It’s not unusual for Transformerpreneurs to start pricing their sessions, classes, workshops, retreats, and teacher trainings after researching what their nearest competitor is charging for the same or similar transformative offerings.
If the likely costs associated with giving, hosting, facilitating or delivering your Product Service is less than what you’re intending to charge for a minimum number of sales it’s easy to fall into the trap of assuming you will or are making a profit.
This approach isn’t a bad start but it is only part of the Profitable Pricing story and doesn’t guarantee that your business will make a profit over the course of a year, i.e. a timeframe that is longer than the duration of your specific Product Service offering.
Beware of modelling your products, services, and business on your competitors without knowing their specific financial goals, cost base, advertising budget, and number of clients, enrolments or attendees. To do so can be misleading and risky.
By setting a price you are attempting to convey value. Your intended market will tell you if it values what you’re offering by paying the price you’re charging, or not, regardless of how much it costs you to create, offer, and transfer that value.
So, if you want and need to know that what you are offering and working hard to deliver will make a healthy profit your pricing must work holistically, I.e. at a Product Service level and at an overall business level.
What is a holistically profitable Product Service?
It’s an exchange of value that generates enough Gross Margin (Price - Costs of Sale CoS) in sufficient quantities (Sales Volume) to cover (single product business) or part-cover (multiple product business) your Business Overheads while generating a surplus (Operating Profit).
Get to know your Holistic Pricing Variables.
Successful Transformerpreneurs MUST know and work with the following Pricing Variables in order to arrive at their Minimum Viable Prices (MVPs) for their suite of Product Services.
Enrolments (e.g. 1 for private sessions, 10 for group classes, 15 for teacher trainings)
Instances (e.g. 200 private sessions, 100 group classes, 4 teacher trainings per year)
Variable CoS (e.g. instructor fee per student, wellness package, certificate printing)
Fixed CoS (e.g. advertising, space rental, specialist instructor fee, team travel expenses)
Business Overheads (e.g. your salary, marketing fees, subscriptions, equipment)
Operating Profit % (the profit your business wants to make on its product service sales)
How do I use these variables to calculate MVPs for my suite of Product Services?
If the instructions below look a little too daunting for you sign up your FREE copy of the Transformerpreneur.com ‘Profitable Product Service Holistic Pricing Tool’ at the end of this post and the hard work and calculations will be done for you!
(1) From your records (or estimates) note down your yearly Business Overheads.
(2) Decide what your Target Operating Profit % for the year will be (20% is a healthy profit).
(3) Name and list your Product Services.
(4) Add the Minimum Number of Enrolments alongside each Product Service.
(5) Add the total Variable Costs of Sale (CoS) alongside each Product Service.
(6) Add the total Fixed Costs of Sale (CoS) alongside each Product Service.
(7) Add the Minimum Number of Instances per year alongside each Product Service.
(8) Add together the Variable and Fixed CoS for ALL Product Services and note it down.
(9) Calculate Budget Income by adding (1) + (8) and dividing the answer by 100% - (2).
(10) Subtract (8) from (9) to get Gross Margin and note it down.
(11) Calculate Gross Margin % by dividing (10) by (9) and note down the answer.
(12) Calculate Operating Profit by subtracting (1) from (10) and note down the answer.
(13) Multiply (4) x (7) to calculate Enrolments per Year for each Product Service.
(14) Multiply (4) x (5), add the answer to (6) to get the Total CoS for each Product Service.
(15) Multiple (7) x (14) to calculate the Total CoS per year for each Product Service.
(16) Divide (15) by 100% - (11), divide by (13) to get the MVP for each Product Service.
Click below for a Multi-Product Service suite Transformation Business example.
Adjusting your Pricing Variables will generate updated Minimum Viable Prices for your suite of Product Services that allow you to assess how your intended audience, students, and clients will value your offerings.
For example, if your adjustments generate an enrolment price for Teacher Training that is double what your competitors are charging you’ll have to seriously consider making some more significant changes to your Pricing Variables.
Likewise if your pricing is coming out significantly lower than your competitors you may have to check that you’ve thought of and included all related Costs of Sale (CoS) and Business Overheads in your calculations.
Are you already, or intending to offer any of the following non-exhaustive transformation modalities as sessions, classes, workshops, retreats, or teacher trainings to your clients, customers, and community?
Past Life Regression
Save your time, effort, and brain cells learning how to holistically price your sessions, classes, workshops, retreats, and teacher training by signing up above for your FREE copy of the done-for-you Transformerpreneur.com ‘Profitable Product Service Holistic Pricing Tool’ Google Sheets template (as shown in the example screenshot above).