Ep 70 Transcript: Stop Undercharging and Start Profiting: Strategies to Know Your Worth

This transcript was auto-generated and may contain errors in spelling or inaccuracies in the spoken words.

Shauna Lynn Simon (00:05)

Hello and welcome to the Real Women Real Business podcast. I am your host, Shauna Lynn Simon. And if you're working harder than ever, but you're finding that your bank account just not reflecting that you can't seem to keep up with all of your expenses, you might actually be caught in a pricing trap that so many women entrepreneurs find themselves stuck in and it keeps them just spinning their wheels. So today I want to cover the four invisible traps that are keeping you stuck in a cycle of under earning, overworking and

Honestly, feeling pretty frustrated about the whole thing. So grab your coffee or tea or beverage of choice and let's dive into the pricing trap that's keeping you well broke. And more importantly, we're going to talk about how to actually get you out of that as well. Now, before we jump in, I do want to lead with this important reminder. If you don't know what it costs to offer your products, your services, you're going to continue to find yourself struggling when it comes to your pricing.

But when you know what your expenses are and you can account for all of those, then you can price for profit. When you know what it costs to offer your product or service, you make sure that you identify your time, your opportunity cost, all those expenses, all those costs that go into that. You won't sell it for anything less than that. I have worked with numerous entrepreneurs over the years, helped them fix their pricing strategies. But even myself, I need someone to check me out every now and then.

to remind me that pricing isn't this arbitrary number and that I have very real bills to pay and I can't just be discounting my prices because someone was really nice and I really wanted to work with them or it sounded like a fantastic opportunity. Trust me, I've heard it all. So I've worked with a lot of entrepreneurs to help them with their pricing strategies. And honestly, this can be, it's an ongoing challenge if you're finding yourself.

struggling with it and you think, everybody else seems to have this all figured out. Let me tell you that pricing is a constant conversation in majority of my coaching calls still to this day, no matter how successful someone is, no matter how much money they're bringing in. One of the biggest mistakes that people make, though, is that they mistake revenue for profit and they actually consider revenue cash flow like, ⁓ cash is flowing in, but they're not paying attention to

cash flowing out and so they end up with what's considered a negative cash flow, which is not sustainable. Of course, when you're just looking at revenue, it's easy to miss the fact though that your expenses aren't necessarily keeping up and that's just a slow leak in your business. So you do need to ensure that you are on top of your numbers at all times and what this looks like for every company is a little bit different depending on you know how big the volume is that you are operating in. So.

You might not get down to every single detail as to how many Post-it notes and staplers were bought that month. But if you're a smaller company, yeah, you need to be paying attention to all of those intricate costs. Maybe not quite down to the very last staple, but you get the idea. So when I worked in my last corporate job. So for anyone who's not familiar, I worked a couple of corporate jobs prior to shifting into entrepreneurship back in 2007. So my last corporate job.

It's actually really funny. I was working with the VP of sales. And so my responsibility was to price out all of our products. So not just our regular catalog products, but if someone had a special request for something, I was the one who was responsible for evaluating what our production costs were for that, what our raw material costs were, what everything that went into that producing that product, what it costs. And then

identifying what we should be selling it for based on a reasonable margin or markup. So I'm working with the VP of sales and he was not understanding the concept of negative cash flow. I mean, maybe he was. I guess I can't say see inside his head, but he was looking at strictly revenue. So we had this quote request for it was like a million of this small product that we sold, the small product that we sold. Think on average, we're selling like a hundred of these, maybe 200 of them for like a dollar. And

He wants to know, can we do it for less than that, given that these guys wanted to buy like a million of them? Well, of course we can do it for less. There's a lot of efficiencies, there's bulk purchase quantities. We can do a lower profit margin, of course, in order of that size. So I crunched all the numbers, got it about as lean as I possibly could, and gave him the number of here's what we can present it as. And he said, no, we need to do lower than that.

