Putting a price tag on our work for some reason always puts a lump in our throats.
We don’t want to underprice because then we’ll be stuck doing a ton of work at a low rate. But we also don’t want to overprice because then we’ll cause wide eyes and massive sticker shock.
It’s a hard balance, for sure. I’ve been on both receiving ends and neither feels great.
Instead of trying to find a number that sounds right, why don’t we approach our packages in a way we know will make us profit every time?
No more obsessively typing out numbers in your calculator to play out different scenarios — let’s present our packages with confidence and clarity so we feel good and our clients feel good too. Here’s how:
Know Your Expenses
So often I see business owners not include small expenses or even worse not track them at all. You NEED to know how much you spend every month to keep your company running so you know you’re covering all of your expenses with each package.
This is also called overhead. On average, it’s good to keep your overhead around 40% percent, but this number might be much higher for you depending on what stage of business you are in.
To calculate your monthly overhead, take your estimated monthly income divided by your total expenses.
So for example, if my monthly expenses were $1000 and I made $5000 per month, my overhead percentage would be 20% (that’s ridiculously low and would be awesome if my expenses were that small, but you get the point!!)
Don’t forget your annual subscriptions, those count too!! Speaking of not forgetting, let’s cover some basic categories for you to track your expenses — at least the categories I use for my business:
- Automobile Expenses
- Business Licensing
- Charitable Gifts
- Client Gifts
- Dues & Subscriptions
- Office Supplies
- Salaries and Contractor Fees
- Professional Fees
- Bank Fees
Fun fact!! The sooner you can make your salary an expense, the better!! Plus, once you realize how much you need to make per month personally, you’ll realize a lot of your expenses can be counted under your business (things like your internet bill, phone bill, maybe even your car!) and you’ll realize you don’t have to pay yourself as much as you thought.
All that to say, consider your expenses. It has to start here. Remember the overhead percentage I was talking about? We’ll use this number to influence how much we price our packages. But before we get there, let’s talk about Step Two:
Track Your Time
Know how much time each of your packages averages. Once you track a few clients, you’ll see a trend and can use the average. You won’t have to track every client forever!!
This is a mistake I see creatives make all the time — there is a fear of overcharging so they only account for the amount of time it takes to do the actual work.
When I say track your time I mean track everything you do for a project. Not just the deliverable itself.
Consider all your creative meetings. The prep for those creative meetings. Driving to and from vendor appointments. The back and forth between emails and phone calls with your clients — not to mention your vendor team as well. Rehearsal dinners. The prep for those rehearsal dinners. I could go on, but I think you get the idea.
Every task you do for the client has to be accounted for. Every. Single. One. Otherwise, you are bound to undercharge because you won’t include all behind-the-scenes work it takes to deliver the end result.
Be meticulous. The more you break down each task of a package into subtasks, and understand how long each subtask takes, the better! Trust me, you’ll be glad you did, and probably shocked at how long a package is actually taking you from start to finish.
Now on to my favorite step…The BGG Point System!!
Use the BBG Point Method to Price Your Packages
In case you don’t know, BBG is my wedding planning company, Blush by Brandee Gaar. After selling a few packages and realizing sometimes we wouldn’t end up profitable after a wedding, we decided to set up a system to keep that issue from happening again.
Remember, when keeping track of your hours, we want to account for how long a package takes in its entirety — meaning you must include all the admin hours and backend work in addition to the service itself.
Here’s how it works:
If your basic package costs $2500 and takes 25 hours to service then consider this = to 1 point.
You also want to take a percentage off for overhead, lead or project manager costs, contractor costs, and any additional fees that go into servicing the package you offer.
Each of your following packages should be based on this point. So if your tier 2 package takes you 50 hours to service, it should be $5k and worth 2 points. 100 hours for your third-tier package? That would be $10K and worth 4 points.
The goal is by the end of the month, you should have an idea of how many points you need to reach your monthly revenue goal with the current packages you offer.
So try it out! When using the BBG point method, will ensure you’re charging the appropriate amount per hour for each of your packages. AND that you are never undercharging again.
It’s Time to Get Paid!!
It’s easy to spit out numbers and calculations but putting pen to paper with all that math (hello – we are creatives aren’t we??) can get a little challenging. So as my gift to you I want to share with you my Business Budget Template!!
It’s totally free and this tiny step will be the first of many you take as a business owner to create a sustainable business that supports a life you love!!