The way you price your services or products has a huge impact on the success of your business.
This is the conversation I have with business owners more than any other.
Go low – pros and cons
New business owners sometimes feel they have to buy their way into the market by offering prices lower than their competitors. This may get you lots of work but you could end up working just to cover your costs.
Low pricing is the main factor that prevents businesses from growing as there is never any money left over to invest back into the business. It can create an expectation and a perception that you are “cheap” so you could miss out on clients who are looking for quality and end up with those who are only interested in price rather than value. These are rarely good clients and won’t help you build a great business.
If you are offering a totally automated, high volume service or consumer product go low. Otherwise, don’t.
So you’re just the same as everyone else in your market. How does that attract clients?
Go high – pros and cons
If you’re good at what you do and you’re offering a great service or product, why would you not charge premium prices? Price is just one indicator of value, so if you want to attract the clients who appreciate quality, and won’t quibble about price, this is the best way to find them. You might end up with fewer clients but if they’re paying premium rates this is better than working for lots of people with little reward.
Avoid hour or day rates
For most service businesses its impossible to say how much could / should be achieved in a set amount of time.
If your service can be neatly packaged into specific offerings for a set price that helps potential clients to understand exactly what they’re going to get for their fee. (Beware of scope creep – also know as “Could you just …?”)
Advertising your prices also keeps away the people who don’t have the budget to pay you.
If you can’t be specific about pricing because you create bespoke services or packages, having a “Starting from £xxx” statement will help people to know if they have the budget or not.
For bespoke solutions, a good way to arrive at a price is to assess the value that your work will add to your client’s business.
If you bring them one more client what is that worth to them?
This requires you to have an open discussion and for the client to understand that you will be working to enhance their business as well as your own. This is a good relationship to have and means these clients are likely to appreciate you more and see you as an investment, not a cost.
Pricing is a perception
Pricing isn’t a science. It’s as much about the pyschology of creating expectations, emotions and desirability as it is about money. A higher price will create expectations of value.
If you have any questions about pricing for your business, please get in touch. It can make a huge difference to how much you enjoy building your business and the relationship you have with your clients!