Wondering how to price your products or services so you can make a profit?

You're not alone. Figuring out the right price is one of the biggest challenges business owners face.  In this podcast I am going to tell the 2 key stages in pricing, don’t worry about the number crunching I have FREE online calc that steps in to help

Firstly, focus on your 2 key financial outcomes

Secondly, consider 5 key factors that will help you set a price that meets your business objectives

Listen now and learn how to price your products or services for success!

You need to make sure you're covering your costs and making a profit. In this podcast, I'll explain the two main financial outcomes you need to meet, and share a FREE online pricing calculator to help get it right.

Pricing can be tricky - but it's essential for making a profit in your business.  Listen more so you can get it right every time.

Conclusion

Knowing how to price your products or services will make you money, now and in the future.  Moreover, you will achieve two key financial objectives.

For more business and finance, news, advice and tips, don’t forget to subscribe and watch our weekly videos on I Hate Numbers, listen to our weekly podcast I Hate Numbers.

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Furthermore, my mission is to inform, inspire and educate you to get closer to your numbers.

You can make more profits, save tax and time, improve your well-being and your money mindset.

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The Numbers Crew- Here to help you!

If you want to make sure you are pricing your products and services correctly, you're not alone. Figuring out the right price is one of the biggest challenges business owners face. In this podcast, I'm going to tell you the two key phases in pricing. Don't worry about the number crunching though. I've got a free online calculator.

Yes, you heard me right the first time. A free online calculator that's going to take the heavy number lifting from you.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another weekly episode of I Hate Numbers, the show that's there to improve your financial awareness, up your money mindset game, help you make more profit, save tax and time. Let's crack on with the podcast, Now, the first key phase in your pricing approach is to focus on your two financial outcomes, and those two financial outcomes

are ones that are critical to factoring whatever business you have. The second phase is to take on board five key numbers that's going to help you set a price. Now, pricing can be tricky, but it's essential for keeping your business going. Now, the first phase is about objective. Now, whatever your business objectives are, and you must have those, you must include in that at least two key main financial objectives.

Firstly, you must aim to recoup, to get back the costs of running your business. The second aspect of financial objectives is to make sure you make a profit. Let's explore those in more details. It doesn't matter what size your business is, what industry, what sector you're in. You must make sure that you recoup the cost back from your customers.

All businesses will have costs in running the business, keeping it on the road, whether you're home-based, whether you've got a factory unit, whether you've got an office space that will be cost associated with running and delivering products and services to your customers. You'll have software costs, staffing costs, publications, rent rates, subscriptions, accounting fees.

You get the picture. Any business, whether it's a humble market trader, a mighty oak of a business will have running costs. Ultimately, it's your customers who will recompense you for those running costs. So that's critical objective number one: make sure you recoup those costs. Now, the second most critical financial objective is you must make a profit out of your business,

out of your pricing. That's right folks, profits. Factor it in, because without profit you don't have a business. You just have a very expensive hobby on your hands. Profit keeps the wheels turning of your business and it's essential for prosperity, for keeping still, for growth, for you to be able to sustain yourself and deliver your why to your customer.

So get comfortable with cost recovery and with making profits. Now, let's look at the five key numbers that you need to include when you think about pricing. Now, this approach applies to products, or to services. Firstly, consider the time that you have available, what we might call your capacity. The second aspect of that is how much of that time will be spent on supporting the business in terms of administration and marketing, and how much time, by nature,

are you going to have to be able to deliver the work to your customer to produce the products on your production line. How much of that time is gonna be spent on actually delivering your service to your end customer? Whatever type of business you have, some of that time you have available, some of your capacity will be taken up with marketing, administration, working in the business, developing the business, supporting the business.

That time is not necessary going to be available to charge to your end customer. Now, later on in this podcast, I'm going to blend some numbers in here to bring some life to these words. Now, first two key numbers we've talked in terms of is the available time that you have, and how much time was actually going to be spent directly supporting the business, and how much is going to be spent in terms of what we might call back office functions in terms of marketing, in terms of developing, networking, coming up with new product concepts, new ideas, and the like.

Having decided what that is, and I would typically suggest that you consider that on a weekly basis. So in a given week, what's those two time elements? Now, extrapolate that nice big word there, is how many weeks you are likely to be working over the next 12 months? It's going to be anything from zero up to 52. If the number is zero, by the way, folks, you're not going to have much chance of recouping any money back from anyone.

52 is not recommended. Now, if it's 52 weeks, if you are an individual, if you're a service-based business, that means you're not going to have any let up, you're not going to have any time off with friends, family, time to recuperate, and that means your light is gonna hit a brick wall. We're not robots here.

