The Side-Hustle Dad

Ep13
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Pricing Anxiety Intro
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Bryan Steele: Welcome back to The Side Hustle. Dad, I am glad you're joining me here today on the podcast. So today we're going to answer that one question. I know so many of you have been thinking about what do I charge for my service, for my product? I have no idea. I've never been a business owner. I've just gone to a job and they say, Hey, you do this and we're gonna pay you this.

And it's take it or leave it. Maybe ask for a raise periodically, but that's it. And now you're confronted with the possibility of asking for whatever you want, but, but if you [00:01:00] go too high, people are gonna say no. If you go too low, you're gonna feel like you were taken advantage of. So where do you start?

Where do you begin when you're starting to price your services and price your product? So that's what we're gonna talk about today, really practical things. And at the end of it, you're gonna have a framework to operate with, at least as a starting point. It's not where you're gonna stay. And I want to caveat that it's certainly not where I'm pricing myself at.

You just are where you are right now, and then you can develop and you can go from there.

Switch to Project Pricing
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Bryan Steele: Now, the first thing. That I wanna say is you come up with a project pricing in as many cases as possible. I want us to move away from hourly rates because honestly they don't serve us anymore. You're going to come in and you're gonna provide a transformation for your client.

You're going to provide a benefit for your customer, which goes beyond just the time [00:02:00] you spent on the job. So you have to start thinking about, instead of what it costs for me to do what I do, to what worth does this have for the person that I'm serving? What worth does it bring to them? Now I know. That.

That's just what we come to things with in our day job. And so that's the way we think about things, but we have to shift the way we operate over to project pricing.

Studio Example Results
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Bryan Steele: Now, I'll give an example with my recording studio. When I would work on music projects, I would see lots of studios, and there's still tons of studios that charge hourly rates.

Hey, you come in for this number of hours. It's this much per hour. That is the project rate. Maybe they've got day rates where you say, Hey, to record for this day, you know it's gonna cost X. Maybe it's a little discounted because you're taking an entire day instead of a couple of hours, but it's still very [00:03:00] time-based.

What's the problem with that? Well, a musician does not know how long something should take when they come into the studio. They don't understand what is involved. What they want is a song on Spotify. They want a vinyl record, they want a mix tape, whatever it might be. That's what they care about and they want it to sound great in those formats.

They don't come in going, I want two days in the recording studio. That's not what they're looking for. So that's a an example that I've come across where I say we've got to transition our thinking to projects. So with all of the music. So with all of the music projects I work on, I say it's going to cost X per song, and it's gonna be Spotify ready.

That is the promise. That is the guarantee. That's what I'm working for. And they don't have to think about [00:04:00] how long they're spending in the studio. It's a totally different way of operating. And so we have to shift our thinking to the benefit that we are providing, the transformation we are providing.

Hourly Rate Trap
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Bryan Steele: There's another trap going on. Most of us start by thinking like employees, I'm gonna charge $20 an hour. But there's an issue how long it took you to do something at the beginning. is not how long it takes you to do something after four months or six months, what happens? You're better. You're better at your craft, you're better at the work you do, and you accomplish that work faster.

More efficiently and with the same or better results, but if you're charging by the hour, what happened? You made less money for the same or better product. that's an efficiency penalty. You are [00:05:00] punishing yourself for your own expertise, so we've got to stop selling our hours and start selling the results.

Your client doesn't care if you took 10 hours or 10 minutes. They care that the job is done right and well so that they can move on, so they can experience the benefit of your service. So. Everybody should be moving to project-based pricing, period. Obviously with the product, you're gonna charge X dollars for the product.

Nobody cares how much time you put into that product necessarily. You're gonna just gonna come up with a price.

Set Your Price Floor
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Bryan Steele: So how do we come up with that initial price? Now this is the floor, so we're going to take what I think is an initial amount of time that something should. Consist of, right? We're going to set a floor at $25 an hour.

If you've got some special credentials or expertise or [00:06:00] certifications, you might bump that up to 35, $40 an hour, something like that. But you're gonna set that price $25 an hour, and then you're gonna tack on. All materials associated with that. So if you're making a physical product, you know you're doing wood carvings, for example.

Okay, well if it takes you 10 hours to do a wood carving, then you take the materials, the wood that you purchased, and whatever finished material you use on it, and you take your 10 hours. You say, okay, well I'm charging $25 an hour. it's $250 for the labor. Say the wood costs $50 and another $50 for that material, so you come up with $300.

Makes sense. That's good. Got an initial floor. Do you go to the client and say, this is what it's gonna cost $300 for this? No. Why? Because how accurate do you think you're gonna be [00:07:00] at the beginning of this? How accurate are your estimates gonna be? What is the likelihood that something comes up that you underestimated on materials that you underestimated?

How long some piece or part would. Take, or that you might have a part of your equipment break and you gotta go get it fixed and then come back. So now there's more time wasted in the work.

Add Buffer and Margin
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Bryan Steele: So we need to put in some buffer to that. So you say, okay, if something takes 300. Dollars. That's my initial rate. I recommend 20 to 30% on top of that gives you some profit margin beyond, so you can grow as a business, but also gives you a little bit of a buffer if, if things go sideways.

So in this case, $300 was our initial estimate. 20% of that. Another $60, $360. Boom. There's the pricing which you can present to the [00:08:00] client. You're still delivering on the result you're not just barely scraping by.

You've got some margin, you've got some buffer, and you can go forward with this now. Make sure. In those materials, you include everything that might come in the cost of providing your service or product. So if you have to rent equipment, if you have to rent a vehicle, whatever it might be, make sure that's included in setting the price of your work.

