you need to know your target income before you can set your sweetspot price
What exactly is your sweetspot price?
There’s a certain sweet spot in pricing. That point where your price feels okay, where it’s doable for your customers and they’re happy to pay it. It doesn’t feel too cheap, it doesn’t make them feel like they’re getting ripped off or really going to hurt. It’s also the price where they’re happy to come back to you again and again, and are likely to recommend you.
We’re looking for the sweet spot where you can get the right number of customers at the best possible price
This is one of the most important parts of the process. Whenever I’m working with my mentoring clients, I always start off the pricing process by embedding it in what my clients want to earn. We’ll need this information to set your prices – and it gives us a great baseline to work from because we know what we need to achieve.
We’re going to start off by setting three different target incomes
This spreadsheet helps you to work out your three different target incomes and how close to each of them you are.
You can download this to your computer and work out your target income, and what your income and expense are right now. Instructions on how to do this, and why we’re doing three levels of target income are below.
Why this is useful to do
We need this information to set your prices because we’re going to work back from these targets to set your prices. Don’t be tempted to skip this stage as you’ll need this for all the other work we’re going to do to work out your prices. If you’ve already gone through this process, and you just want all of your resources in one place, there’s a list here…
Using the target income calculator has some added bonuses as well. It tells you how near (or how far) you are from your targets. It might be that your business still needs a lot of love and care to get it to the point where it’s creating enough money for you to reach your survival income. That’s fine, we’ll work on how to get there. Or you might already be earning somewhere around your good income, and you need a push to get you to your success income.
And getting real about your current financial situation also helps you to budget wisely, plan ahead and maybe cut out some of the things you’re currently paying for and don’t really need.
There’s lots more information, tips and guidance in the book on how to make the most of this exercise.
What are the three target income levels?
Your survival income
This is what you need to live on: the basics. It includes your rent, mortgage, bills, food, loan repayments, a little bit for going out and maybe a basic level holiday. Don’t forget about toiletries, clothes and shoes, and things you don’t necessarily buy every month. Your list might also include childcare, things you need to look after yourself, such as acupuncture or yoga, school fees and subscriptions like Netflix or Spotify.
If you’re the main breadwinner, remember to include the stuff your partner needs too, but add the amount your partner earns to your income total. Don’t include any business expenses here, especially not that bit about “working from home allowance” that the accountants love. Keep that for your tax return.
Everyone has a different list, because we all have a different idea of what’s essential.
Your good income
Your good income is what you need to earn to live a decent life. This is probably the budget you’re going to aim for.
Start with all the things you must pay for, your survival budget. Then add in the extra bits which would make your life more fun. Again, this is different for different people – for me, the extra bits are about holidays, being able to spend £350 on a nice suit without worrying about it or putting it on the credit card. And not having to worry about buying the nice olives in Waitrose.
What would success look like?
Now let’s think about what your life would be like if your business were truly successful. What would you do with the extra money? You can have some fun with this one, and set some targets for the future. This blog has some ideas other people have included in their success income target.
The next step – time for some upside down accounting
Once you’ve got your three levels of target income clear, it’s time to work back from these figures to work out how much you need to sell.
The next step – upside down accounting