And so he gave me a number that he thought was reasonable. And I don't remember what the numbers were. Let's say I told him we could sell it for, 70 cents each. And he comes back and says, no, we need to sell it for 60 cents each. And I said, well, the problem is it's costing us like 60 cents to make this. So there's no way we can actually sell it for that. Or I think actually like, I think he wanted to sell it for 50 cents. And I'm saying, well, it's costing us 60 cents to make it. So like, how do you expect me to sell it for 50 cents? And so I told him, like, so we can't do it for that price. He didn't care.

He said he didn't care. He said we need cash right now. And so he's going to take the order for quote for cash flow. That's what he said. He said, I wanted I want us to get this order for cash flow. OK, let me say this. Sometimes this has worked for companies where you take an order that you know you're going to lose money on, but it's going to give you an injection of cash. And so the idea is that that cash buys you some time to be able to.

either reduce expenses or bring in additional revenues. So it can be a strategy that can work. I don't recommend it unless you have a solid pipeline with very real deals coming down the road that you know you just need to get through until that point. So in any case, he decides he's going to take this for negative cash flow just so that that we can get by for the time being. Totally understand that.

I didn't like it, but I understood it. The problem was that this started to become a bit of a habit for him. And so the more times you do that, eventually simply can't keep up. Your cash flow will not be able to keep up because negative cash flow is exactly that. So this should only be done when you have a plan for that loss. And this was one of my first experiences with understanding, you know, the real difference between revenues, profits and cash flow and how that all works together.

from the point of running the business. That wasn't my responsibility of that company. I wasn't running the business, but I was responsible for ensuring that we made profitable orders. So in any case, needless to say, the company actually folded not long after they laid me off. So not overly heartbroken about that, but there were some wonderful people there. So I am sorry about that part of it. Anyway, let's jump into the four pricing traps that are keeping you broke because I see this happening time and time again.

And I want to help you to identify what these traps are. And then we'll talk about how we make sure that you that you avoid them as well. So the first one is the employee mindset trap. This is when you're pricing your services as though you're still an employee as opposed to a CEO. You think in terms of your hours worked, you're just going to trade an hour of time for money and you're not actually thinking about.

everything else that's going into it. So you've calculated your materials plus your labor plus a little markup call it a day boom done. But here's the thing. You're not just selling your time. You're selling your expertise. You're selling your systems your years of experience your value the transformation that you provide when you price like an employee you're leaving money on the table and honestly you're doing your clients actually a disservice because you're not positioning yourself as the true expert that you are. This is one of the reasons why I work with my clients to create what we call

value pricing as opposed to just a strict hourly pricing because again this is a common mistake that people are making but think about the brands that you know and love. If you're to if you're going to go into your lululemon store for example or if you're going to go into your louis vuitton store you know approximately what your price point is going to be for those items. Does that mean that they're a better quality than something else that's similar that's the knockoff the dupes that are on the market?

Not necessarily, but you are paying for the value that you feel you're going to get from their brand. But the idea is that you do expect to get value. If I don't know this other brand that I can find on Amazon for 20 % of the price of the Lululemon, I know Lululemon has value. I know that they have designed their products in order to fit my particular body type. I know exactly which products fit me in what way. And so I'm going to be that much more willing to invest in them. So I want you to position yourself as the expert.

and consider value pricing as your strategy. And again, this is something I get into with my clients a little bit more, but it helps you to shift that mindset from being an employee and you're trading times strictly for money. And instead, start focusing on your trading a transformation for money. You're trading a result for money. Okay, trap number two is the I know it's a lot trap. my goodness. This one makes me cringe.

Every time I hear it, have ever caught yourself saying, I know it's a lot, but when you share your pricing, I've seen so many entrepreneurs do this. I've had people present their pricing to me and, you know, here's the quote and they're kind of they're skittish about it. They're like, listen, I know it's a lot, but and then they go into this whole justification and listen as a Canadian, I understand because as a Canadian, we apologize for everything.

