Weekend Workshop: Finding the Right Price

This transcript was generated from the episode audio and may contain minor errors.

[Music]

Welcome to another edition of the Weekend Workshop. This is a new segment we've been doing in 2025, helping you learn the key steps to a new side hustle, one step or concept per week. For our text, we're using the book "Side Hustle" from idea to income in 27 days. It is available wherever books are sold. And if you don't have the book, that's okay.

I'm gonna be taking you through those key steps along with listener stories and examples throughout the year. Today's episode comes from day 12 in the series. It's all about finding the right price. This is really a critical decision to make. How do you know what to price your product or service at?

How do you price offers? It's gonna actually make a huge difference in your ability to convert potential buyers, clients, customers to your offer if you can figure out what the best price is. And of course you wanna find a price that is profitable for you and attractive to customers. There's usually a range of what that number can be. But that also suggests that there are numbers outside the range that won't work.

Like you could price your product or service too low, and then you're not gonna have a profitable offer, or you could price it too high and no one's going to buy, right? So how do you in fact set prices that are profitable for you and attractive to customers? In fact, it's one of the most challenging decisions in a new side hustle or small business. The good news is you don't need complex calculations to set good prices. We've already talked in this series about how you can simplify a bunch of things in terms of deciding which idea to proceed with and how to use the back of a napkin to make some simple projections.

So when it comes to pricing, we're gonna apply the same kind of perspective, and we're gonna focus on two fundamental questions. Question one, what's the minimum you need to earn to make this worthwhile? And question number two, what are customers willing to pay? And as I said, there's likely a range or a spectrum of answers here. And there's two basic approaches to pricing.

When you think about these questions. So for products like physical products or anything that is limited in quantity that has hard costs like materials, shipping, something else, you wanna calculate those costs and then add enough markup to make a worthwhile profit. And this is called cost plus pricing. Now for services, you wanna start with your minimum acceptable hourly rate, like what is the least you'll accept for your time. This should be at least what you make at your day job since you're using valuable free time and hopefully it could actually be more.

So finding the sweet spot where you make good money while providing clear value to customers, that's the goal of both of these approaches. So as an example, let's consider a couple of different business models. Example number one, a handmade jewelry maker. You know, that person's got some of those hard costs. So they need to calculate their material costs.

They need to account for time spent making. They need to add enough markup to make a profit and price competitively with similar items. So those are kind of the steps in determining a cost for that type of product. A business consultant, someone who is essentially providing a service, they don't have a lot of those hard costs. They wanna determine their minimum hourly rate.

They want to consider market rates for similar services like what are other people charging. They also want to account for preparation time when they're determining their hourly rates and package services attractively, which is all about creating offers. Talk to you a little bit about that. We'll talk some more about that as we go in different segments. Here we're focusing on pricing.

And in both cases here, the key is ensuring enough profit to make the venture worthwhile. All right, we've covered this a bit. Let's take a quick break. When we return, let's put it together and create a systematic approach to finding prices that work for you. [Music]

All right, welcome back.

Pricing shouldn't be guesswork. I'm trying to give you a model or a systematic approach that can help you find prices that work for both you and your customers. Remember, it has to work both ways. So we've talked about the cost plus model for products where you calculate your total costs, you add time and labor, you include any overhead expenses, add the profit margin and so on. For services, you set that minimum hourly rate, you account for prep or admin time, you think about packaging options, you look at competitor pricing and you add value perhaps through bonuses.

So your action exercise is to calculate three potential price points for your offering. Okay, so you wanna have basically a conservative price point which we're gonna call minimum viable price, your target price, which includes a good profit margin and your premium price, which is the maximum you think the market will bear. So minimum viable target price, premium price. The first one is gonna cover your cost and give you a small profit. Your target price is kind of what you're hoping for, a good profit margin and the premium price is like, "Hey, maybe we'll get really lucky here.

What is the maximum we think the market will bear?" This is gonna give you a lot of information. And if you struggle with this, then it might be a sign that something is fundamentally wrong with the product or service or at least the way that you're thinking of it. Doesn't mean you should abandon ship entirely. But when you struggle with identifying a good price range, it is a clue that something isn't quite right. And if you just kind of proceed without working on it some more, then your results might not be what you hope for.

So we wanna get this right before we move on. Here's a quick little self-check for you. Ask yourself when you're setting these numbers, would you be happy earning your minimum price? Like, is that okay? And if it's not okay, maybe that should not be the minimum price.

Maybe we need to change something. Next is your target price competitive in the market, like based on what other people are charging, even if there's not something exactly like what you're offering, what is similar. And then for the last question, for that premium price that we set, what extra value could justify that premium price? Like how could you stretch to get there? And of course, you can always adjust prices later based on market response, that's okay.

But as much as possible, you wanna try to find the good price range before beginning. Start with prices that ensure profitability while remaining attractive to customers. And last but not least, I say this every week in this segment, it's better to have a simple idea you can start right away and a brilliant idea that never launches. Thanks for tuning in today. This series will continue in one week.

And until then, we've got a new episode coming out, a new episode of the podcast that is coming out every single day. My name is Chris Guillebeau, you're listening to "Side Hustle School." [Music]

From the Onward Project.