Undercharging and over-delivering can be a challenging habit to break. You have to come to terms with the idea of increasing your prices and overhauling your packaging structure.
If you’re like my guest today and feel nervous about raising your prices, then listen up because I have a real-life case study for you! I interview CEO Collective member Sarah Young about her journey over the last 18 months where she increased her price points, decreased burnout, positioned herself differently than other bookkeepers and CPAs, and now enjoys her business more than ever.
On this episode of Promote Yourself to CEO:
6:15 – What did Sarah’s business look like before she joined The CEO Collective? She reveals what prompted her to get into business for herself.
10:11 – Sarah feels like her pricing story is a little embarrassing, but she tells it anyway. Everybody has the same struggles, especially women.
14:27 – After some research, Sarah started raising her prices but still found herself burning out. Then something happened in January 2021 that changed her business.
21:28 – What did existing clients think after Sarah raised her price points? She discusses repackaging herself for higher-paying clients and framing a response to those who could no longer afford her.
27:13 – Sarah reveals something she had to come to terms with as she rebuilt her business from the ground up.
28:48 – Where did Sarah find higher-level clients willing to invest at her prices? If you think it’s super complicated, think again.
32:08 – Sarah shares what she sees happening financially with fast-growing businesses when they underprice themselves.
36:09 – How do you build in profitability in your pricing, especially as you hire and grow a team? Sarah offers her insight.
42:47 – Sarah shares what’s been the best part of being a member of The CEO Collective.
Mentioned in Increasing Profit and Decreasing Burnout: A Case Study with Sarah Young
This post is just part 3 of a much bigger series: 3 Key Strategies to End Hustle and Entrepreneurial Burnout
If you’re ready to for a business that doesn’t require working 24/7 and to finally get out of the feast or famine cycle – you’re in the right place! Here’s what you can expect from the series:
1: How Hustle Culture Creates Entrepreneurial Poverty for Women Entrepreneurs
2: Why Underpricing (& Overdelivering) Is Creating Business Burnout
3: Increasing Profit and Decreasing Burnout: A Case Study with Sarah Young
4: Your Profit Roadmap for More Sales & a Truly Sustainable Business
5: From Struggling to Selling Out Your Offers: A Case Study with Leesa Klich
6: Avoid Hustle & Burnout with The Hidden Money in Your Business
If you’ve been loving this series – join the waitlist for The CEO Collective to be the first to know when we open the doors to new members PLUS get a waitlist only bonus!
Racheal Cook: How does it feel when someone you trust and respect takes a look at your business and says, "You need to increase your prices. You have been undercharging and overdelivering to the point where you are, probably starting to feel burned out because you have way too much on your plate, and you're just not getting well compensated for it." Well, if you're anything, like, some of my clients, especially my client, who is coming on the show today. This feels like a huge challenge to overcome when you realize, you need to increase your prices and you have to wrap your head around it and start to feel comfortable moving forward with a more premium pricing and packaging structure for your business.
If you have ever felt nervous about raising your prices and you aren't sure how to navigate that. I want you to listen in to this conversation with one of our CEO Collective founding members, Sarah Young, a CPA who leaned into the recommendation we gave about increasing her price points and positioning herself, not just as another bookkeeper and CPA, but as the fractional Chief Financial Officer for small business owners.
Video Audio: Are you ready to grow from solopreneur to CEO? You're in the right place. I'm your host, Racheal Cook. And I've spent the last decade helping women entrepreneurs start and scale service-based businesses. If you're serious about building a sustainable business, it's time to put the strategy systems and support in place to make it happen. Join me each week for candid conversations about stepping into your role as CEO. The hard lessons learned along the way and practical profitable strategies to grow a sustainable business, without the hustle, and burnout.
Rachael: Hey there, Racheal here, and welcome back to a special conversation here on Promote Yourself to CEO. If you listened to the last episode, I have been sharing a lot about how we can break free from hustle culture, and entrepreneurial poverty for women business owners. And the 3 key ways that we are talking about over this series, to help you build a more sustainable business. Because when you have these things in place, it really helps you to burn out-proof, hustle-proof your business, while positioning your business for growth at a sustainable pace.
