What's up brand builders Stephen Houraghan here at BrandMasterAcademy.com and in this video
you're going to learn the difference between cost price and value so you can improve your
conversations with your clients and increase how much they're prepared to pay for your services
now when it comes to the branding industry the terms cost price and value are often
used interchangeably certainly by prospects going out into the marketplace and looking
for their jobs to be fulfilled but there is a distinct difference in the three of them and
if you understand that difference then you can structure your conversations with your client
so you can influence the outcome of what they're prepared to pay for your services so let's take a
look at cost price and value and break them down so you can better understand them number one cost
now one of the most frequently asked questions if not the most frequently asked question within
the whole of the branding industry is you've probably guessed it what is the cost of a logo or
how much does a logo cost now when an entrepreneur asks this question they're actually asking what is
the cost to them but what they usually get in response from a freelancer or a designer is a
cost based on the designers cost so they don't take anything into consideration other than
what it's going to cost that actual designer now what they should be taking into account
here and what they should be coursing up are a number of different things including the labor
any hardware used any software used the premises that they're working on is there any rent there
and any other outgoings that might contribute to how much it actually costs the designer to
produce that work now even if the freelancer does take the time to include all of those costs within
their quote including their rents their any expenses they might have their hardware their
software and then their labor on top of that even if they do take the time to include all
of those costs they're still not making any money at that point because they're only charging out
what it's actually costing them to produce the work but in reality most freelancers don't even
do that they will charge out for the cost of their labor so they'll work out how much they want to be
paid per hour they'll work out how many hours the project is going to to take and that's how they
base their prices so in reality they're losing money on all of those other expenses so for most
freelancers with every project they do they're actually losing money on that project so how does
that differ from price well let's have a look at the cost again the cost is the cost of production
to you as a supplier that is how much the job is going to cost you the price on the other hand is
how much you're going to charge and the difference between the two the difference between the cost
and the price is your profit so when a prospect comes to you and asks you for the cost of a
logo or the cost of your services what they're actually asking you is the cost to them they're
assuming that within your costing and within your pricing to them that you're going to include some
kind of profit they're not thinking that you're going to be losing money on the work that you do
they're assuming that somewhere in the background you have included in some profit for your business
so any business whether they're selling apple juice or running shoes or legal services they are
selling their services at a given price and that price includes their profit now if the business is
not making any kind of profit and they're charging their services or their products out at the cost
of production well then that business is not going to be around for long because they're not making
money any business exists to make a profit and if it's not making a profit then it's a charity so
you really need to consider your services and your freelance business as an actual business
you need to include the profit that you want your business to make within the services that
you provide to your clients so what should your business be earning from their profit margins well
you have different businesses earning different levels of profit margins right across the board
you have some businesses that will charge 10 other businesses that will charge 50 some 300 percent
and then upwards of that as well it really depends on the individual business and you should assume
some risk with your profit so for example within a branding business you have the risk
that your client is going to come back to you with multiple changes they want to adjust the outcome
they want to adjust the delivery now in some cases you'll be able to adjust the price with that
but for the most part you will assume some risk with your profit margin what you need to determine
is what your profit margin should be and what risk you're going to assume within that profit
margin and number three value now as the seller of your services you get to determine the price
that you're going to charge but as a buyer your prospects and your clients will determine the
value they'll determine whether or not they're going to be prepared to pay the price that you
have laid out and if they do see value in what you've put in front of them and if they see that
the value is either at or above the price then your prospect will potentially become a buyer so
you need to determine what your price is going to be within the marketplace and you base that
on your costs and your profit and you set that price but the buyer and your prospect
will determine the value they'll determine whether or not they're prepared to pay
the price that you have set out if they are you will have a new client now some freelancers do
struggle with the idea of marking up their prices and they can't get past the idea of determining
what their hourly rate should be and then working for those amount of errors to earn that amount of
money and essentially they're stuck in this cycle of trading their time for dollars and
it's not until you're able to break free from that model do you actually start to build a business
now although your prospect does determine the value you have the opportunity to influence that
value now there are a lot of designers out there that work as subcontractors for bigger agencies
and essentially they sell their work to the agency at one price and then the agency on sells that
to their clients for another price now they're able to do that because they have influenced how
much value their clients see in their work and therefore they're able to charge those higher
rates so when it comes to your prospects and your clients you have the opportunity
to influence how much value they see in your work and when it comes to brand strategy the best way
to do that is to educate your clients to talk to them about the value of what real branding
is and the fact that a logo is not going to get them too far so when you speak with your clients
think about the value that you offer within your business think about the value that they see
within your services and then try to influence that by education but i would love to hear from
you how do you go about charging for your services do you have those types of clients coming to you
asking you how much does a logo cost and if they do how do you charge that up do you include the
cost of your hardware your software your rental premises do you include all of those costs
along with your labor and then you charge a profit on top of that and how has that been
going for you if you've got any challenges at all i'd love to hear from you in the comments below
i'll do my best to answer all of those if you like this video please give it a thumbs up and hit that
subscribe button and hit the notification bell as well it'll let you know when i've got new videos
coming out if you want more exclusive tips like this then head on over to brownmasteracademy.com
and sign up for the newsletter it is free i do keep some exclusive tips
for my valued list and i will drop those tips and techniques right into your inbox but again
i would love to hear from you let me know in the comments below what your challenges are
until next time brand like a master and i will see you in the next video
you