When was the last time you actually looked at your prices and asked whether they were still working? Software costs have shifted, contractor rates have shifted, your skills and your processes have shifted, and your pricing is probably the only thing that hasn’t kept up. Mid-year feels like the worst possible time to have this conversation, which is exactly why it’s the best one.
So today we’re walking through why creatives avoid pricing audits in the first place, the pattern I see almost every single time I run one, and what it actually costs you to wait until December to act.
If you’ve been avoiding the pricing conversation because the data isn’t set up to actually have it, that’s the conversation to have with me. Pricing audits with close rate, effective hourly rate, and forecast inputs all running together are part of how my CFO services work. Send me a message on Instagram @firestormfinance or book a discovery call and let’s talk about a profitability report and whether your prices need to move.
Read the Transcript
Hello, hello, hello. It feels like it’s been so long since I’ve sat down to record, and realistically it’s just because I’ve been so crazy busy. I’m very excited to be back, and today we’re going to talk about the pricing audit that every creative avoids at mid-year.
You might be thinking, “Sam, I don’t know if I really need to audit my prices, that doesn’t seem like something I naturally need to do.” But the truth is you should be auditing your prices every year, even if it feels like it’s not necessary, because so many things shift. The cost of your software subscriptions shift. Your contractor information sometimes shifts. Costs in general shift, and that changes a lot of things for you. So the question we want to ask is: when was the last time we actually looked at our prices and asked if they were still working?
Why mid-year is actually the best time
Mid-year feels like the worst possible time to have this conversation, when realistically it’s one of the best. It’s the moment you can pivot and actually reach the targets you’ve been setting for yourself all year, before December rolls around and you’re saying, “I don’t have time to change what I want to change anymore.”
But mid-year pricing audits don’t happen, and we want to ask ourselves why. The emotional resistance is real. You’re thinking, “I don’t want to lose customers, I don’t know if I really need to change my pricing, there’s a lot of work that goes into looking at this.” It feels heavy. It feels like it can cause you pain and heartache. It feels like something you can run into a wall with. It makes it so much easier to skip it and avoid it. Because if you don’t do it, you don’t have to deal with the stress, and you don’t have to do all that work.
Why the data is hard to look at alone
When you’re thinking of a pricing audit, the data is hard to look at by yourself. The answer you’re going to suspect underneath is that you need to adjust your pricing, and that’s going to feel uncomfortable. You already know deep down, and the true answer is going to make you uncomfortable because you have to step outside the boundary you’ve set up for yourself. You have to talk to people about changing your pricing. The conversation needs honesty most creatives can’t give themselves about their own pricing.
When you’re looking at your own pricing alone, you’re thinking, “I don’t know if I really need to flex on that because of this.” When someone else sits down with you and says, “This is how much time you’re putting in, this is what your software costs are, here’s what your profitability looks like,” there’s a deep change that happens. You look at it and say, “Okay, I actually do need to change this.”
Pricing feels personal. Charging certain prices feels confrontational. It’s a natural instinct, a natural emotion, this is not foreign. I even feel this way with my own pricing. It feels confrontational when you have such a large price, and even when the numbers say you need to charge it, you feel like, “I can’t charge that.” The reason is we look at what other people are charging and we compare ourselves to them when our situations are entirely different. They’re using different software, different systems, different people in their business. You cannot compare your situation to someone else’s. And the longer it goes unexamined, the more lost revenue is sitting in that gap.
The patterns I see every single time
When I run a pricing audit, the same patterns show up almost every time. People are not charging enough for the time they’re putting in. You start out at $60 an hour. You’re 3 years in, you’ve never run a pricing audit, and the time you’re spending (or your contractors or employees are spending) is almost triple what it was when you started. You’ve developed skills, processes, and efficiencies. But you never charge the right amount for that. Even when we don’t charge per hour, that has to be built into your packages.
It surprises even the most thoughtful business owners, because they’re saying, “I thought I was covering that.” When we sit down and look at what’s actually going into the offer, they miss it. It’s the missing piece. And it’s not because they’re dumb, it’s because they’re scared to look at it. Scared to see how much time is really going in. Scared to raise prices because they don’t want to deflect clients. But the right people will find you regardless of your pricing.