You need time to recuperate, regenerate, grab some respite and recharge those batteries. If you're a product-based business, what you're saying is that your production line is going to be running continuously for 52 weeks of the year. There's no downtime for maintenance. There's no time for factory closures.

So again, 52 weeks is theoretically possible, but is an extreme number. Having considered the time elements, now, let's consider the anticipated, the predicted, the future running costs in your business. What's it likely to be, what's it likely to look like for rental, for salaries, freelancers, costs, information, publication.

Let's get those accounting and professional fees in as well. Now, it doesn't mean you have to be a fortune teller to predict the future with exactitude, but you've got to have some idea is what that future looks like in terms of those future costs. Some people call them overheads. Some people call them running costs, but there will be costs associated with running your business, taking it forward with marketing, development and administration.

That sets a bare minimum, the cost that you want to get back from your customers. The last thing to consider is what's the level of profit that you wish to make in your business? It's not what somebody else is making, but what do you consider a realistic profit? Take into account your own expectations.

Take into account the type of lifestyle that you wish to have. Take into account, yes, consider your competition, but you know, what's that number, that level of profit that you wish to make, that you need to make in your business. The final thing we've got to do is to blend those numbers together in a wonderful concoction and come up with two numbers.

And those two numbers will give us a guide with the cost per hour that says a bare minimum. And number two, what does that equate to if we were going to translate that with profit factored in? Remember, folks, there is a free online calculator. I'll leave a link in the show notes. And this free online calculator gives you the options of playing around with numbers.

It's got a slider, and by slider, I don't mean a sandwich. Now, what we're waiting for next is some numbers to bring this more to life. So let's imagine your business. You've got 10 hours available in a typical week. So those 10 hours takes into account your own personal circumstances. It takes into account,

you know, how much time you have available. You may have other commitments. There may be other things going on. 10 hours may be too low, maybe too high, it doesn't matter. This is purely an illustration. Now, of the 10 hours you have available in a week, whether that's on the production floor, or whether that's in our service business, some of that time will be taken up with back office, marketing,

admin and support. And let's assume, for argument's sake, that's two hours that's gonna be taken out. Now, you've decided that your business is gonna be running for 50 weeks of the year. So if I've got eight hours that I have available to deliver services to my customers, to produce my products, that gives me 400 hours of available time

over the next year. Now we've looked at what our business is. We've figured out what the support costs will be. We've considered the rates, the marketing costs, the salaries of our staff, freelancers is in the order of 8,000 pounds. Now there's 8,000 pounds that we've got to recoup, and we've got 400 hours of available time.

That gives us an hourly rate of 20 pounds per hour, so charging 20 pounds an hour will get us that 8,000 pounds back. Now obviously recouping costs is a minimum, but we'd like to make some money. We'd like to recompense ourselves. We'd like to make some profit. Let's assume we set ourselves a target of 8,000 as the profit target.

That means then the hourly rate becomes 40 pounds. What that means is that every hour that we deliver a service to our customer, every hour it takes us to produce a product, the rate is going to be 40 pounds. Now, the beauty of the calculator is it's not just putting numbers in and seeing what the outcome is, even though that's really critical, it gives you options and it gives you the ability to play around.

Now, if we decide that we've got more time available, then with the power of the slider you can up that in. Now, the more hours you have available, assuming that that overhead rate, that support cost rate doesn't fluctuate, that means the hourly rate drops down, and that means, it gives you the opportunities to perhaps play around with your pricing approach.

If you decide that you want your profit aspirations to go up, let's say you want to double the profit, then the hourly rate will reflect that as well. The hourly rate will go up. Now, depending on the nature of the industry, depending on the nature of your sector, depending on how you wish to approach your pricing, you can play around with your objectives, where your business is likely to be, and it gives you a lot of possibilities here.

If you wish to invest in your business by increasing your marketing spend, recruiting more staff, getting more freelancers, upping the levels of your wonderful friendly accountant, then that is going to impact on the rate that you charge. You may suddenly find, if you increase the number of hours available, you might find there's a lot of dead time going on in the back office.

That gives you the opportunities to explore and make some efficiency gains as well. In future episodes, I'm going to explore mechanisms, and look at approaches to how we can make our business more efficient, and how we can expand on this pricing approach. Now, this pricing approach, by the way, is one way to approach, and as a bare minimum, any business needs to at least consider the impact on time, cost, and profitability.

Folks, I hope you found this a useful podcast. I hope you get some value out of it. I'd love it if you could share. Give me some feedback, give me some love. If you find there's a topic that you want to explore in a future episode, drop me a line and we'll factor it in into our content schedule. Apart from that, folks, happy pricing.

We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.