Have you ever found yourself tangled up in knots over how to price your products or services? You’re not alone. Many creatives struggle with pricing, especially when incorporating all those hidden costs that sneak up and threaten to nibble away at your profits.
Today, we’ll cut through the confusion and discuss why understanding and including your cost of goods sold (COGS) in your pricing strategy isn’t just a good idea—it’s essential for your business’s sustainability.
Why Worry About COGS?
COGS isn’t just another acronym to keep track of; it’s the backbone of your pricing strategy. This includes all the direct costs of producing your products, from raw materials to the labor you pay for production. For service-based creatives, consider the tools you use and the time it takes to deliver your services.
When you base your prices solely on market value, you might set yourself up for a financial fumble. Sure, it’s important to stay competitive, but if you’re not covering your costs, you’re running a marathon with a backpack full of rocks.
Shifting to a Profit-Based Pricing Mindset
The trick is to shift your mindset from pricing just enough to stay competitive to pricing smartly to ensure profitability. Here’s how you can start making that shift:
- Calculate Your COGS Accurately: Dive into what each product or service costs you. Don’t overlook anything—that half-used tube of paint or the software subscription that helps you stay organized counts, too!
- Factor in Overheads: Beyond the direct costs, consider the overheads. Rent, utilities, and even your internet bill should play into your pricing strategy.
- Set Profit Margins: Decide on a profit margin that suits your business goals and market positioning. This might mean testing different price points to see what your market can bear while ensuring you stay profitable.
- Monitor and Adjust: The market isn’t static, and neither should your pricing strategy. Monitor how things are going, and don’t be afraid to adjust prices if your costs go up or if you realize you’ve underpriced your goods.
The Bottom Line
Remember, pricing your products or services shouldn’t be about pulling numbers out of thin air or just breaking even. It’s about creating value for your customers and ensuring that every sale contributes to a thriving, sustainable business.
Don’t let underpricing dig a hole in your wallet. By focusing on pricing for profit and understanding your COGS, you set the stage for a business that lasts and leaves you feeling fulfilled, not frustrated.
Still feeling a bit foggy about adjusting your pricing strategy? No worries, that’s what I’m here for. Reach out, and let’s get your pricing aligned with your creative brilliance and business savvy.