Well today, I wanted to follow up the pricing conversation with a real-life case study. One of our CEO Collective founding members, Sarah Young came into my world, a little over a year ago, almost a year and a half ago when she was working on growing her CPA. Her accounting business. And what I have seen in her business, as she has really stepped into what she truly has to offer for business owners and entrepreneurs, that she loves working with. It has just been incredible. It has been absolutely amazing to see how even though she was very hesitant and nervous to raise her prices, to reposition her business, not just as another bookkeeping accounting firm, but as a fractional CFO, Chief Financial Officer for small businesses who is a strategic partner and helping them plan their growth plan, their cash flow, plan their tax strategy. It has been amazing. Amazing.
If you have been nervous about the whole pricing conversation. If you are scared to go back to your clients and tell them that you are increasing your prices. If you're worried that a price increase will mean that people are mad at you or they don't want to work with you anymore, you need to listen in to this conversation because I know the mindset is just as important as actually going on to your website and changing the dollar amount for your packages or your services, or your programming. So listen in, Sarah Young is a CPA, a wife, a mom, and the founder of Young and Company, she helps driven CEOs to increase their bottom line, find financial peace, and feel confident about their taxes. Sara believes in a modern approach to accounting. So she takes a holistic approach to how she provides a CPA tax strategy for her clients.
I know you're going to love this conversation and hopefully, my dear dear hope here, is that you will feel even more confident in reviewing your pricing and looking at it as a more strategic way to design sustainable success in your business. Let's dive in.
Hey CEOs, welcome back to another special interview with one of our amazing CEO Collective founding members, an incredible CPA, and now CFO, Sarah Young. Thank you so much for joining me today.
Sarah Young: Hi, thank you so much for having me. I'm really, really excited to be here.
Racheal: Well, I wanted to bring you on because when I was thinking about this series that we're currently recording, I was thinking, okay, who in the collective did I see make massive moves in their business and just a year with one of these strategies, and pricing is so powerful. And I knew because you see both sides of it as a CPA, the working with other business owners and your own business, this would be such an interesting conversation.
But before we dive into, like the moves you made last year, I would love for you to share with everybody a little bit of background about who you are and your business specifically, like, how did you got started and what did your business look like before joining us in the Collective?
Sarah: Yeah, absolutely. So I started my business in 2018, as a side hustle, after having a pretty terrible personal tax experience. My husband had a business. We had a rental property, and we just decided to outsource our tax return that year because I was in the big four at the time, and just slammed, and it was just horrendous. And I remember looking at like, just the whole experience and thinking to myself, I could do this just so much better and it sort of planted the seed in my head.
I started off just doing bookkeeping and tax, because that's what accountants do on the side, and then we ended up helping out a family business. So my husband has a family business. It's a landscaping company and they were having a really tough time with their controller, they had an in-house, not a CPA, but just somebody who did all of their accounting, and they just had a ton, a ton of problems with it. And I was like, "you know what? Let me just help you because this is exactly what I do in my job and the whole business was born."
I went full-time with my business last year after having a baby in March in the middle of the pandemic and grew it. I started off doing, bookkeeping, taxes, and then eventually I realized I don't know, my skill set is better used to help business owners with the higher level, virtual CFO strategy type stuff, in addition to doing all of the day-to-day work. So now my business is Young and Co. We do outsource CFO and accounting tax services for small business owners. And our really ideal clients are the ones who are going through massive growth who are experiencing a lot of changes. They need help managing their cash flow. They might find themselves squeezed for the first time as they're hiring people or making investments in their business and they just need help managing them.
We do all of the day-to-day accounting and tax work in addition to helping with budgeting and planning and how do you pay yourself more? How do you grow your business? So that its profitable and sustainable and it's really fun actually to use my like skill set to help business owners because it has an actual impact on their lives, like helping them with their money situation helping them make sure that they pay themselves and they're able to create wealth for their family and leave a legacy behind, I think is really exciting.
Racheal: It is really exciting. And this is something I also experienced coming from kind of the more corporate world when you get to work with entrepreneurs and small business owners and you see what a big impact you can make in someone's life and that is to me so rewarding compared to working in corporate where you're like, "Oh great. I hope this big huge company and help them with their bottom line." But who knows what's happening for the people in that company. You can actually see the results when you're working this closely with small businesses, which is so cool.