Like if you're walking down the street in Canada and someone bumps into you, you're going to apologize to them. Okay, this is just how we do it here. But you don't need to apologize for being excellent at what you do and charging what you're worth. So instead of saying something like, I know it's a lot, but try saying something like, I know it might seem like a lot, but let me explain and only say that in response to a client.

identifying that maybe they can't afford it or that it seems high for them. Saying that it's a lot. I've never confirmed when someone says that's a lot of money. No, it's not. It might be a lot of money for them. And I understand that. And it's not to say that you shouldn't be respecting someone's budget, of course, but is it a lot? It's all relative. And so if you are worth it, then it's never too much. If anything, you should probably be charging more. Right. So.

Instead of saying, I know it's a lot, but try saying, I understand it might seem like a lot, but let me explain and then clearly break down exactly what's included. Explain the transformation. Help your clients to understand that they're not just paying for your time. They're investing in your results. Most of the time when someone says no to whatever it is that you're offering, they're not necessarily rejecting your price. It might seem like they are because they might even package it up as though they're rejecting it due to price, but they're revealing that something isn't

clear. No really just means I don't understand yet. I don't understand the full value yet. So educate. Don't apologize and be prepared, of course, to walk away if someone's just not going to be the right fit. If they can't afford it, they're not if they're not able to afford it today, they might be able to afford it in a few months, but it doesn't mean that they're going to be able to afford it next week. So walk away, come back if needed. OK, so trap number three.

I mean, I think so many people have been caught in this trap. Even even I've been caught in this trap for sure. This is a pretty big one. When someone says that they can't afford your price, your first instinct might be to just like, all right, let me just start slashing some things here. Let me just cut the rates. But discounting actually sets a very dangerous precedent and it devalues your expertise. Once you start discounting, clients come to expect it. We all know that there are certain websites online where you're going to buy things from and you would never

pay full price for those places because you know if you just wait another week, they're going to come out with another price or promo code. Even when I go to the grocery store, there are certain items that are always going on sale, so never going to buy them at the regular price because I know if I just wait a week, they're probably going to be on sale unless I'm making something super special that demands that ingredient, of course, but the but there's certain staple type products that if they're not on sale, I just don't bother buying them. And so this comes.

This is what ends up happening with your price. And if you're constantly able to negotiate on that price and discounting things, no one's ever going to pay the full price. They're always going to expect a negotiation. So if once you start discounting, their clients will come to expect it. They assume that your pricing is flexible. And when your pricing feels flexible, it stops feeling confident too, right? Because now they're thinking, well, they've got some negotiation. They can totally just chop you down. So here's what I want you to try instead of discounting. So if someone's saying that they can't afford you,

Can you throw something else into the mix to sweeten the deal? This is considered an upgrade instead of a discount. So if you've ever flown on an airplane or taken a train or anything that has, the whole general economy class versus business or first class, you if you've ever been upgraded and this actually happened to me a number of times over the years, I've traveled quite a bit and I've been upgraded to first class from the economy.

Well, let me tell you, when I'm upgraded to first class, at no point do I think that the next time that I buy an economy ticket, that I should get the same treatment that I got in first class. I know that that was an upgrade. They didn't just say, hey, do you want to buy this first class ticket? But I'm going to slash a bunch of money off of this. You'll get it for super cheap. And it's basically going to cost you the same as the economy. No, no. I know that that was a special circumstance that I was upgraded. So this can be a really great

strategy for securing clients, especially newer clients. So think about the value that you can provide and can you add something to their package that doesn't cost you a lot of time or money, but can be considered a bit of an upgrade for them. instead of discounting, how do we upgrade? I've talked previously about doing three tiers of pricing. This is one of my one of my core.

pricing strategies. I call it the Goldilocks pricing strategy where you have three tiers of pricing that mid tier, that middle package. That is the one that most people are going to gravitate towards. Now I understand if you're doing custom quotes, this isn't necessarily something that's optimal or that something that you can actually implement. But let me just use this as an example and think about how you might be able to apply it to you. And I'm happy to have a conversation with you about how to apply it to your specific situation. But for the purposes of today, I'm going to talk as you have three main packages. You have your middle package.

which is the highest value package. You've got your lower package, which is kind of just the basics, no bells and whistles. And then you have your top of the line package. So let's say we've got that mid tier package and you get a new client that comes to you and they're debating about whether they should go with the basic one or the mid tier one. And in the end, they're like, you know what? I guess just give me the basic one because they're of course, they've never used it before. They're just trying things out. They're not really sure what to expect. So now why don't you say to them, absolutely, let's get you into the basic. But you know what I'm going to do for you?

