[00:00:00] Emma: 90, actually 92 percent of women in business are making less than 100K a year in revenue. That's our top line number. Some of this is literally just due to not knowing how to price their offers. I would love to see more women making more money, not for the sake of it, but because it leads to more choice.
[00:00:24] I would love you to grab a piece of paper and a pen. Yes, we're going to be looking at some numbers. I'm going to pull out my calculator, which of course is pink and do some numbers around this. I have seen those posts on social in social media groups, mainly in Facebook, where they start with, I'm not sure how to price this or can I have some advice around price?
[00:00:48] I just find those posts so dangerous because you're not doing the thinking needed to understand what your pricing model is.
[00:00:57] I want to make this episode super easy for people. I want us to stop charging an hourly rate. So I'm going to put that out there very transparently. I think what happens for women in business is we charge an hourly rate, then we cap ourselves and we cannot escape the hourly rate. Let's make an offer that is not revolved around hours.
[00:01:23] Hours is so old school and I want to talk about. Some different ideas as to how to price your offers and what it looks like. my main, idea for this is tiered pricing model. So if we say basic, standard and premium, what does that actually mean? But before we get into that, how much money do you actually need to make?
[00:01:49] Do you know, I was on a call with someone recently and she was a startup and I was doing my clarity call and she just needed some help in understanding her numbers. And when I asked her what she needed to [00:02:00] make, she said, well, I need to replace my salary. My awesome. Okay. So if you replace your salary, how much money do you need to make above that?
[00:02:07] And how many of the things that you have, do you need to sell? And she couldn't tell me that is not uncommon. Sometimes we just dive straight in and we don't do the numbers. Now I'm not. A numbers girl. So I'm coming at you with very simple numbers today. I'm not a bookkeeper. I'm not an accountant.
[00:02:25] Don't check those things off, but I think it's important to start there. We use the a hundred thousand a year example, because I think that's easy. So let's say you want revenue of a hundred thousand dollars a year. How many weeks do you want to work? Let's say you want school holidays off. So you want to work 40 weeks in a year.
[00:02:47] That's what I do, 40 weeks in a year. And then let's say you want to do a couple of school drop offs, a couple of pickups, etc, etc, which means you don't want to work a 45 hour week. You want to work a 30 hour week. Right? Do we all agree on that? Grab a piece of paper. Like I said, this one might blow your brain a bit.
[00:03:06] Anyway. All right. So we get the hundred thousand, the calculator out, do a hundred thousand and we divide that by the number of weeks you want to work. So 40 weeks. So that gives us the number 2, 500 a week. that we need to make to hit 100, 000. Now, then we say we only want to work 30 hours. So we divide 2, 500 by 30 and we get 83.
[00:03:36] 3333. Let's call it 84 an hour. Now, already my thinking is flawed. Do you know why? Because if you want to work 30 hours a week, that means you would have to bill all 30 hours. So let's go back to the calculator and go 100, 000. Divided by 40 weeks. Same amount, 2, [00:04:00] 500. Now we're going to say, actually, we only want to deliver 20 hours a week because you need 10 hours to do all the other things, marketing, socials, bookkeeping, blah, blah, blah, blah, blah.
[00:04:13] So we divide the number by 20. And that gives us an hourly rate of 125 an hour. So if you're listening to this and you're a woman in business and you're like, I want to make 100, 000 a year. I want to work 40 weeks in the year because I have school children and I want to deliver 20 hours a week. Your hourly rate has to be $125 an hour.
[00:04:37] I'm just going to let that sink in because I know there are many, many of you not charging that amount of money. Now we don't charge hourly, but to understand pricing and pricing structures and pricing offers, we've got to know how much money we need to make an hour, So that's probably the only time that I would say we use an hourly rate, right?
[00:05:00] Okay. I'll put the calculator down and I'll get off my high horse. I want to talk to you today about a tiered pricing model. So a tiered pricing model pretty much involves offering multiple services or versions, multiple versions of a product or a service. each at a different price level. Each tier provides a different set of features or benefits. And what we know from human psychology is that if there's three options, one, two, and three, most people will go for number two.
[00:05:35] So make that your best dopper. Why would you do it this way? It's a great question. Why, Emma? Why? Well, it attracts different customers, different price tiers can attract a broader range of clients or customers. Some customers may want some basic services at the lower end. Some customers might want some kind of standard offering, and others are prepared to pay for premium features, especially if it saves them time or [00:06:00] money, that's one reason.
[00:06:01] The other reason is to increase revenue. Right? By offering higher priced tiers with added value, businesses can increase their overall revenue without significantly increasing their costs. Number three, so we've talked about tiered pricing models. Why use it? How it fits into a good business structure. So let's say we've got basic, standard and premium.