Sarah: No, exactly. I feel that way too. I'm used to working with huge public companies and when I made the switch and now work with business owners, a lot of family-owned businesses, a lot of women-owned businesses, and minority-owned businesses. I just feel like I'm making a huge impact on their lives and it's way more fulfilling for sure.
Racheal: That's awesome. Well, I remember when you joined us with the CEO Collective as a founding member, it was right when the pandemic was starting, you had a brand-new little one and you were going full-time in your business, all at once, which is a lot. And in the past year and a half now, tell us a little bit about what's happened in the past year and a half in your business because you've made some major moves.
Sarah: Yes, so I'm going to tell my whole pricing story and I'll be honest. It's a little bit embarrassing but I'm going to tell it anyways because I think it's important for people to know that they are not alone. I think everybody has these struggles.
Sarah: Especially, I find with women-owned businesses, we have a lot of imposter syndrome going on and even you can look at somebody like me who's air quote, "good at numbers" and I still make the same mistake. So I'm hopeful that people will learn some stuff from my story. So just kind of quickly to summarize where I started, when I started on the side, I pretty quickly got a few referrals of businesses who needed bookkeeping, and I was like, I have no idea how to price this. But I knew I didn't want to price hourly because I feel like when you price hourly, who gets the benefit of me being really fast and who gets the benefit of all of my experience that I have from years and years of doing accounting.
When I'm pricing hourly, right, I get things done way faster and the person who benefits is the client because their bill is lower, as supposed to me, who has all the experience, right? So I knew I didn't want to price hourly, and I wanted to come up with a way to do just a recurring monthly revenue because I wanted to create a predictable revenue stream, but what did I do to create my first proposal, was I thought about, okay, if it's going to take me just a couple of hours a month, probably to do the bookkeeping for this client. And if I charge like $50 an hour, how much does that work out to be in a monthly fee? And it was like $125 or something, and that's what I charge them per month like to do all of their bookkeeping and it was a smaller business. I think [crosstalk] $100,000 or $200,000 in revenue, but looking back, now. I'm like smacking myself. I didn't want to charge hourly but I still anchored my pricing decision based on how many hours it was going to take and I talked to business owners, I know that a lot of people also start there.
Sarah: I think that that's fine as a data point, right? It's important to know how many hours is it going to take? And what is the value of my time? If you have a team, how much is it going to cost them? But that's just one data point to consider not necessarily where you should start. So I started off again as a side hustle, right? I had a handful of accounting or monthly bookkeeping clients that were $125 to $175 a month. And I went along that way until I went full-time about a year and a half ago, and what I found along the way, was it took me a long time to be able to say this confidently, but I found I'm not a bookkeeper. Right? Like I'm a CPA. I have a lot of this higher-level experience and my clients knew that. And so they would email me and ping me all the time with questions, right? Tax questions, budget questions, strategy questions, and trying to be helpful. Of course, I answered them, all for the low low rate of $125. I told you, it's embarrassing, but I'm pointing it out...
Racheal: It's such a common problem, and this is... We've had so many people in the Collective who've had the same thing where we underpriced ourselves and were over-delivering, and we're not including all the back and forth, all of the brain picking, all of the quick questions, those things add up and we have to remember that. So, keep on going.
Racheal: I'm so excited because I know so many people are going to be like, "oh crap, that's me too."
Sarah: This is why I'm telling the story as embarrassing as it is, right. So yeah, and I both price myself too low and I did not have any boundaries around, what I was doing during my time. None of that because I just felt like, "hey, I'm trying to grow a business." Right? I want to get clients. I want them to be happy. I want to get a good reputation. And so I felt like I needed to do all that. So fast forward, March 2020, I had a baby. Two weeks later, the whole world shut down, right? Because of the pandemic and I had planned to quit my job and go build my business, but I remember looking at my husband like, "am I crazy? Can I do this in the middle of a pandemic?" But I did it anyway, but I thought to myself, I need to raise my prices because I had realized, there's a lot of this brain-picking type of thing in between.
