Pricing your Services Correctly | Four Factors Entrepreneurs and Business Owners should consider
We’ve all been there. You’re networking. You meet a prospect – they meet your criteria, they match your client persona perfectly, they seem interested and in need of the services you offer, and you would like to explore the possibilities of working together. You agree to meet for a coffee/lunch soon to learn more about each other’s businesses.
On said day, you meet, start to chat about all sorts. You delve into business talk and tell them what you do and who you serve, and then they ask the dreaded question, “How much do you charge?”.
You freeze, somehow unprepared, as always, for this question.
Then you start to reply “Erm, well it depends, we would have to discuss it further, but usually, it could be around £1,000. What do you think, sound ok?”.
This is the absolute worst situation to find yourself in. You notice as their expression goes from interested to distant, warm to cold. They cannot get away from you fast enough. You’ve committed the faux-pas of inexperienced entrepreneurs. You’ve not:
- Decided what your prices are going to be using a clear pricing strategy.
- Written out and practised a clear answer to this oh so common question.
- Communicated your value with confidence.
Pricing is an art as well as a science. It is crucial for you as business owners, especially in the service industry to price your services correctly, and then communicate that with confidence.
Four Factors to Consider when Pricing your Services:
1. Your ideal customer – Know your customers. Who they are, what they need, how they want to be served? How do they make buying decisions? Are they price sensitive or quite elastic i.e. will tolerate a large variance in price to get what they want? Assess whether what you have to offer matches your idea of the ideal client.
2. Positioning – Where will you sit in the market? Are you a high-end service, targeting a limited number of clients that can afford you? Are you more focused on providing a low priced yet high-quality service that will appeal to vast numbers of buyers? How are your competitors positioning themselves? Will you create a blue-ocean and occupy a yet to be discovered position in your market? Once you know this, you’re on your way to setting the right price.
3. Costs – What costs are involved in running your business? Will you work out of swanky offices, or will you work entirely online? What are your fixed (monthly expenses no matter what) and variable (incurred by delivering your service) costs? If you’re just starting out, don’t forget that while you (the Business Owner) may be putting in your sweat equity and not expecting any returns yet, you (the Employee) should be priced into your business to get a true read on what your costs are.
4. Profit Margin – How much profit do you want to make? How much is the industry standard? Are you happy with that? Taking the other three factors into consideration should you aim to have more or less of a profit margin than industry standard?
Remember, you can decide the answers to these questions. Your work has value and you should be compensated accordingly for it. Add on a suitable profit margin with some contingency built in as well.
So, how do you determine your pricing? I’d love to hear what you’re doing and answer any questions you may have.
Uzo Ijewere is a Business and Mindset Coach. She works with and supports female entrepreneurs to align their vision with a strategy to achieve intentional, and intelligent, results. Read more articles like this one at www.augmentresults.com/blog/