[00:06:24] Please don't use those. I hate those terms. Think of something fun. Don't go too clever because you don't want to lose it, but you don't want to lose the impact of it. But basic standard premium is a bit meh. Anyway, but a basic tier offers the essential features and services at the lowest price.
[00:06:42] it is designed for cost sensitive customers. We know that mid tier or standard is what I would call it includes more features. or services at a moderate price, mainly the most popular option, as I said, and then a premium tier, which is provides a more comprehensive service or product or value. And it targets customers who want to pay a little bit more, and get the extra value.
[00:07:12] So instead of charging an hourly rate, We move away from the hourly rate and we move towards a tiered pricing. model. Now there are other ways to do this by the way, rather than just TID, but I'm just giving you a basic example today because it's a bit to wrap your head around.
[00:07:27] Okay. So let's try one. So let's say a basic model is 50 bucks a month. I'm just going to go super low ball so that you can see how this works. 50 bucks a month, which includes five features. The standard might be a hundred bucks, but includes 10 features. And the premium plan, Might be 200 bucks a month, but includes 20 features.
[00:07:51] Yeah. So one, we have a tiered model too. We have what we call MRR, monthly recurring [00:08:00] revenue. So, you know, in business, those peaks and troughs of cash. Yeah, we get rid of those at the same time. Isn't that cool? Win win I say. All right. So actually I'm gonna now change those.
[00:08:14] I'm gonna go basic, a hundred bucks a month, standard 200 bucks a month, and premium 400 bucks a month. So write those down if you've got them. Basic is 100 a month? Standard is 200 a month, and premium is $400 a month. If they were going to choose basic, which is a hundred bucks a month over the course of the year, that would be $1,200.
[00:08:35] You get me? I just did a hundred times 12. 1200. If they were gonna choose, standard is 200 bucks a month. So 2,400 a year, and if they're gonna go premium, 400 bucks a month is $4,800 a year. So now we've got those. They're the basis of what we're going to discuss next. How do we hit a hundred grand a year?
[00:08:55] Great question. So to hit a hundred grand a year for your basic model, which is your hundred a month, which is 1200 a year, you need 83. 33333 customers. So let's say we need 84 customers. If you were going to sell your standard, which is your mid tier, which is the most popular 2400 a year, you would need 41.
[00:09:22] 6666, so 42 clients across the course of the year. And if you're going to sell your premium package of 48, you would need 20. 83, so 21 clients across the course of the year. Now some of those numbers feel scary, but let's just break them down even further. Let's break them down even further. I need my calculator for this.
[00:09:44] All right. So let's say we need 84 clients across the course of the year. That means we need to be onboarding seven clients a month. Do you have the time to do that? Cause that's a really big part of this, right? [00:10:00] If we need 42 clients, you can hear my tapping in the background. Sorry about that. you would need to onboard three and a half clients a month.
[00:10:09] Let's say four, because there's no three and a half's and if you needed 21 clients, you need 1. 75 clients a month, let's say two clients a month. So you need to decide what you can actually offer and what's included and then how you would deliver it to the very high standard that you, you've come to expect yourself and that you would deliver on.
[00:10:32] Now you can have a mix. So you might say, yeah, I want a couple of, um, 1200 bucks a year. I want a couple of 2400 bucks a year, and I want a couple of 48. So then you just work out the maths based on that. When you work it out like that, two clients a month. Let's think about the sales on that, even though this is not a sales episode, but, two clients a month would mean that you need to have four proposals out, which means you have to be speaking to eight people, which means you have to have 16 people that you've told your offer to.
[00:11:03] So I just work backwards from the end number. Yeah. I know that this works. I have seen this implemented in many, many of my clients businesses. I have seen them go for, I'm going to go enough for premium clients only, or I'm going to go for basic clients only or standard is my sweet spot that's all up to you, I just wanted to share about actually, how do you work out the pricing? And this is a very. a basic way to work out pricing, right? I don't want to overcomplicate things. There are other things to consider, but I didn't want to overcomplicate it today, but I wanted to show you a tier model so you could see what is possible.
[00:11:45] Do you see what's possible? Are you sitting there with your piece of paper thinking, okay, well, I've got a membership and it's 35 a year. And so getting to 10, 000, that's a lot of memberships I need to sell. But it's good to know that, right? Cause then you can work [00:12:00] towards something. Then you can throw some marketing money at it.
[00:12:02] You can run some Facebook ads if you want to. There's a whole stack of things that you can actually do.
[00:12:07] This strategy, the tiered model, depending on what's in it can help your business to scale. And, uh, episode ago, we talked about growth and we talked about scale. And so I really wanted to put this episode in to make sure that you could see that if you tear A certain service or a certain product or whatever, you could actually scale it.
[00:12:31] I hope this has been helpful. We would love to hear what you think in the DMs or shoot me a comment. I would love to know. And if you've implemented something like this, we'd love to hear as well. Otherwise, see you next time.
