Master Your Pricing: Set A Minimum

Today, we’re welcoming back our friend Alison Ellis, owner of Floral Artistry and Real Flower Business, for Part 2 of a 4-Part Series called Master Your Pricing. Please feel free to leave comments and questions for Alison at the end of the post!

From Alison:

In business we reach milestones from time to time. Finding the courage to set a minimum on weddings was one of the more important (and scary) milestones in my business. I was wary of declaring out loud on my website that “you have to spend this much to work with me” because I didn’t know if this bold move would actually create the results I wanted or completely tank my business.

The decision to set a minimum did not come easily. I work from a home-studio and at the time I only booked 25-30 weddings per season (which is only about 5 months long in Vermont from the end of May to mid-October!), so I knew that enacting a minimum was inevitable if I wanted to grow my business, but it still required a huge leap of faith.

Before I took that leap to set a minimum, I worried that it might be a mistake. I knew I was a good designer, and I knew my customers received outstanding service prior to the wedding day, and if I was ever going to quit my day job/bridge job, well, I’d have to define what a reasonable income per wedding would be, whether I felt “ready” or not.

Minimums can seem like you’re turning away “perfectly good business”, but in truth, setting standards in your business helps attract perfectly better business—and if you do it right, explaining your minimum can actually feel like excellent customer service.

You don’t want to turn away perfectly good customers, but not every florist can work with everyone at every price point, which means you have to set some standards on your work and determine your own worth.

A minimum budget is a clear and direct way to communicate what sort of work you do and who you work with.

How do you set a minimum?

I suggest you make 3 easy calculations to help determine a reasonable minimum:

1. Before deciding on a minimum spend, first, determine your current “average spend”. You can determine this easily if you add up all of your wedding sales and divide by the number of weddings. (Example: $80,000 in sales divided by 20 weddings = an average of $4,000 per wedding.)

2. Now, look a bit closer at your numbers. If you have $80,000 in sales for 20 weddings, but one of those weddings was a $15,000 sale and a 2 of them were pick-up orders of less than $1,000 each, then your $4k average may be skewed a little high, in which case, I’d discard that $15,000 sale (even though it was a wonderful sale & a great accomplishment!) and I wouldn’t include the two $1,000 pick-ups, and by doing that I’d end up with an average spend of $3,700. ($63,000 in sales divided by 17 weddings = $3,700 per gig.)

3. If you want to be even more accurate on the “average” spend you can look at the “mode” or the number that appears most often.

(Example: You have an average/mean sale of $3,700 per wedding, but the budget that appears most frequently is $3,500.)

Based on all of the above info, it would be reasonable to set a minimum budget of $3,500 because you’ve proven you can achieve this goal consistently in your business.

If you set a minimum of $4,000, it’s possible you may also reach or exceed your sales goals, but you could be pricing about $500 above that reasonable starting point for your current clientele.

Note: In addition to the 3 calculations mentioned above for determining a minimum you should consider your income and sales goals when setting a minimum order.

For example, if you want to sell $100,000 in events and you’d like to do no more than 25-30 weddings per year, then you need to book an average wedding at $3,300-4,000 to reach that sales goal.

If your ultimate goal is to do fewer weddings at a higher price point, then you’d need to get the average sale up a bit; for example, 15 weddings at $6,700 a piece.

If your current average sale is $3,500, then setting a minimum of $6,700 may be a bit of a stretch; it may not be feasible to “up the minimum” and expect customers to get in line.

There isn’t 1 right way to set a minimum. Know your market and set prices that fit your business model.

The Moral of the Minimum:

Over the years, my minimums and the way I present a minimum to a client have changed quite a bit, but I’ll never regret taking that leap and setting that minimum because it transformed the way I do business.

We can’t keep doing the same thing year after year in our business and hope for change; we have to “be the change”. We have to take the steps in order to forge our path and reach our goals.

In Week 4, I’ll share some tips on how to raise your minimum so stay tuned!

Do you have a minimum? How do you present a minimum to your clients?


Still to come in this series:

Customers Can’t Set Prices

When Should You Raise Your Minimum?

 

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