Holly Howard is our go-to business consultant. She’s helped countless small businesses in Brooklyn and beyond (including us here at Brooklyn Based) with her expertise and know-how. This summer, in an unprecedented program, 10 small businesses in Red Hook, Brooklyn have come together to work as a community to grow their businesses through Holly’s From Artisan to Entrepreneur® Business Growth Program. This program was made possible through the generous support from ReStore Red Hook, New York Business Development Corporation, and Southwest Brooklyn Industrial Development Corporation. Over the next 10 weeks, Holly will dedicate her weekly advice column to a specific business in Red Hook that is participating in her in hopes that their journeys will bring enlightenment and inspiration to your business as well.
My partner and I own a small restaurant and catering business in Red Hook.
In many ways since Sandy we are starting over again, almost from the beginning!
We are looking at what we do, and why, and we realize there are many things we could improve upon and do better for ourselves and our customers.
One area we are examining is the pricing of our catering services.
We know to factor in cost of product, and our time, but what we aren’t including is the more intangible value added factors: creativity / design/ skill….
People come to us because we will create a unique and special event, beautifully designed and curated. So how do we define, and then quantify and price the thing that people are really hiring us for???
I know what we do is special and distinct, but because it is so personal, it becomes hard to honestly value and price ourselves appropriately. Because of the extra creative effort and time we expend to accomplish this, we often end up overextending ourselves, and feeling frustrated and unappreciated.
It’s a gray area that a lot of creative people struggle with, so we’ve never found a “formula” per se to use. We’d love your advice about how to approach pricing so that it’s not just a made up number that changes regularly depending on our confidence level, and who the customer is!
This is such an important question that you raise here. I know I can certainly relate to what you’re saying. Pricing our products and services is challenging for so many entrepreneurs, and I feel that there’s a special struggle between creative people when it comes to placing a value on their products or services. There’s a personal attachment to the work that is hard to monetize, but once we understand the true value in what we offer then we can charge what we’re worth.
Let’s talk about the tangible pieces first. You’re absolutely right to consider your cost of goods and time invested when pricing. I’ll add in here that people often forget or greatly underestimate their overhead as well. You need to be sure that when you are doing your pricing that you take into consideration covering your overhead costs such as utilities, supplies and facilities. Make sure you’re itemizing these expenses for yourself so that you know how to factor them into proposals for clients.
But once you get beyond the tangible pieces, you raise an excellent point. What about that part of your services that you feel is somewhat intangible—that personal aspect that is solely unique to Roquette and the creativity and skill you bring? You have to make sure that you’re charging for this because this is exactly why people hire you in the first place. Let’s look at how we can make those perceived intangible pieces a little more tangible for you.
We often think that our services are just about the features that we offer such as: fresh, local, seasonal food or classic cocktails. But, any marketing expert will tell you that people buy for the benefits of your services, not the features. The benefits are the advantages of working with you, they are the perceived intangible pieces. These benefits are truly unique to you and do not exist within any other catering company around. You may have some crossover with other companies, yes, but the combination of what you bring exists only within Roquette. So, before you can charge for these benefits, really put your time into understanding how to define them.
Start broad here and most importantly, don’t be judgmental. I see far too many creative people underestimate the value of what they bring to the table. One benefit could be that you’ve been catering and hosting parties for over a decade all across the city. Your clients get your expertise that comes from years of experience. That would bring any client peace of mind. Additionally, I think you’ve got a gift for understanding how people need to be nurtured without them even expressing it. And, you know how to work that into an event through the design and the service you provide throughout the process and on the day of the event. I bet clients find that immensely valuable considering that large events can feel potentially stressful. Who wouldn’t pay more for an expert who can anticipate the unspoken needs and make sure they’re all being met and likely exceeded? If you’re not charging for these benefits, then you’re not recognizing the real value of what you bring to the table.
If you get stumped trying to understand the benefits of your services, I always recommend that you ask former clients, “Why did you choose to work with us?” Or, “Can you describe your experience of working with us?” My guess is that in their responses will be the answer, and I bet almost none of them say, “Because you were the least expensive around.”
Once you’ve got your list of benefits, go back to your pricing and start increasing it according to what you’ve added to the list. I can’t give you an exact percentage to increase by, but I always go by the rule that if your pricing doesn’t make you slightly uncomfortable to say, then you’re likely not charging enough. Consider what adding an additional 10-20% to the price might look like and start there.
Having this list of benefits will also help guide the conversations you have with potential clients about pricing. We often don’t charge what we’re worth because we struggle to articulate the value. Use these benefits as your talking points when you’re with clients and you’re negotiations will be much smoother.
Don’t be mistaken, you may see a drop-off when you increase your pricing. Remember, your business does not exist to meet the needs of everyone. But, you can’t keep underselling yourself, or I promise you that you won’t stay in business. It’s better to take the risk of losing some potential clients and move forward in the most honest way rather than stay stuck where you are. The longer you stay in your current pricing structure, the harder it will be to break out of it.
Good luck! I find that once entrepreneurs start focusing on the benefits of their services rather than just the features, everything starts to move forward with more momentum.