There’s almost always at least one offer mispriced by 15 to 30%, and it’s the biggest pattern I see. There’s one offer that’s just completely mispriced, and shifting it brings in more revenue automatically.
Sometimes the mispricing is high, and the close rate proves it. Maybe you’re spending less time on something now, and we look at it and say, “We can bring this down a little and you could be making more money more often. You can afford to have this be a lower price and still deliver properly.” Sometimes it’s really low, and your burn rate proves it: how many people are coming in your door and going out your door.
The offer the owner felt the most confident about is often the one most off, either priced too low or too high. The audit also surfaces 1 or 2 offers that should have been retired 6 months ago. We look at them and say, “We shouldn’t even be putting effort into these. They’re not bringing in clients, they’re not bringing what we want to see in the business.”
The 4 inputs the audit actually needs
This analysis takes more than punching numbers into a calculator. You can’t just look at one number and decide. There are 4 inputs you have to look at:
- Close rate of your current price. How often do inquiries come in for these offers and how often do you close them?
- Effective hourly rate. Revenue divided by the hours you actually work, including admin and sales. This is why I’ve been telling you for a while to track your hours.
- Refund and redo rate. If you’re a graphic designer, how often are you having to redo work? What percentage gets done twice or refunded?
- Category-level revenue. How is your offer mix actually trending versus what you planned?
If you raise your prices by $200 or $300 without looking at the facts, you’re just looking at one number. If you want to be accurate and profitable on every offer, you have to dig in.
What to do with what you find
After the audit, what do we actually do with the numbers? And how do we change pricing mid-year without losing clients?
First, we stage the pricing change. New clients come in at the new rate automatically. Existing clients transition on a timeline. If you’re a graphic designer and your past project clients aren’t coming back anyway, that doesn’t matter, but your new clients need to be on the new rate. If you have retainer clients, that’s where you transition slowly. “Here’s what’s changed over the past year, here’s the amount of work I’ve been doing for you, here’s what we’ve added to our packages. This is your new price. I’m giving you 3 months to decide if you want to continue or look for someone else.”
Do it in a kind way. If they see the value and they want to stay, they’ll figure out a way. If they don’t see your value, they’re not the right clients for you, and that’s okay.
The conversation with existing clients needs to be almost scripted and unsentimental. Don’t attach emotion to it. Even if you think they’re great clients, even if you think they’re loyal, even if you think they’re your best friend, it has to be unsentimental and the same for every client. Tell them why you’re raising your prices. Tell them what you’re giving them in addition to the raise. Show them the facts. Don’t make it emotional. Give them the facts.
Then look at which offers are getting the change, which are getting retired, and which are getting held because they’re already priced right. Once everything is baked in, go back to those cash flow forecasts we keep talking about and make the revisions. Look at what the future actually holds once the new pricing is in.
The cost of waiting until December
Why does it matter that we do this now instead of later? Pricing decisions made now can hit cash flow by September. If you make a pricing decision in November, it won’t hit cash flow until the next calendar year. If you wanted to hit a profitability goal by the end of this year and you make the decision in December, you’re never going to hit it this year. Every booked month at the wrong price is revenue you can’t get back. And the second half of the year is mostly set by October, so the audit has to happen before then if you want it to actually count.
When we think of pricing audits, we’re not trying to be emotional. I get it, we have amazing clients, the people we work with we love. But sometimes it’s about what’s best for you and your business. If you want to continue providing the best service for your clients so they keep recommending you and working with you, you also have to consider what you need out of your business to provide that service.
The pricing audit with close rate, effective hourly rate, and forecast inputs all running together is part of how my CFO services work. If you’ve been avoiding the pricing conversation, or even avoiding looking at it because the data isn’t set up to have it honestly, let’s have a conversation. Let’s talk about a profitability report and see if your prices need to move.
As always, if you enjoyed this episode, please like it, share it, subscribe, share it with friends, family, business partners, whoever, so we can get more people listening and have more conversations like this.
As always, I wish you the best week ever, and we’ll see you next week.
Farewell, fellow travelers.
For specific legal or tax questions, please consult with a licensed attorney or CPA in your jurisdiction.
