As a small business owner, putting yourself out there, building connections, and successfully pitching your business can be an exciting experience.
Yet, figuring out how to price your work can be puzzling at best and nerve-wracking at worst.
The good news is that with careful thought and a good dose of self-evaluation, you can easily find the right pricing strategy that does justice to your service and expertise.
Plus, finding that sweet spot will boost your confidence about the value you’re offering, removing any hesitations about quoting your prices in the future.
Let me share six factors to consider when pricing your work:
Research Your Market & Competition
The first step in your pricing strategy is to delve into your industry’s current market conditions and trends.
Look at what other professionals or similar businesses charge for their services.
What key factors are influencing their pricing strategy?
How does your pricing compare?
Understanding your competitive landscape offers two advantages:
Firstly, it provides a helpful benchmark and a sense of the average price range floating around. This knowledge will help you position your pricing effectively.
Secondly, it reassures your clients when they shop around for quotes. By aligning your pricing within the ballpark of what others are charging, you’ll give your clients confidence that your quote is fair and reasonable.
In addition to industry-related factors, it’s also essential to factor in external influences on your pricing decisions, such as economic conditions and industry regulations.
During economic downturns, customers tend to be more sensitive to prices. Being mindful of these external factors will help you make any necessary adjustments to your pricing strategy.
Assess Your Skills & Expertise
Next, put on your evaluation hat and take a good look at your unique set of skills, qualifications, and experience. Think about your level of expertise, any special knowledge you hold, and the value you offer to your clients.
Remember, the more unique and valuable your skills, the more justified you are in setting a higher price for your work.
Be proud of what you’ve achieved, and don’t hesitate to highlight these accomplishments when talking to potential clients. After all, this is your worth.
Try this: Imagine you’re describing a friend’s abilities instead of your own, and you might surprise yourself with how much you can add to your value list. I bet there’s more to talk about than you might initially think!
Work Out Your True Cost Of Sale
The cost of sale represents all the expenses associated with producing and selling your product or service.
This includes:
● Direct costs like materials or software licences.
● Indirect costs include overhead expenses (rent, utilities, insurance) and marketing costs.
● The time spent on your customer, including both billable and non-billable hours. Think about every aspect of your client’s work, including conducting research, sending emails, and making phone calls – every minute matters.
Let me give you an example of this:
Imagine you’re running an ice cream van. The cost of sale refers to all the expenses you incur to produce and sell your ice cream and lollies.
For example, you have the cost of your ingredients, such as cream and sugar. These are the raw materials that go into making the ice cream. Then you have other costs like cones, ice lollies and napkins, which are necessary for serving your customers. These are all your direct costs.
You also have to consider the expenses too. This includes things like the cost of renting or buying a pitch, any permits or licences you need to operate, and even the wages you might pay to any employees helping you. These are your indirect costs.
When you add up all these costs, you get your total cost of sale. It’s important to keep track of these costs because they directly impact the profitability of your business.
By understanding your cost of sale, you can make informed decisions about how much to charge your customers and how to maximise your profits.
An example of a profession which does this well is solicitors, who are notoriously fearless in calculating their cost of sale (the clock is ticking as soon as you speak to one!), so why are we not doing this, too?!
Determine Your Pricing Strategy
You can consider several pricing strategies, depending on what you aim to achieve.
For instance, you could go for value-based pricing, where your prices reflect the perceived value you bring to your clients. Alternatively, you might charge by the hour or offer bundled pricing for certain services.
Each approach has its own ups and downs, so weigh these up and pick one that syncs well with your business model and target market.
Don’t shy away from offering various pricing options depending on your client’s needs. A savvy tactic often used is gently throwing the ball into your client’s court by asking about their budget.
Remember, pricing is an art as much as it’s a science. Take the time to carefully consider all the variables, but most importantly, have confidence in your value.
Test & Adjust
Your pricing structure isn’t carved in stone!
It’s perfectly fine to test the waters. Stay open to fine-tuning your prices based on the value you bring and the demand for your services.
The more clients are eagerly waiting to work with you, the higher you can demand. And as with anything in demand, prices can naturally rise. Both Netflix and Apple are great examples of this as they adjusted their pricing strategies recently to adapt to evolving market trends.
So, remember, just like you’re constantly growing and improving as a business, your prices can too!
Understand Your Value & Educate On it!
A common tendency I notice in small business owners when discussing their prices is that they often feel they have to justify themselves.
Personally, I’d recommend shifting your mindset to focus on the fantastic value you deliver rather than dwelling on the price itself. There’s no need for excuses when charging what you truly deserve as long as you deliver on your promises.
Show off your expertise by sharing testimonials or case studies. These can work wonders in reinforcing your pricing and showing prospective clients that others have found great value in your work. It’s all about having confidence!
Remember, pricing isn’t some rigid feature of your business. It’s normal and beneficial to tweak your prices as you gather more experience, grow your client base, or roll out new services.
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