I’m back with another peek at our 30-Day Business Transformation program. If you missed the last few
videos, go check those out because I’m sharing sneak peeks into the classes in this program
each week for 7 weeks. Today we’re taking a look at a segment from module number 5:
Know Your Numbers. So grab your free worksheet download in the comments and take a peek.
Welcome back for day 22 of your 30-Day Business Transformation. It’s time to set your prices.
Notice, we’re almost entirely through this program before we’re doing this. And
there’s a reason for that. It’s not something to arbitrarily choose. If you charge $70
an hour and I ask you why you charge that…if your response is something to the effect of
“everybody else in the area charges around that”, “my clients seem happy with it”,
or anything like that…it’s an arbitrary number. Which means it doesn’t hold water.
This number needs to be based on data! So that’s what we’re doing here. Scrap whatever your price
point is right now, because it’s not important. We’re going to look at the factors that are.
And that includes… Minimum annual personal income
Max sessions per month Average Monthly expenses
Desired business profit Any max potential discounts
So to keep this simple, let’s look over at the
calculator I have on the website that will figure out what your base pricing should be. That’s
linked in your workbook alongside the formula so you can figure this out yourself if you’d like to.
So you’re going to punch in your numbers regarding minimum annual personal income,
max sessions per month, average monthly expenses, your desired business profit (so what the business
keeps after expenses, taxes, and your pay is all taken out), and any future potential discounts.
Minimum annual personal income is how much you need to make to keep your personal bills paid
and live comfortably. Remember, this is pre-tax so you’ll want to shoot a little above what you
actually need to make to account for the taxes you’ll pay, depending on your business structure,
household income, all that jazz. So typically you shoot for about 20% to 25%
over your actual needs to account for that tax, but of course it varies widely depending on your
own situation so that’s a total ballpark estimate as to how much is going to tax.
Max sessions per month is how many of those sessions do you want to see? How many can your
body handle? How many is kind of your goal as for those work hours you’re now tracking?
Average monthly expenses being just what they sound like, how much in expenses do you have pay
every month to keep your business operating. Don’t forget to include the
amount going over to taxes on this. Then your desired business profit,
so what’s left for the business entity after your expenses, taxes, your personal income,
all that stuff is paid. How much is left in retained earnings for the business as profit?
And then your max potential discount. Some of you won’t discount ever at all, some of you might,
but we want to factor this in because people really start to eat into their profit margins
when they keep discounting large amounts or even small amounts, but repeatedly.
So that potential for a discount should be factored in when setting your pricing
to start so that regardless you’re making plenty on each session. This isn’t saying you’re going
to discount regularly, this is just making sure that if you do discount, you’re in no way hurting
your bottom line.
So use that calculator and that gives you a base price to start with. For this example, we’re
saying I want $50,000 a year in personal income, and I’m going to bump that up to $62,500 to
account for taxes. My max session per month is 80, because I like staying around 20 clients per week.
My average monthly expenses are only about $800. I want to retain $500 a month in business profit to
save up for this or that investment or improvement for the business. And I won’t be offering any more
than a $10 discount at any time. That puts me at $91.35 per massage that I should be charging to
get all of that covered.
But I also what you to take into account a few other things…
-your competition analysis -your education and experience
-how booked out you are -your client experience
-and your ideal client’s household income relative to cost of living
Remember coming up with all that stuff? Yeah, now’s where we’re going to put it to use again.
You have your base amount that fulfills your needs based on the numbers you’ve now worked up.
But how do we put those these sort of things into a dollar amount?
There’s no black and white way to do it, but here’s a simple way that might help.
We’re going to rate each one of those on a scale of 1 to 5.
So you’ll see in your workbook that you’ve got a section to fill out there. You’re going to rate
your business from 1 to 5 in these categories. Your competition analysis – on a scale of 1 to 5,
how much do you stand out from the competition. 1 being you’re offering
the very same thing everybody else is and 5 being you’re the only one in a 50 mile
radius who offers your awesome abilities? Your education and experience – on a scale
of 1 to 5 how would you rate that compared to your competition and what clients can find elsewhere?
1 being just out of school and limited to no experience and training beyond the basics,
and 5 being you’ve been in this a long time and/or taken a whole bunch of classes
and training that have solidified your skills? How booked out you are – on a scale of 1 to 5,
how hard is it to get in with you? 1 being your schedule is wide open and can even take same-day
appointments if you want and 5 being that you’re booked out weeks or months in advance.
