We’re thrilled to have Shanna Skidmore contribute to this week’s newsletter. Through her business, Shanna helps individuals and small business owners with financial and business planning and is sought out in the creative and wedding industry for her ability to understand the needs of these businesses.
We asked Shanna what is one important thing to consider when pricing one’s work. Here’s her answer:
Knowing how to price your work is one of the hardest and most frequent questions I get as a business development consultant. If I could give one tip to creative business owners, I would say “know your cost!”. When creating and making your product, many business owners calculate their product costs, such as materials, packaging, shipping and postage, but often forget to calculate in cost for the time commitment of creating that product. If you have to pay an employee a set hourly rate to complete the same project, what additional costs will you be incurring? Once you see not only the material and production costs, but also take into account time commitment, pricing starts to look a lot different.
For example, say I am a floral designer who was hired to create wedding florals for a client with a budget of $1000. If I spend $500 on flowers, materials and freelance labor, I would show a $500 profit after the event. That number feels really good. If I then take the $500 profit and break it down based on 70 total projects hours from client inquiry to event completion, my hourly wage is $7.14 per hour. This number feels very different.
Accounting for product costs AND time commitment may feel discouraging at first, but will really help when evaluating and setting future prices. Having this information will allow you to intentionally choose a profit margin you feel excited about and comfortable with, given market demand.
Read more of our newsletters on our Vendor Corner page.
Learn more about Shanna Skidmore’s consulting services.