How to Price Your Services Using Breakeven Analysis

Hi everyone. Welcome to another episode of Beabosscoaching. This is episode three and this episode we'll talk about how to price your services using a breakeven analysis. I love to talk about this. I love to teach it because every time I teach it, I'm actually reinforcing it for myself in my brain and. Makes me feel smart. It makes me feel like I know how to strategically price my services and products, and I want you to feel good about your prices for your services and your products as well. So let's get into it.

So something that I hear often is to charge your worth, and absolutely you should charge what you're worth every day, all day, and I would encourage you also to charge. With a little bit of strategy and a little bit of business acumen, it takes a little bit of math. It's very simple math, which trusts me as someone who never felt confident in their math skills.

This is a very easy way to understand your. Profits to understand your breaking point and to then feel creative about how you can bring your sales and your business overall to to profit, to operate at profits. Okay? So you're gonna wanna learn three things, and I'll go over the, these three things in detail.

So number one is you're going to want to know your fixed costs. You're going to want to know your variable cost, and you also want to know your unit contribution. All right?

Fixed costs are business operating costs that are constant and never budged. So despite how many units you sell, fixed costs are things like your rent if you own a brick and mortar, as well as monthly subscriptions like HoneyBook or Zoom, if you use these services to provide.

Your services over video or online.

Number two. Is your variable cost. And the variable cost is how much it costs you to make your product. For example, to keep things simple, let's say that you make candles the cost to make your candle might include things like the container, the wax, and the string. I really don't know much about candles to be honest with you, but let's pretend that it only takes those three components and each component, costs $5 to make the entire candle. That means that your candle costs $15 to make.

And number three, lastly, and this is the most important thing that you want to figure out, is your unit contribution. Your unit contribution is the difference between what it costs you to make your product. So your variable costs and the price of your product. So to keep things simple, if it costs you $15 to make your candle and you sell your candle at $20 a unit, that means that your unit contribution is five, because that's the difference between what it costs you to make it and how much you sell it for.

You can think of it as. Your profit, but, um, I don't want you to think about it as your profit for now, because all you really want to know is the unit contribution at this point, which is five. All right. So now that you have. Everything that you need. You have fixed costs.

You know what fixed costs are. You have your variable costs, how much it costs you to make your product and your unit contribution. To understand your breakeven point, You need to have at least an estimate of your fixed costs. So let's say that your fixed costs are a hundred dollars a month and your unit contribution is five.

If you were to think of your fixed cost like a brick wall, Think of your, of each sale that you make as a brick, an individual brick, you need to sell 20 units. If you're selling candles, 20 candles to reach your fixed costs, that's because your unit contribution is five. Each sale represents five. Each brick represents five.

So when you sell 20 units, you're at least at that point covering what it takes to simply open and operate your business. Because as we all know, operating a business costs money to open every day, to show up, At least with this strategy, you know, the estimate of how much you need to sell to get yourself to those profit making levels.

Okay, so knowing this information is really going to help you get creative with how you can bring yourself to that point. Because if you're not operating at a profit, but you will know. How much it costs you to make your product, you know, your fixed cost and you know your unit contribution. Now you can really make some very strategic decisions about how you can move forward.

You can reduce your fixed cost, for example. You can increase your prices, you can reduce your variable cost, meaning you can reduce how much it costs you to make your product. Combine two of these strategies. You can create new ones, you can use all three, at least at this point you have the information that you need to think creatively, and these are not end all strategies, but they'll help you think strategically like the true entrepreneur and boss that you are.

All right, I'd like to take this chance to remind you to please head on over to beabosscoaching.com and sign up for my newsletter and check out the entrepreneur mindset guide that I created where I go over the practices that you can start today in order to help you get into the mindset of the entrepreneur identity that you wanna take, and that is going to help you put together a mindset where you can take risks comfortably, where you can get creative and move your entrepreneurship journey forward with this new identity.

So head on over to beabosscoaching. Let me know how you like it. If you have any feedback. I'd also love to know, any thoughts or questions that you have.

I hope that this was helpful and that it gave you a new way of thinking about your prices and how to price your services and your products because it truly was a area for me where I had a lot of trouble and. Frankly, I still have some trouble around it because I also bring into account how accessible my prices are and that's another topic that we can talk about at a different point, but I'd like you at least to get a starting point for your own pricing strategy and your own services. Thankfully, I had some coaching around this issue. I had to remember that I was trained, that I have experience and that I am capable of helping the clients that I have achieve the results that they want to create for themselves.

So, If this was helpful, I invite you to Come on over to Instagram I'd beabossocaching and tag me, and uh, I'd love to hear your thoughts. You can also send me an email over at beabosscoaching@gmail.com or B E A T R I z@beabosscoaching.com. I probably should just have one email where you can email me.

It's kind of tough to manage both, to be honest, but I think I have this fear around, oh my gosh, what if something happens to one email and then I can't, you know, there's this whole fear around it,

All right, y'all, thank you for sticking around with me and

Have a great rest of your week. Bye.