I thought, "okay. Well, what the heck, do I raise my prices too?" And at that point, I went and did a lot of research on competitors, and it's hard to find pricing out there, but some people publish it and so I just tried to go out and get data points of what are other people charging for this. Again, like it's important to know as a data point, but it's not necessarily something you have to anchor yourself to which, again, I did do this. So I'm saying this from experience.
I ended up increasing my monthly prices from less than $200 to minimum of $275 and then I took on people up to like, $850, right? So I think my average price ended up being $425 a month once I grew. So, from last summer through, Q4. I took on just a ton of clients. I think I was up to like 17 by Q4 of last year and I was like burning out. I was stressed out all the time. Plus I have a baby at home too, right? Like how I did all this? I have no idea, add on all of the extra, the tax season was never-ending last year because of all the deadlines. They had the PPP loans and all of the other stimulus stuff that people were asking me questions about like, it was just crazy.
Sarah: But I felt like, I raise my prices they doubled or tripled in some cases like surely this is the right answer, but I still found myself really burned out. So then fast forward to January of 2021 and another business coach, who is in Charlotte where I live. And I've worked with her before too, she referred me to a client that she worked with. That does multiple millions in revenue, and they were in desperate need of somebody like me. So I had done CFO Services before just hourly kind of project-based and I had put it on my goals like back at the December retreat. I put my 2021 goals. One of them was to move over into doing CFO Services, instead of bookkeeping, and I just didn't plan on it happening in January of 2021, but when things fall in your lap, you take advantage of them.
I remember putting the proposal together for them and I finally feel like I got my acts together in terms of pricing because I put out $4000 a month thinking like there's no way they're going to go with this, but I did it anyway because I knew for working with clients before, like how much work was going to be involved to do this. It's just a whole new level and this business, in particular, was pretty complex. So, I put out, $4000 a month and what do you know, they accepted it.
Sarah: Without even questioning it. I think from there, my whole business started to change. So I was able to hire my first employees in January, right? Having this revenue, I basically, I don't know. I think I increase my revenue by 50% with one client, right? Like this one client was equal to ten of the other ones which are just mind-blowing if you think about it. So, I was able to hire my first staff person who helped me take over a lot of the like day-to-day client work. By March, I had hired another one, because we just kept growing, and I don't know, I think, since then my whole business has changed over. I feel like I'm still in the process of like fully transitioning into what I call Young and Co. version 2.0, but since January, I reworked all of my products and pricing and have really tried to step into this idea that like, "Sarah you're not a bookkeeper," Right? You're not just there to do the transactional work and some people need bookkeepers and that's great. But I am not just that and like really stepping into, "Okay. I can do the virtual CFO stuff. This is the highest and best use of my time and my skill set."
I reworked all of my pricing structure and now, instead of doing a one-off tax return for people for like $500, $600. I have a tax package that's a full year of support at $3000 plus. $3000 to $4000, right?
Sarah: Instead of doing like $275 a month for bookkeeping, I'll do the tax package plus all of the monthly accounting, it depends on the business, right? But think $275, we're now up to a minimum of a $1000 a month. I have like CFO Services where I first priced, this one at $4000 a month. I just took on a client a few months ago, for $5000 and I could see it increasing over time with the right clients, right? So I don't know just comparing where I was in Q4 of 2020, I was stressed out, and burned out because I was hustling all the time, trying to bring on more and more small clients that require a lot of work relative to their size and was not able to have a team because I couldn't afford it. Now I've got 2 employees. I'm in the process of hiring another employee. I have a VA, it's just enabled me to step into the CEO and CFO role that I feel I'm more, I don't know. I'm just a better fit for that, as supposed to like just doing the day-to-day transactional work. So I'm really excited about that.
Racheal: So many amazing points that you're sharing here in your story and I hope everyone is really listening to this because I think this is a transition a lot of us go through. When we are really seeing the opportunities to dramatically uplevel our business, and maybe the idea of taking your price points from, you said like $300 a month to $3000 a month or that's a 10 X on your price point which to some people might seem like, "I can't do that, that makes no sense to me." But what really happened is you identified a new type of client and you repositioned and repackaged your offers to now serve a new type of client who to them, that price point is no big deal because it's a 100% in alignment with what their needs are.
Can you talk a little bit about what happened with your clients when you made this transition? Did you keep those smaller clients or did they all level up? Did you have people get upset about price increases, what happened on the client-side?
Sarah: Yeah. As I brought on and I'm still working through it, I've tried to sort of. Here's another lesson I've learned, always put a term in your contract because when I started out it was just sort of like, month-to-month never-ending and I had a hard time with identifying when to roll clients off. But as I've come up on a year working with clients, I've started to roll them off and I do have clients who leave. Because I go to them and say, "hey, look, I understand, you're at this price point, but I'm offering a different service packaging because it's more valuable to the clients."
When I'm actually able to help them increase their profitability, help them with the tax strategy. And help them think more strategically about their money than just doing the bookkeeping. And so along with that extra value, comes a higher price. And so some of them are like "Hey, I can't afford that" or "I can't like just justify that. I don't feel like I need all of that." And I say, "You know what, great you need a bookkeeper, right? Here are a couple of referrals for you to go reach out to you. They do good work. You're set up, now everything's cleaned up. We put processes in place for you. You are welcome to go find somebody else to do your bookkeeping, right? If you ever want to come back to me, like, I'm still here. I really appreciate working with you."
I find this as long as it's sort of framed that way they're not as like they're not angry at me. I was always afraid they were going to get mad and talk smack about me on the Internet or whatever and like nobody has done that, right? Like as long as you sort of provide them with an off-ramp and continue to provide a good client experience. I think it's a lot more smooth, but I have had a couple who have upgraded, but honestly, I've completely repositioned the clients that I work with. And so most of the clients that I took on when I went full-time with my business and was growing, that's just not the same type of client that I really work with anymore and that's okay. I do want to add to, it's important. You mentioned, like I, 10 X my price.
Sarah: I think it's important to note, that I'm not just increasing my price just for the heck of it, right? I'm not offering the same service for a crazy high price. I repackaged what I'm doing, I provide more for things and some of it is like yes, we still do the monthly accounting but I try to add things that I feel are very potent in their meaning. It may not be a ton of time commitment on my part to do these things for them, to help them come up with a budget to help them do like a break-even, to do benchmarking, to help them pick KPIs, right? These things aren't necessarily a huge time commitment on my part, but they're very like high value to the client. So I re-bundled the way that I work with them and that's how I was able to increase my price up to that point and also find new clients to work with, right?
Sarah: Now, I'm working more with the clients who are going through the same massive growth that I have gone through and I'm still going through where they really need that extra support and they are willing to invest in me because they know that I'm going to pay off for them, but they're more and I don't know. It's just a better experience for me and for them because I'm working with people who are really excited about what I'm going to do for them.
Sarah: As supposed to working with people who are like, "I just need to have my books done." Right? Like they're not really excited about that.
Racheal: It's such a huge shift here. And this is something I see a lot in The Entrepreneur Space is, we have to remember that if all we are is like a task-taker and we don't offer any additional strategic higher-level value. It is going to be really hard to increase your prices because your pricing to the lowest common denominator, which is just getting the bookkeeping done. And this could be, played out across so many different types of businesses. Like, if you are on social media and all you're doing is the bare minimum posting the social media, if you're a designer and all you're doing is the bare minimum, like creating a couple of designs.
If all you're doing is checking the box and you're not offering any higher-level value. It's going to be really hard to differentiate yourself in order to have the higher price points. And I love the way that you're talking about these things don't necessarily take a ton of your time or bandwidth, but they offer so much value to your clients. And this is where the expertise is so important. And it's so easy for us to discount our expertise and be like, "Oh, surely, they know. They should have a budget or they should have KPIs," but honestly, most people, the things that you think are like, surely they have this, they don't have it. They don't have it in place. And then, that's, I mean, I've built a whole business on teaching people basically how to plan. Because I know that I'm like, I started my whole business thinking. Well surely people sit down and write out goals and know how to plan, and then execute that plan, but no it turns out they need a lot of support around that.
Sarah: Yeah, and these are things that I never would have realized at the very beginning of my business like it took a while to come around to it. And so I think it's important to note too, it's okay. If you don't get it, right the first go-round, just keep listening to people, right? Like keep talking to your clients and they'll tell you what they need. And then even if you can't offer them that service that they know that they need, right? You still have sort of an arsenal of like tools, I can do this going forward for this client and they're going to need that and it's going to resonate with them.
