Earlier this week I attended Show & Tell at The Well Collaborative. It's a beautiful gathering, but more importantly, an opportunity for women to present ideas/projects/businesses and receive thoughtful and supportive feedback. We inevitably got into a pricing discussion during one presentation, and I sensed that more guidance was needed for entrepreneurs who are trying to price their unique services and offerings. One of the things I love doing with my clients is optimizing their pricing models. It's one of the most important pieces of their financial success.
Finding the "right" price means striking a balance between what your customers are willing to pay and what motivates you to deliver the service to them. Getting it right will lead to better relationships with your clients. If they see value in your offering, and you believe you are being compensated appropriately, you will both be satisfied with your end of the deal. Having good customer relationships will be key to sustaining and growing your business.
Here are some tips and steps that I often use to advise my clients (and that I use for my own business model).
3 Tips for Successful Pricing
1. Always pay yourself
Even if you are new to the game, your price should always incorporate the cost of your time. if you believe in the value of your service, don't sell yourself short. In the long run, you will be more satisfied with your business if you have a customer base who values your time and are willing to pay for it.
2. Be Consistent
Once you have determined an hourly rate for your time, in most situations you should keep it consistent across all your services. This can help create trust with your customer base and also make it easier for you to set prices as you develop new services.
3. Practice makes perfect
Pricing is an art that takes experience. Don’t try and get it right the first time. Rather, accept that you will make mistakes, and know that these mistakes will provide invaluable experience and information about your unique offering and your customer needs. Your pricing will always evolve with your business, services and experience. Keep trialing, and tweaking it as you build your customer base and develop new services.
5 Things to consider when pricing your services
Answering these questions are important in defining your overall business model and will lead to sustainability in your business. Be honest and realistic with yourself. You could even model two scenarios - one with more conservative numbers, and one with some stretchy dreamy numbers. Start somewhere in the middle, and work towards getting to your dream number down the road.
What is your sales goal for your service in a year?
How many hours will you spend delivering the service to 1 customer?
How many hours do you want to spend on this service per day / week / month / year?
What is an hour of your time worth?
How many customers do you want?
Does your price align with the above five variables? If it doesn't, go back to the drawing board and tweak it until all the pieces fit together in a way that makes you feel energized to take your service out to the world.
If this is your first time pricing a service, I highly recommend trialing it with a few customers before offering it to a wider audience. This will allow you to ensure that you have correctly estimated your time, and it gives you a chance to understand your value to your customers. Once you've delivered the service a few times and you have received feedback, you will come out with a better understanding of what your customers need, how much time you actually spent, and what your true value is. You can then go back and tweak the service, or the price, or both.
Don’t let the fear of under-pricing or over-pricing stop you from launching your service. Start somewhere. When in doubt, start on the higher end and get some feedback from customers. Either you will need to educate them on your value, or you will need to reduce your price. Starting on the higher end will always be easier than having to go back and asking your customers for more money after you have an agreed price with them.
If you would like some more guidance on pricing your services and setting an overall financial plan for your business, I'm hosting the next Master Mind at the Well Collaborative on October 15th at 9:30 am. The session will be 2 hours and I will walk you through my business plan template so you can get started on making 2021 sucessful for your business.
Good luck on your journey, and remember that your services will always be just as unique as you are.
p.s If this has brought clarity to your business model, I would love to hear from you! Send me an email and let me know how this article has helped you in your business.