It might just be the most stressful decision you ever have to make: what to charge?
You’ve got the competition to consider, your own skill set, what you perceive to be your skills (yes, this is different from the former for most of us), what your market will pay, your location, and a host of other variables. Working it out can feel like a hurdle you can’t quite get past.
As a small business owner, it’s so easy to simply take the decision to be the cheapest.
Hands up if you’ve ever been tempted to do that!
Or, you might think, you’ll start off really cheap, and then when the market knows you, you’ll increase your prices to match competitors.
Only problem with that, is that your customers will get to know you as cheap, so putting up your prices when they know, will not necessarily bring you the results you want, plus you have to find a way to cover your outlays whilst you are offering your services so cheap…
Another mistake quite often made, is to simply think in terms of the hourly rate you want to earn.
You think back to your 9-5 and the dissatisfaction you felt with your take home pay, so you add a little to it and work your prices out from there. Only trouble is you’ve a lot more costs to cover now you are running a business then you did as an employee.
So, now we know. There’s quite a lot to consider before setting your pricing. So let’s take a look at your:
Have a dig around. What is your competition charging? What do they offer for that? Can you research how satisfied their customers are? Price alone doesn’t tell the whole story.
Be realistic about who, exactly, your competition is, though. Don’t undervalue or over-sell yourself. In other words, make sure you’re comparing yourself to another provider who shares the same skills, market, and track record, rather than simply looking at who you strive to become.
In some fields, this is easy. There are certifications and educational programs that allow you—by virtue of having achieved them—to charge a certain rate. If you’ve followed this path, then pricing will be easier for you. If not, take a solid look at what you can legitimately claim as a skill.
Look, too, at your track record. Have you proven yourself by helping former customers (and do you have the testimonials and case studies to show for it)? Have your former clients moved on to bigger and better things after working with you? (That’s a good thing!) These are all reasons to maybe consider a higher price range than you might have first thought.
In the game of setting rates, it’s your market that has the final say. As any business student can tell you, the price of anything lies where what the buyer is willing to pay meets what the seller is willing to accept.
If your goal is to give newbies a helping hand and lead them down the path to success, that unfortunately means you can look forward to low paying gigs. That’s not a bad thing—everyone has to begin somewhere—but it does need to be acknowledged. If, on the other hand, you’re target market is more established and economically stable, then a higher fee isn’t just warranted—it’s a must. They will expect a higher price, and will not find value in the lowest-cost provider of anything, whether it’s coffee beans or business accounting.
Choosing your pricing strategy from the above still then needs to pass the overhead test!
What does it cost you to deliver that service? Or offer that product for sale? If you deliver a service, how much time do you spend away from your clients preparing, researching, analysing, reviewing etc?
How much does it cost you to acquire your customers?
What about business overheads such as insurances, the place you work from, the technology you need?
Have you invested in the latest equipment, technology etc in order to improve results for your customers? If so, make sure your prices account for this…
Getting your pricing right is key to business success and your general satisfaction.
If you set it and find it isn’t working, don’t be afraid to change it. Nothing is set in stone, but the quicker you make any changes, the easier all round it will be.