Like I said, I feel like I'm doing Young & Co version 2.0 right now of my business. And, like I just basically had to start over, right? Redo the products and services completely from scratch. And I'm cycling out old clients and bringing on new target clients. And I think it's important to note, too. Like it's okay if there are clients out there who aren't a good fit for you. Like you don't have to be the person for every client who comes your way like it's okay, if people tell you, "no" because I've focused on like that certain type of client who was going through, what they're going through in their business. I'm able to charge a higher price because I can provide the value that is exactly what they need.
Sarah: It took me a long time to like be okay with that idea, right? That I don't have to offer something that everybody needs, but it's really sort of changed the way that I do business. So I think it's important.
Racheal: It is super important. Now, I have a couple of things I want to ask you as you transition and we've talked about, this is a different type of client. Where have all these CFO-level clients come from because you've described so much work in order to make these shifts. Where did you find these higher-level clients who are willing to invest at this level with you?
Sarah: Yeah, well, that's a really good question. I've honestly had to put more time into doing sales and marketing activities than I did before. So before I grew a lot off of referrals and I still do, I think probably 50% of my new clients come from referrals now, but the rest have come from me going out and doing networking and me doing webinars, and just getting out and talking to people and trying to get my face and my name out there, like being more active on LinkedIn. I have people who find me on Instagram somehow and I just speak to them, right? Which I never really thought would happen. But like, it does actually happen. And in real life, people find you on Instagram, but I still do get a lot of referrals. But now that I have my target client set and I have the messaging set. I find that I have more coming from other sources, like visibility moments and just me doing outreach and making connections with people.
Racheal: I love that because it's not overly complicated, your marketing strategy didn't turn into some super complicated high-tech, forty-seven steps funnel. It was just a layer on top of the referrals to make sure that you're consistently bringing in some new people, and you're consistently hiring right now, which is really exciting because that means you can spend more of your time, like you said, as a CEO and acting as the CFO in a high-level strategic way instead of the day-to-day, like in putting things in the spreadsheets.
Sarah: Yes. And the higher that I'm working on right now is going to be another CPA, somebody who can manage my team, my staff accountant, somebody who can be a main client point of contact. And I'm really excited to hire this person, which I never would have been able to do at my old price points, right, but I'm excited to hire this person because it will enable me to step out of the rest of the day to day stuff that I'm doing. So I have a team who prepares and then I'll have this person who can review and project manage and work on client service. So it's going to be like the next game-changer for me and I'm so pumped about it.
Racheal: Well as a CPA and CFO, I am curious to hear your thoughts on this because you're working with these fast-growing businesses. And I often tend to see that when people underpriced and over-deliver they end up in burnout but they also just they're really kind of depleting their business of the resources they actually need for growth including the ability to hire people. So what do you see with these fast-growing businesses happening for them financially? What happens to them cash-flow wise and everything else when they're pricing is not set correctly.
Sarah: They just have no cash flow. Right? Like they just constantly feel tight. Like they're checking their bank accounts and they're like, "I don't have enough money to do X, Y, or Z." And the first thing that goes is always their pay, right? The first thing that business owners, let go of when they start to feel the squeeze, is they stop paying themselves which like the whole point of you running your own business is that it supports your life, like yes, you're here to do your client work. And yes, we have a lot of fulfillment from that but like when it comes down to it, we have to make money in our businesses because we're not here. We're not all non-profit. Right? Like we have to make an income, and I think it's okay to have that mindset shift, right? Like a lot of women, especially I find this, in their head of, like, "I am just here to help people. I'm not worth making money. I shouldn't make money." It'll make me somehow a bad person, right? So the shift when they're not pricing is they have no cash flow. They stop paying themselves and then it completely stifles growth because you don't have the money sitting there to invest in anything, to invest in hiring, and then it just puts you in this cycle of just constantly having to hustle, right? Until you just can't hustle anymore and you want to quit and shut your business down. So I think the pricing is one of the absolute most important things.
Once you have been in business for a little while and this is what I'm doing. This is the problem that I'm solving. I think it's important to revisit your pricing because it's the thing. Like for me. I'm a great example.
Sarah: Enabled me to just totally skyrocket my business, but it's not something that you can just set and forget either. So I have clients who they make multiple millions in revenue and I had one, in particular, with a home services business. They had not increased their prices on some of their big customers in 5 to 10 years.
Rachael: Oh my gosh.
Sarah: In that time, right? Like this is a home services business. So they have labor, right? A lot of labor. In that time, think about like how much wages increase, like think about how much the other expenses increase and they hadn't increased their pricing and then their profit was like, maybe 2% or 3% a year.
Rachael: Oh lordy.
Sarah: I ask the question, "Well, like, when did you increase your prices last? How do you know, like if your customers are profitable or not?" And they're like, "We don't know." I'm like, "Great. I'm here to help." So we go through and we do an assessment of okay, what is the pricing first and foremost, but then, how does that flow down into profitability for each client after you put in all the extra costs? And you'll find that there are clients who, once you allocate all of your time and resources that you put into that project, right? You'll find that there are ones you don't make money and you can actually let them go and increase your overall profitability even faster. So I think the pricing is really important, but also just considering like, overall profitability is another piece of that too.
Racheal: This is another interesting thing to talk about because I think often, especially when we are talking to owner-operated businesses, that haven't started to hire people. We don't consider all of the extra costs associated with each new client that we take on because initially, it's just our time, right? So how do you build in profitability in your pricing when it's just you right now, but you think you're going to hire a team down the road. Do you have any insight into how we can start thinking about that?
Sarah: Yeah. So I work through sort of methodology with my clients when we talk about this and I like to start at the end goal instead of starting with revenue goals. Everybody says, "I want to make $10,000 a month." And then once they hit that, "I want to get to $25,000" and then "I want to get to a million dollars a year." And I'm like, "But why? Why do you want a million dollars a year?" Increasing your sales, if you're not profitable overall, increasing your revenue is not going to magically solve all the problems in your business. So I like to work from backward, right?
Sarah: We start with thinking about, how much do you need to pay yourself to live? Right? That's step one. If you're not paying yourself at all, then we need to pay you just a basic living wage. Once you're paying yourself a living wage, then it's a question of okay, how much do we need to think about for retiring? Or for me, "I want to buy a lake house." Actually, this is my personal goal, right? Like, "I want a lake house." How much do I need to build in to afford that?
What are your personal goals? And then we think about, okay, we've got to layer in taxes. And then we have to think about, all right, what expenses do I have in my business? So if it's, I want to hire somebody how much is that going to cost me? If I want to get out of my house because I'm tired of working here, 24/7. I want to get an office. How much does that cost me? Right?
Sarah: We're thinking about what are all of the expenses, including how much you want to pay yourself. Plus leave a little bit of savings in the business, right? We need to create a cash cushion and have a little bit of profitability. And then from there, you can back into okay, what should my overall revenue be to make sure I'm covering all of these things? As supposed to thinking top-down, right? Like, "I want a million dollars." How am I going to spend it? It's what do I need to run my business? And the way that I want to run it in a way that supports my lifestyle both from a time and money perspective, right?
Then you think about your revenue goal. And then once you have a revenue goal, right? Maybe it's not a million dollars. Maybe it's $500,000, right? Then you think about, all right, what is my price? What is my capacity? If I hire somebody that increases your capacity and then you can sort of back into what should my pricing be, right? So I did this exercise too. I started with I want to pay myself. I want to build a lake house or buy one. I want to not work all the time because I have a 17-month-old who I want to spend time with while he's cute and little. I just don't want to live that like, hustle life lifestyle. And so knowing that means I need to hire people. That means I need to invest in some software and things to streamline my whole operations and then I backed into, okay, this is my revenue target and I'm going to target these mini CFO clients. These mini tax clients, these mini accounting clients and that's what I'm working towards right now.
It's more intentional when you think about it that way, as supposed to starting with, I want to make a million dollars, and then I'm going to spend it here and here, and here, and here, and then, inevitably, what happens is you don't leave enough to pay yourself. You don't leave enough to meet all of your goals. So that's how I work through it when my clients have this issue.
