Are you pricing your services based on your gut? A price that makes you feel a bit uncomfortable? Or maybe you are pricing based on the value you deliver. Or one the other myriad of ways that the internet suggests pricing your services. I am a fan of what works for you as long as have some key pieces of information before you start setting your prices.
Before you set your prices I recommend you do some research and calculations and get on top of the following:
What it costs to provide your service.
One of the quickest ways to go out of business is to burn yourself out charging too little for your services. Before you set any price work out how much it costs to provide your service including your time. Pricing needs to be high enough for you to make a profit.
Your price should include paying yourself an income you can thrive off. If you need to work 60 hours a week to make the money you need to live off, business is not going to be fun.
When you are thinking about your time, you also need to take into account the hours you are working that are not client related such as marketing, working on your business and admin tasks. Your price needs to be set on the basis of how much time you can dedicate to client work.
What your competitors are charging.
This one can be a tricky one as it can create all sorts of comparisonitis symptoms checking out other people’s websites for prices. Pick a day when you are feeling confident and upbeat and dive in. It is not a task for that day when you are feeling all existential and questioning your purpose in the world (we all have them don’t we? Or is it just me?)
The aim is not to make sure you are charging less than everyone else – a recipe for disaster and dodgy clients. It is about doing a sense check on what you are charging. Low prices can turn people off as much as they can be turned off by high prices. They suggest you don’t know what you are doing.
You can charge lower if you are offering a beta or introductory price as long as you make this clear to potential clients. They understand this is not the usual price.
It is also about making sure you can differentiate yourself from those who are charging budget prices. How can you explain why you are worth what you are charging? What value are you delivering that perhaps the lower end of the market is not?
This extra value could be explaining how you take the time to properly understand your client’s business compared to the cheaper options who may be using cookie cutter templates for all their clients.
It could be that you do your work super quickly so people are paying a premium to get a result much quicker.
It could be having a great portfolio on your website that shows the quality of work you deliver.
If you are offering a premium service then your price should reflect that. This links back into knowing the cost of your service. Premium services normally cost a premium price to deliver. If you don’t deliver then you may get a few clients but you won’t get those all important referrals that are the life blood of most service based businesses.
What you need to consider is what is important to your clients. What are they willing to pay a premium for?
Who your customers are.
Knowing who your target market is and their attitudes and access to money will affect your pricing. I was in a Facebook group the other day and someone posted that you shouldn’t get into your client’s wallet.
To a certain extent I agree with this. I have had a few people who haven’t been willing to pay my prices because they say they have no money. I then see them posting holiday photos. This is not a judgement on them – it is what they value at that particular point in time. Saying they can’t afford me is an excuse that is easy to give rather than saying I can’t see the value in what you are offering.
But sometimes people genuinely can’t afford your services. I personally don’t want anyone putting themselves in financial distress to work with me. I want people to feel comfortable with working with me. I don’t want them losing sleep over paying me.
Having the occasional potential client who is not a good financial fit or doesn’t see the value of your work is not a problem. Where you do have a problem is if your whole target client basis is struggling financially or has specific money attitudes. Small NGOs running on an oily rag would not be my ideal client. They are also unlikely to have the funds to pay for a premium service. They often rely on pro bono work for this kind of service.
If you are offering a premium service then your price should reflect that. This does link back into knowing the cost of your service. Premium services normally cost a premium price to deliver. If you don’t deliver then you may get a few clients but you won’t get those all important referrals that are the life blood of most service based businesses.
Once you have researched your own costs, your competitors and your clients then you are in a much better position to rely on your intuition to set your prices. The knowledge reduces the impact those dangerous money mindset gremlins can have on you.
Would you like to start setting prices to thrive not just survive? Enter your details below to receive my Antidote to Under Pricing Worksheet to help you get on the right track: