So you have set up your pricing for IPS and you are ready to conquer your very first ordering appointment with a client, or maybe you have been doing IPS for years but you want to check and make sure your pricing guide is tuned up to perfection.
Here are 3 things you need to check with your pricing to build a successful business.
#1. Know your COGS %
Your COGS is (Cost of Product/Sell Price) x 100
It is incredibly important to know what your target COGS% is that you need to have in your business to be able to sustain a successful and profitable business long term. PPA recommends a COGS of 25% or less. I always recommend shooting for the 15-20% range. It is important that you know where every penny goes in your business so that you are able to not only pay the bills, but actually pay yourself in your business. Keep in mind that most businesses operate at 1/3 | 1/3 | 1/3, meaning that 1/3 of their money goes towards their expenses, 1/3 is what you can pay yourself, and 1/3 is put back for taxes. I think this is a good starting point for most businesses, but it can be broken down even further and adjusted to your individual circumstances, which I will explain in another blog post.
If we are using this 1/3 scenario, and our COGS is at 25%, that leaves about 5% of what we make to cover expenses, if we are paying ourselves 1/3 of what we make, so you can see how this could lead to some issues with having enough cash flow without cutting into our own pay.
#2. Know your price per image
Always consider the price per image for products or packages that may include multiple images. This may include things such as sets of images, albums, or image boxes. In order to incentivize clients to purchase more images, it is important that as they purchase more images the price per image decreases gradually.
For example, an a la carte gift print may sell for $120, if a client purchases a set of 10 images the price per image may be $100/image, if they purchase 20 images the price per image may go down to $90/image, 30 images the price per image may go down to $80 an image.
You also want to consider your a la carte gift print image price in comparison to your album pricing per image. If your gift prints are $120 each for an 8×10, and in your albums your price per images is only $20 per image there is a huge disconnect between the two so make sure you are not undervaluing your images in albums. The price here should be comparable.
#3. Keep Things Simple
Keep your pricing simple. Once your pricing is complete ask yourself, “Can I simplify this?”
Here are some ways to simplify your price list.
- Price your Gift Prints (8×10’s & 5×7’s) the same: Your cost difference is negligible here.
- Group your wall art sizes together: For example, price a 16×20, 16×24, and 20×20 the same.
- Limit your offerings: There is no reason to have 10 different options, have 2 or 3 options max.
Remember that less options helps avoid analysis paralysis in the sales room. The last thing we want to do is overwhelm or confuse our clients, and keeping our pricing as simple as possible helps with this.