Racheal: I love that. And I hope everybody goes back and hits rewind. And listen to that again. Because this is so important. And I think often this is where I know a lot of times, we tend to feel like we're pulling numbers out of thin air. But if we sit down and crunch the numbers, it is not have to be overwhelming or scary. But if we don't know where we want to go, personally in our own personal financial journey and makes it really hard as a business owner to make good decisions. And this is where I see a lot of people who find themselves in that hustle cycle and that feast or famine cycle because they haven't stopped to make sure that the numbers make sense. They haven't thought about their capacity at all and instead they're just thinking will more equal better. But more does not equal better. Sometimes you can get to the point where you are stretched so thin with too many clients, too many things going on, and too many offers at too many price points. Where it's just hard to run an efficient business that way, and then you end up completely exhausted and burned out.
Sarah: Yeah, like running a business that is efficient that is profitable. Like it doesn't just happen by accident. Like it's not just luck, right? You have to make decisions with all of the data that you have, you have to like, actually put intention into it, which is why I think the pricing is really important. But pricing the right way is really important, like increasing your prices just for the sake of increasing your prices without thinking about what's going to go into this package, right? What else am I going to have to spend to make this happen? How much am I going to have to hire to make this happen, right? Like without thinking through all those different pieces is just not going to magically result in a business that works for you.
Racheal: So many great insights here. Oh my gosh. I am so excited for people to hear this story and to hear your takeaways here because again, I truly believe that this is one of the big levers we can pull that very quickly will turn things around in a business if you're willing to sit down and crunch the numbers, you're willing to sit down and get intentional about what you want your business to look like and start designing how you want your business to look instead of just running it by default saying yes to everybody and everything, picking numbers out of thin air. That is not the way to get out of that hustle cycle.
Thank you, Sarah, so much for sharing with us your journey around pricing and what your business has done over the last eighteen months that I've been supporting you has been so awesome to see and so awesome to see you really stepping into making those big leaps. I know they were very intense when you are making those big decisions, but seeing you on the other side of them now has been awesome. So I'd love to know as we wrap up, what has been the best part for you over the last year and a half of being a part of the Collective. What have you really taken away from being a part of our experience?
Sarah: So many things. Honestly, my gosh, I don't know. I think, how many times have I asked about pricing? How many times have I asked about packaging, right? I think it's just hearing the messages that you have, right? About how to structure things, how to plan things, and how to improve things. For me, I think repetition has been key. And honestly, I have a lot of imposter syndrome, right? And so hearing, you can do this, like yes, this is something that would work. Yes, this has value. Yes, you can do this over the course of I mean, I don't know how many months like it took me a while to come around to it. But I think that was just one of the things that you need to hear because I don't know where else I would have heard it. I think that that just sort of like helped me finally come around to like, "yes, I can do this. Yes, I can charge this. Yes, I provide value to clients." And it enabled me to get to where I'm at. So I don't know. It's all been really helpful though.
Racheal: I love that and I think this is why it's so important just to surround yourself with people who can reflect back to you, the value that you have because imposter syndrome loves it, when we are on our own a 100%, with no one to really talk to. It loves being in that kind of isolation. But the minute you get into a community of people who are like, "You do what? You offer this much value? Are you kidding me? You need to raise your prices." Then it becomes a little easier to break through for that a lot.
Racheal: I love it.
Sarah: It's definitely easy to just be on your own right as a business owner, especially in the last year when we're all just at home plugging away on our computers. So it's just helpful to have other people telling me these things that I know and I can say to my clients. It's just really hard to take my own advice sometimes so I appreciate that.
Racheal: Absolutely. Well, Sarah tell everybody where they can find out more about you and all of your amazing CFO services.
Sarah: Yeah. Well, I am on Instagram @youngcocfo, so you can find me there. I tried to put out just helpful tips and tricks and try to make finance more fun for people and more approachable. I also have a new free download that I put together recently. That is my CFO checklist. That includes, what are all of the steps that you need to take in your business, to make sure it's profitable and sustainable and to make sure you're staying out of trouble which includes a section or a checkbox on, make sure your pricing for profitability. Right? So all the other things, you can find that @trustyoungco.com/cfochecklist. So that's on my website and that is a free download that I think will be really helpful.
Racheal: I will make sure to link all of this at. Thank you so much for joining me today.
Sarah: Thank you for having me.