Quote Confidently No Discounts
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Bryan Steele: Now, before you start with that, make sure this math is staying private, right? This is for you. You're still providing the benefit. You just tell the client, look, here's the finished product. You don't have to tell them how many hours you put into it, or you don't have to tell them what costs per hour it is or what the materials were like.

You don't have to itemize any of that. You're saying for me to do this, it's going to cost this and you do not want to chase. [00:09:00] The sale at this point, it's take it or leave it. If they say, nah, I think I'll pass. You say, awesome. Great. If you change your mind, let me know. Do not drop the price. You are only discounting your work.

We'll talk about setting prices later, raising prices, making sure we're in the right spot in our market later, but never, ever, ever feel desperate. To try and land and say, what? What about if I drop it to this, would you do it? Then like, do not get into negotiation. We do not want to be in that space because you will always be in a race to the bottom competing with people who are discounting their work, and you don't want to be the cheapest one out there because it's gonna attract clients and customers who are looking for just the cheapest thing.

And those are not the people that you want to work with. You wanna work with people who value what you provide. So do not discount your work.

Dad Math Time Value
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Bryan Steele: Now, before you send that quote out, I want you to do a little dad [00:10:00] math. Just give yourself some perspective. We've been looking for those pockets of time in our weeks to work on these things, but look at what it might cost you to do a project.

If you're going to make a pitch and say it's gonna take you five hours. And you're gonna charge $25 an hour. Is $125 worth it for that? Maybe not. So make sure you're thinking about that in the setting of your prices. Depending on the projects you're doing, you want to make sure that it's, if it's gonna pull you away from your family at all, it's gonna be worth it.

I know we're building and so maybe initially you go, yeah, I can. I can do that to get the first couple of customers under my belt. So this is really an absolute floor and we're gonna grow from here. But look at that. Evaluate that. If you go, it's not worth it to me to take on this [00:11:00] project 'cause of what it's gonna cost me in time away from family, then don't quote that or raise the price to the point where you feel like it's worth it.

Consider those costs when you're making those and don't feel like you have to take on any project. If one just doesn't feel like a project you want to do, just move on. We talked about the benefit of having the day job is that we're not desperate. We get to build the business that we want and that we want to work in.

So do not resist the urge to just try to close a sale. Hopefully that's help make, make sure you're evaluating that.

Physical Goods Hidden Costs
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Bryan Steele: Now, let's talk a little bit about physical goods versus the services. So obviously it's pretty easy when you're doing a service. You can estimate the cost, the materials, whatever, to get the, the result for your clients, whatever that might be.

But with physical goods. There's a lot of hidden costs that you also need to put into it. So if you are making a [00:12:00] product, you can estimate how long it takes you to make X number of products. 'cause I'm guessing you're gonna batch, which I would recommend everybody does, which is you make a bunch of them at one time.

You set aside a time and follow a process and, and so you just get into a flow state. So you come up with that time that it takes to make those products. You know what the materials were to generate those products. Okay? That's getting you somewhere in there, you do your markup, 20, 30%, maybe more if it's more valuable than that.

But make sure you also include the hidden time. So making the online listings for the products, managing the inventory, packing the the product, driving to the post office to ship it. So look at those other. Factors in those physical goods. Make sure you're accounting for those in the pricing of a physical product.

Digital Products Value
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Bryan Steele: But on the product side, not everything is physical. What do you do when something has zero lumber or shipping costs when [00:13:00] you've done an ebook or an online course? Well, now you're in the tricky position of going, well, I guess it's just like five bucks. Like, let me just get As, because I guess it doesn't matter.

I just get as many people as I can to buy it. So let's do a low price. You might think that's appropriate, but I would argue that's that's not the approach. You're not charging for the physical product. You're actually charging for the benefit, the transformation that somebody is experiencing, because now they don't have to pay the time cost to develop the expertise which you're giving them the shortcut for.

So whether it's an online course or an ebook, think through not the time you spent, but how much time you are saving somebody else. You're saving them all that trial and error. You're saving them the hours [00:14:00] online, trying to watch YouTube videos. You're short cutting everything so there's a clear process and they can get to the result they want faster because of your expertise.

'cause of your expertise. They are getting there quicker. It's saving them 10 hours of frustration, and that's worth a lot more than a cup of coffee. So make sure you're valuing that piece. Okay. They don't, they're not thinking in terms of $5. They're thinking in terms of how do I get. The impact, the result faster so you can save them that time with your digital product and price it based on that.

Now, you may not be able to charge, you know, tens of thousands of dollars for an online course. Maybe you can, if you can promise that sort of a benefit, but it might be worth 200 $500 for an online course. That ebook might be worth 50 $75. Because you can think about it a little [00:15:00] bit at scale, but it's going to save you a lot of time.

So that's what I would recommend for you. If you're looking at, say, a digital product that you're putting together to sell, think about the time savings for someone else. So charging a fair price is what's going to make this sustainable. You're not trying to take advantage of anybody here. You're trying to develop the transformation.

And make a fair profit for your work, for your family, for this.

Wrap Up Next Steps
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Bryan Steele: So the step I've got for you now is if you're new to this, look at your floor. If you've tried pricing and you're struggling with it, try a calculation like this. What does it come up with? What is the absolute minimum you would come up with and go?

Is that worth it? Does that make sense? Do I need to adjust it a little bit? Because I'm going to say it might be a little different for you. It might be slightly different pricing. You might decide it needs to be something else before this is a business you're willing to to [00:16:00] sacrifice that time for. So calculate that floor, figure that out.

Next time we're actually gonna talk about moving that price up and how to know when it's the right time. So look forward to that conversation with you, and I will see you then.

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