Your client experience – on a scale of 1 to 5 what’s the client experience like
compared to other places around town? 1 being your client experience workup is the same as pretty
much everyone else and 5 being it’s over top spectacular and they feel extremely pampered from
the time they walk in til the time they leave. And lastly, your ideal client’s household income
relative to cost of living. In other words, do they seem to have a good chunk of disposable
income? 1 being nope, things are pretty slim margins, but they can still afford massage,
and 5 being they’re rolling in it and money is absolutely no barrier to them.
Now that you have those rated, for each point
you gave a category, I want you to add 50 cents to $1 to your price point. So if you landed on $90
as your base price, and you’ve rated these.. your competition analysis 3,
your education and experience a 1, how booked out you are a 2,
your client experience a 3, your ideal client’s household
income relative to cost of living a 3, that’s a total of 12. Which means I’m going to
add $6 to $12 to my base price which lands me at $96 to $102 per session. To keep it simple,
I’d probably land at $100.
The reason I do this is because you should be charging more for the uniqueness and special
qualities you offer. Again, the numbers matter first, and then it’s the considerations that help
fine tune and get you a bit more robust number to fit for the uniqueness you offer too.
Now, I want you to
go back through and do this exact same thing to figure up another price point…the 10-year goal.
We’re tying this back to that business vision you developed a few modules back. If you set an
income goal, you want to cut back on hours or whatever it may be, make some estimates as to
what this would look like in all these categories; the numbers and these other considerations….then
plug it all in and figure up what your price point would roughly need to be to support that.
You’ve now not only set the price you need to be at currently, but you’ve also set the goal price
you need to work your way up to. Which can give you a great indication as to the goals you need
to set in other areas to get you there. So take a few minutes and go back to that vision if you need
and hash out a few more things.
Alright, for many of you,
it’s likely that that first price point, the one that fits for now, means a price increase
for your business. So how do you go about that? You do it. Don’t freak out, again,
reach out, post in the group, do what you need to to get in touch and let me help you through this
process. But there’s a few things to consider… #1 if it’s a big jump from your current price,
do you raise it all at once or do smaller increases over a period of time. It really depends
and I’m honestly not going to say it’s one way or the other that’s right here. I think one of the
biggest factors is your current client load; so how far out are you booking, like solidly booking.
Not that you have 2 appointments on the schedule 6 weeks from now because those 2 clients have
a standing appointment, but you’re solidly booked and can’t get anyone in for 6 weeks. That’s what
I’m talking about. The farther out you’re booking solid, the bigger I think your price jumps can be.
The disposable income of your clientele can also speak to this. The more disposable income they
have, the larger your jump can be.
Point #2, people are always worried, what if I lose clients? I get it. But if you need to
make that certain amount to keep all your bills paid and live comfortably,
then clients who can’t pay that or aren’t willing to pay that in exchange for what you’re providing,
those are not your ideal clients. And they’ve just opened up space for people who are. But really,
the vast majority of people I know who raise their prices, they see very little if any client loss.
Even with big jumps. So I know it’s scary, but you have a business to run. Even charities gotta pay
their bills and pay their staff well.
Point #3 how far in advance do you tell them? 6 weeks is generally plenty of time to give everyone
ample notice of the price increase, change over all your marketing materials, change it
on your website and booking software, and all the places. So I wouldn’t do much more than 6 weeks.
That’s plenty and gives people plenty of time to process. All it takes is a simple notification in
your communications; send out an email blast to everyone notifying them of the upcoming change on
this date, put a little notice in your reminder emails that prices are changing on this date,
put something up on your website and out on social media. That’s it. And please, please, please,
don’t justify it. Don’t say “I took this class and Savanna said I had to” or “my expenses have
gone up” or whatever. Just these are the new prices, this the date it goes into effect,
let me know if you have any questions. Period. Done. Again, you’re a business, not their best
friend who can share all the behind-the-scenes happenings of your finances…this is what it is.
Now, it’s time to go through all those
services you came up with in the branding module and set your pricing for each one. This session
pricing should translate into those timeframes pretty readily, but feel free to reach out if you
want to brainstorm some specifics with me.
Thank you so much for watching today. If you want to sign up for the program and see more of what’s
included, I’ll link that below. Be sure to follow us on all your favorite social media platforms,
sign up for our emails, join our Facebook group, and keep an eye out for updates,
business tips, free content, and all kinds of other goodies to help
you grow your massage practice. See you next time!