.
So, when you're out of time + money, you need to take Beyoncé's advice and upgrade yourself. And that also means you're growing! So be excited about it.