I'm going to upgrade you to our mid tier package here. And let me tell you why. I really think this is what's better suited for your particular needs. And obviously you're saying this if it actually is better suited for them, right? So you listen, you know, I think I really think this is better suited for your particular needs. I'd like to upgrade you into this middle tier package so you can experience and see what it's all about. And then the next time you come back, you can decide whether you want to just stick with the basic one or stick with this one.

Here's the regular price of it, but I'm going to just upgrade you from the basic one. So your framing is, though, you we really want you to experience this full experience of our most popular service. It helps you maintain your value while also building client loyalty. But make sure, first of all, that it is clear that this is an upgrade. This is not a standard and that you're making an exception one time only. And you'll be amazed at how how much this changes their whole perspective of things.

It builds that loyalty for them to come back. And when they do come back, majority of the time, they're going to stick with that higher end package. So you're going to make that money back. Okay, the fourth and final trap that I see is the everyone should afford me trap. This is the trap of undercharging because you just think it makes you more accessible and likeable. And here's the truth. Undercharging is not a service. It's a slow leak in your business. When you undercharge, you're training people to undervalue your work. You're creating resentment.

in your own mind, you're creating burnout for yourself, and you're attracting clients who are not aligned with the value that you actually provide. And trust me when I say I hate it when someone cannot afford me, when I know how much they really need me, when I know I can really help them. I want to help them, but their lack of budget is not exactly my problem. And I know that sounds cold and harsh, but it's the reality of it.

And it shouldn't be my problem. Now, listen, if you can reduce the scope of your offering without creating a negative impact on your own bottom line or on the results that they're going to receive, go for it. But don't discount. Don't create a deal just because. Don't offer something just because one person could potentially use it. I can recall I was at a networking, like a group networking event. This was many, many years ago. And I met this contractor.

And as a home stage at the time, I was doing home staging interior design work. And so I worked with a variety of contractors and always loved meeting new contractors because again, this is definitely a connection that I can always use. So it's quite excited to talk to this guy and get to know a little bit about his business. And he was saying how he could do a variety of different services. And then he proceeds to tell me though that he prices it based on the client. And so what do you mean by that? And he says, well, you know,

I just stage or like I know you're working with a lot of different clients and some might be seniors, for example, and like they just really need the help and they don't have anyone to help them, but they're on a bit of a fixed income than other times. You know the clients they're a bit well off there in know, he names a specific high-end neighborhood in my local town and I said, so let me get this straight. If someone is on more of a fixed income, you're going to charge them less and then someone who can afford it. You're to charge them more. He said, yeah.

Yeah, you know, you say, I really like to be able to accommodate everyone. I well, that doesn't really seem fair for the people who are paying more, does it? He's like, well, that kind of helps me to be able to allow to charge less for these other clients. So, but again, it doesn't really seem fair that you're charging more. You should be charging what you're worth regardless. So if you're saying that you are worth whatever you're charging the seniors, then that's what you're worth. And you shouldn't be changing your pricing just because someone else might have a few extra dollars to spare. Because that's not really

The integrity of that is just a little bit off. I told him I said I would never refer you strictly because of that. So what he considered a selling point for him, I considered a complete turnoff. I I just can't justify that for my clients. Yes, I had some clients that were on fixed incomes, but I also had some wonderful clients who had bigger budgets, but I didn't really feel that they should be paying for the other people to get the work. So you don't have to be the most expensive.

option out there, but you do need to charge your worth and charge enough to avoid those negative feelings that can be attached to feeling like you're working for next to nothing that comes with that undercharging. So charge with clarity, charge with confidence, because that's what helps you to create that space for real sustainable growth. So I want to give another example of how this how this might play out, though, if you're looking at your pricing and you're thinking to yourself, OK, I am identifying that maybe I'm undercharging right now.

