Key takeaways

As a small business owner your salary should be factored into your prices along with all your expenses.

If you feel pressed to discount your prices, make sure you have an exit strategy to get back to more profitable pricing.

Business owners who treat their salary like it’s something that will happen one day in the future are making a mistake, says pricing strategist Natalie Coombe.

Small business owners should be factoring their salaries into your prices and not treating their pay as a reward, says pricing strategist Natalie Coombe.

Just as you plan to pay all your other expenses, you need to factor your salary into your prices, says Natalie, who grew up in a small family business. After a corporate consulting career in the UK, working behind the scenes with brands including Dyson, Nike and Unilever, she now helps service businesses in New Zealand with pricing strategies.

Take a close look at why you aren’t paying yourself

Not having enough profit to be able to consistently pay yourself as the business owner usually comes down to one of three things, says the pricing consultant.

It may be your pipeline - your prices are profitable but you simply don’t have enough clients or customers to generate the revenue you need to pay yourself a reliable salary. For service businesses you might have plenty of capacity to take on more clients, and for product businesses, being able to produce more products than you can sell in, say a month.

Or it might be your prices, she adds. “You’re fully maxed out - you can’t take on any clients or produce any more product - and yet there’s still not much money left over at the end of the month to pay yourself,” she explains.

This indicates you have a pricing and potential positioning issue, and need to adjust your pricing to ensure you can earn what you want or need, without having to work even harder, explains Natalie.

Or it might be prices and your pipeline, suggests the pricing consultant.

“Many business owners find themselves in this situation, where they don’t have enough clients, but even if they did, they still wouldn’t be paying themselves what they want or require, because their prices are off,” she says.

How to go about discounting prices

As consumers keep a close eye on their spending, it can be tempting for small business owners to do some discounting to drive business in but it’s important to avoid damaging longer term price expectations, warns Natalie.

Always have an “exit strategy” to get back to more profitable pricing as soon as possible, she advises.

And make sure the discount is temporary, always putting a duration of how long the discount applies for and when the price will return to normal.

Also ensure you show the original price and the savings, not just the reduced price,” adds the pricing strategist.

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