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Equity-Based Pricing: How to Create an Inclusive Business Model

When you’re building a socially conscious business, you’re constantly thinking about how everything you do aligns with your values and broadens your impact. Equity is a consideration at every step along the way; that includes when setting prices. Making thoughtful pricing decisions will help you serve a more diverse audience.

This is in contrast with the way many service-based entrepreneurs approach pricing.  Many use their gut instinct or base their prices off of what other people charge. While knowing market rates and checking in with yourself can be useful, remember that your model is going to be totally unique to your business. 

Read on to learn how to map out your true costs of doing business and determine what the right pricing is for you. You’ll also have a chance to account for any scholarships or sliding scale initiatives you want to offer.

What to Consider When Developing Equity-Based Coaching Packages

Again, no two pricing plans are going to be exactly the same. Your model will depend entirely on your specific costs and other factors. The following steps will use an example to walk you through building your pricing model. Afterward, we’ll provide you with a downloadable pricing calculator to use as you set your own rates

The first thing you’ll do is outline all of your program costs. Before we can get to pricing, we have to know what we’re paying out to host or offer this product or service. Here are some things to consider at this stage of the process.

Program Cost #1: What is the direct cost of offering the program?

During seasons of high visibility, you don’t want to actively sell to your audience. I don’t want to be launching my offer at the same time I’m trying to build trust, connect with people, or be in service to them. It’s hard for people to trust you and let their guard down with you if they feel like you’re just trying to get their business or work toward an end goal.
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Program Cost #2: What are the indirect costs?

Indirect costs are any expenses not directly associated with creating or delivering the product or service. This could include salaries for non-program staff, rent for your physical company space, utility bills, graphic designers who created your flyers, etc. Typically, indirect costs are a set percentage of the overall budget that you spread out across revenue streams.

Program Cost #3: How much money will be invested in marketing?

You can think of this as marketing or ad spend. This could include social media campaigns, print materials, and other advertising expenses.

Let’s say after considering these questions, you come up with the following:

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graphic showing how program cost is calculated
Now we know what our actual total cost is. Great! We can move on to the next step of the process.

After you determine the total cost, you want to think about the desired profit margin.

Next, we’ll begin thinking about your desired profit margin. Outline what you’d need to earn in order to:

  • Reinvest in your business
  • Hit your revenue goals
  • Offset any debt you took on to deliver the program
  • Support giving initiatives you have in place

You should also add in a line item to cover your anticipated taxes. If you’re not sure what number to use, ask your accountant. They can help you determine what percentage of revenue should be added in.

Now we might be looking at the following information:

graphic showing how to calculate profit margin

Now that you have your total revenue goal, use this number to determine what you charge people.

Adding all of our costs to the revenue we want to generate, and then making sure taxes are included, gives us our total revenue goal. Knowing that specific number means you know the why behind your pricing. With this target in mind, you can be way more confident and intentional about the cost of your program.

Say you’re running a group program for 12 people. One option is to simply split the total revenue goal across the number of people you will serve. In this case, the individual cost would be around $2,113 per person (I would probably round up to $2,220).

Considering Scholarships and Sliding Scale Models

Many socially conscious businesses offer reduced tuition, scholarship awards, or sliding scale pricing. These initiatives allow you to reach a wider audience. Being clear on your actual costs will allow you to decide how to navigate scholarship programs or sliding scale models. Essentially, a successful program outcome will hit your overall revenue goal—you get to decide how that happens.

Continuing with our model above, we already know we can charge each of the 12 attendees $2,200. We could also offer partial or full scholarships and charge the paying attendees more. From our example above, pretend you wanted to give out 3 full scholarships. You would then spread out the revenue goal over the remaining 9 attendees, making their cost to attend closer to $2,800.

With partial scholarships, spread the amount of the scholarship across the other attendees. So let’s give away two partial scholarships at $1,000. Spread out that total (2 x $1000 = $2000) over the remaining 10 attendees who aren’t getting scholarships. Your scholarship recipients will attend at $1,200. (That’s the per-person cost of attendance minus scholarship amount). The other 10 people will pay $2,400 each.

 

graphic demonstrating revenue math

You can always charge any amount you want; you just want to make informed, conscious decisions around pricing.

Knowing how much your program costs and how much your business needs to run and grow keeps you from making random decisions about pricing. Being clear on your equity-based business plan—and the numbers behind it—will allow you to talk to people confidently about the cost of your programs. If you get questions, you’ll know how to convey the value of your work.

This also helps you steer clear from arbitrary, subjective claims around “charging what you’re worth.” To be clear: You are priceless. We cannot put an actual cost on you or ever charge what you’re worth. What we can do is use quantitative numbers to show what your education and experience are worth. In turn, we can show people the return on investment that they’re likely to have if they choose you.

Try to have offerings at different price points, and ones that are not in competition with each other.

Offerings at different price points allow almost anyone who’s interested to work with you. Sometimes, people just aren’t ready to dive into the higher-end programs. With more accessible offerings, they’ll be able to get a sense of you and your work and potentially become good candidates for future offerings.

Ready to plug in your own numbers? Download my free calculator.

There you have it: the basic information on crafting an equity-based business plan. You have the foundational tools, but you’ll need time and practice to feel grounded in doing this. Once you become more comfortable with it, you’ll start to feel more confident about your price—even if that number still seems high to you.

My recommendation is always that people get really familiar with their numbers. It’s so important to see the actual revenue and understand the ways you can use it to reinvest in your business and move forward. Spend dedicated time thinking about how much it actually costs you to do things and scale the way you want to. The end result is that you’ll feel better about pricing your products and services.

To get started with your equity-based pricing model, download my free calculator today.

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Download The Free Equity-Based Pricing Calculator

If you want to take the next step in creating your equitable business model, consider joining The Collective.

Does this equity-based approach appeal to you? Do you want to do work that helps take down old systems of patriarchal thinking, racism, and exploitation? Consider joining the Equity-Centered Coaching Collective. Through training, coaching calls, networking, and other offerings, you’ll start to understand the ways you can make an impact and how to get there.

The Equity-Centered Collective brings together small business leaders from all areas. Together, we widen the lens through which we view, evaluate, and grow our businesses. We firmly believe that you can grow a successful business while also undoing harmful structures of oppression. Most of all, we believe this because we’re right here next to you, doing the same work.

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