So now what do I do? Well, the shortest answer to that is raise your prices. And that is one of the scariest things for people to do. And I've worked with so many clients to raise their prices because there is a method to doing this effectively that I can't get into all of the steps of it here today. But I do want to share this part with you. The number one fear in raising prices is generally that you're going to lose clients. Right. That's probably what you're probably thinking in your head. I'm probably going to lose clients. I don't want to lose any clients, but

If I keep working at the rate that I'm working at, I'm burning myself out. Okay, so my hairstylist, she's busy, she's in demand and she really felt bad about raising her prices because she didn't want to lose clients. And so we're talking about this one day and I was saying, well, when was the last time you raised your prices? And she said, I raised them last year. I said, really? I I don't remember your prices going up. She said, well, I raised them for new clients. said, ⁓ that's great. Are you bringing in a lot of new clients? Well, no.

No, I mostly am servicing existing clients that I've had for years. So we didn't really raise your prices and you're not really making any more money because of that. Yeah, but you know, I really just don't want to lose any clients. I don't want anyone to get upset. So we did some simple math. Now, obviously, like most of our businesses, she offers a variety of different types of services and they can range in pricing, of course, and they take a different amount of time each day. So she might be able to see only, you know.

three or four clients one day and six or seven another day. But we said, okay, let's just assume you're seeing an average of five clients a day. That's kind of what it worked out to be. said, yeah, that sounds about right. So, okay, let's say you raised your prices by just $10 a client. Now I know that's gonna be different if the client's $20 haircut versus a $200 highlights cut shampoo that works. But let's just say at five clients a day, each one of those five clients paid her.

an extra $10. That's an extra $50 per day, which works out to an extra $250 per week if she's working five days that week, which works out to an extra $1,000 a month on average. Here's the beautiful part about this though. Even if she lost one client per week because of the price increase, we figured out she'd still be making the same amount of money, but she'd be working less. So the worst case is she does lose

say one client per week. So that's four clients in a month. Okay, she loses those. So she's still making the same amount of money. She's breaking even essentially, but actually working less. So she has more time. She has more time to secure new higher paying clients. How would that feel for you knowing that you are making the same amount of money, but working less? So obviously the goal of raising your price is actually to make more money. Yes.

But if you can reframe it in your mind to get rid of that fear that you might lose clients and accept that, yes, you might lose clients, but what if you don't? Then you're making more money. And what if, again, you lose the clients that aren't as well suited for you, it weeds them out to allow you to attract the clients that are going to pay what you're worth? So this is the power of strategic pricing. You might lose that client or two.

but you're not going to lose any money and you'll gain time and energy to serve your remaining clients even better. So how do you escape all of these traps? It starts with understanding that your pricing isn't just about numbers. Yes, of course, that's a big part of it. I've already told you, you got to know your numbers, but it's about how you show up. How do you communicate your value? How do you position yourself in the market? You need to reflect your value.

in everything that you do, but especially in your marketing. If your website, your communications, if those look like do it yourself, the kind of this DIY hack job to it, you're going to attract the clients that are looking for budget options. And if that's the type of client you want to attract by all means. But now you know that you have to go on quantity. And so you're really if they're budget conscious and that's what you're marketing to, the value is not going to be there so much as the quantity needs to be. So understand what your goals and your objectives are.

When your brand experience is polished and confident, your audience assumes that your price is going to match that. And I can tell you in my experience when my clients raise their prices, especially when they raise their prices for the new people coming in. OK, so two different strategies, of course, for raising your prices for the next person you quote versus raising your prices for your existing clients. But if you're raising your prices for the next person that you quote, I can't tell you how many messages I have for my clients saying so.

