If your prices are too high, you are worried you will lose potential clients, and if they are too low, you are working against yourself. Where is the balance? Is there ever a “right” price for the services I offer? How to set the right pricing strategy? Am I better than my competitor to charge this much? These are often questions that entrepreneurs ask themselves at one point in their lives. Or many times.
Quoting low is an easy trap to fall into, especially when you are just starting out. One of the biggest challenges when starting a business is deciding how much to charge for your services or products. Especially in the beginning, when you are unfamiliar with the market and the wrong pricing strategy may significantly affect your business from the very start.
In the business world we live in today, the competition about anything on the market is tough. With a plethora of brilliant minds and great ideas, it’s hard not to doubt your own value and self-worth within a company. Yet, all too often, people sell themselves short and end up frustrated because they feel the price they set wasn’t worth their time, knowledge, or expertise.
Even though there is no magical pricing strategy formula, there are helpful tips and steps you can take to ensure that the next time you say your price, it will be right for you.
Here are a few things to think about before you set your price without having the shakes.
People pleaser mindset: prepare a clear and loud NO
People-pleasing is also a difficult mindset to lose, but it’s crucial that you do so that your time isn’t wasted. To ensure your business is successful and profitable, in addition to a good pricing strategy, you need to save a clear and loud NO for all clients who will offer to pay you less. You will often be tempted to lower your price because you do not want to say no and you don’t want others to think that you want to make money on them or that you will rip them off.
Real clients who appreciate you and your services will never think that because they are aware that you make a living from it. Remember that no matter how much you lower your price, there will always be those who will think you are too expensive. So don’t lower it below what you think you are really worth and what you can live with.
In the long run, it’s better to lose one client who takes a lot of your time and pays little than to start the trend of cheap service delivery. Because, whether you believe it or not, once you set the price low, you are unlikely to raise it in the future. On the other hand, higher prices can help you build an image and bring better and long-term clients.
Research the competition and analyse their services to formulate a pricing strategy
A logical step is to start with the competition. But you can’t just simply copy-paste the prices without considering the quality and scope of services they provide.
Start by analysing everything in detail and then compare it with your experience, knowledge and capabilities and find the ideal ratio. Competitive prices are a good indicator of how much your clients are willing to pay. In addition to their price, research what that service includes.
They may have lowered the price, but they are not offering any additional services that you are offering. Or do they charge more because they have a team of professionals with many years of experience and are known as the best on the market?
Be honest with yourself about your advantages and disadvantages over the competition and, based on analysis, decide how you will position yourself in the market.
Set your goals: Decide what you want and what is your worth
How much would you like to earn this year? We are not talking about dreams but about realistic goals. Set them out clearly and divide by the monthly amounts, add taxes, and you will come up with the monthly amounts you should earn. Here comes the hard part – estimate how much you are worth.
When determining your worth, consider your expertise and work experience and other additional benefits you can offer to clients. An important step here is to decide at what price you are right. What amount doesn’t offend you, and what amount makes you feel guilty.
If you charge too much, you will need to know how to justify the price and provide added value. If you charge too little, you may give the impression that you are unprofessional or do not value yourself enough and take the business down. Even before you start a business, you need to know how to clearly answer the question: “How much is an hour of my time worth?”
Conclusion
When you choose the right pricing strategy, don’t carve it in stone. Over time, as you gain experience and conquer new markets, you will need to change your prices. But, at the end of the day, the most important thing is that you are happy with the ratio of time and energy you have spent on a particular client to the money you have received.