I presented the pricing. raised it up, whether it was $200, $500, $5,000, whatever it was, raised it up and they said, sure, that sounds about right. Okay, this will blow your mind how many people will be saying yes to you. So the key is though, you need to be willing to walk away. And I mentioned this earlier, you need to be willing to walk away. Not every client is going to be your client. And that's a good thing. Your confidence will never scare away the right clients and your confidence in your pricing.

will secure them instead. It's going to attract them. If you've never heard no, you're not asking for enough. I would love to take credit for that quote. I can't to be perfectly honest. I do not recall who said it, but I did hear it on a podcast one time. I thought that is one of the most brilliant lines I've ever heard because it so succinctly sums up exactly what I've been telling my clients, but in way more words. But if you've never heard the word no.

When it comes to your pricing, you are not asking for enough. So when I ask people, what's your conversion rate, if they say it's a hundred percent, they have to raise their prices. So I want you to think to yourself, what is your conversion rate? If you are so busy because people keep saying yes to you, you need to be charging more. And I know that that sounds harsh, but it's true. And if everyone is saying yes to your pricing, you're probably leaving money on the table. The thing is all of this.

The mindset shifts, the strategic price and the confidence is all connected to something even bigger than that. And it's about creating a business that gives you profits, passion and progress. Not just one or two of these, but all three of these working together. So if you're listening to all this and you're thinking, my gosh, I'm caught in one of these pricing traps, or maybe you're not sure which one is keeping you stuck. I want to help you to gain some clarity on those next steps. So I've spoken about this previously.

I do offer a complimentary introductory planning session that we can meet for a few minutes to take a look at what you're dealing with. What is that specific challenge that you're facing when it comes to your pricing strategy, your confidence in your price and your value. And let's work together to create a clear action plan for helping you to be able to move forward from that. So we can explore if there's ways that I can support you further in getting that business unstuck or if there's other resources that might be available to you based on whatever that unique situation is.

So if you're interested in booking this free planning session, simply go to AboutShaunaLynn.com/PLAN And the goal is that we really want to ensure again that your profits, your passion and your progress are all in alignment because when we only have one of those things or two of those things working for us, things are going to feel a little off balance in your business. You're going to feel a bit of a shift. And I know that a lot of my clients say like, okay, you know, I've got the profits are happening now.

But I seem to not really enjoy what I'm doing and I don't seem to be moving forward or we're making some really great progress. We're really moving forward on some of the big goals that we set out. But the money's not there. The profits aren't there. And to be honest, it's draining me and I don't have the passion. Or maybe you're like super excited like, yes, this feels great, but the money's not coming in. You've got to have all three of those in alignment. So feel free to book a call with me and we can discuss where you're at, see where maybe you're falling out of alignment and create a plan for getting you back in alignment.

I don't want you to keep to allow these pricing traps to keep you stuck for one more day. You've got incredible value to offer. It's time that your business and your bank account reflected that. All right. Well, that's a wrap on today's episode. Thank you so much for joining me today. I hope this helped to give you some clarity on where you might be getting stuck with your pricing and more importantly, how to move forward with confidence. And if this

episode resonated with you. I'd love to hear from you. Feel free to DM me on Instagram at Seanalyn Simon and let me know maybe which one of these pricing traps really hit home for you. And of course, if what I'm saying here resonates with you, I really hope that you will allow me to continue to join you on your journey of entrepreneurship. So don't forget to keep tuning in each week. Be sure to hit subscribe on your favorite podcast platform. Leave us a review if you're so inclined. Those really help others to be able to find our podcast as well.

I can't thank you enough for the growth that we have been experiencing since we launched this podcast a little over a year ago. The response has been just phenomenal and it's because of listeners like you. So please, if you've got a moment, take that time and write us a quick review. We'd really, really be grateful for that. And as always, if you know someone who can really benefit from hearing these hard truths today and maybe understand a little bit more about the pricing traps that they're stuck in, feel free to share this episode with one of your fellow women entrepreneurs and help them.

to grow and succeed in their business as well. Until next time, keep thriving.