I remember starting my first two businesses and wanting to get customers/clients so badly that I would be willing to lower my prices. I know, it’s crazy, but it’s true and like so many other individuals starting out in business, lowering prices is the only way to get a sale, right?
Mistake of First-Time Entrepreneurs:
Did you know one of the reasons most business are unsuccessful is because they tend to underprice their services or products?
This causes businesses - such as yours - to fall short of your financial, sales, and marketing goals.
I think that it's standard to want to make a good impression on your potential customers for those word-of-mouth referrals and that continued business, but what are you losing in the meantime?
Yes, you love what you do, but do you want to go broke from it?
Solution: Create your price list
I’m sure you’ve spend hours, days, weeks, or even months finding the right price point for what you have to offer and trying to learn some business pricing strategies.
If you are still trying to figure out how to price your service, try these steps.
- Find your annual salary - determine your ideal annual salary for yourself based on the amount of time it will take to create a product or offer a service. Research others in your field to get a good range of pricing and determine if you will be on the higher or lower end of the price range.
- Calculate your expenses - determine the expenses that will come when having to create or provide a services such as overhead cost, computer, internet fees, etc.
- Determined billable hours - determine how long you will be actually working on a product or services meaning the actually time it take to create or provide the service. Within a week, will you actually be working on the service or product 5 hours a day (not including administrative duties). If so, then multiple 5x5 (if you work Monday-Friday) to get your billable hours. Then multiply that by the number of weeks you will work in the year.
- Get your hourly rate - divide your billable hours/ideal annual salary, and there you have it.
All this has determined your hourly rate and this is no easy task.
You have to get correct figures for your overhead cost, the cost of services, purchasing a new computer, printer, fax, etc.
Whatever it is that took time and in today’s world, time equals money. You are worth what you are charging and should not feel bad about it.
Stick to Your Price
Sell it! Sell it! Sell it!
When I was selling items on eBay, I learned that if your product didn’t sell the first couple of weeks, it later did when I relisted the item and increased the price. Weird? Not really.
I'm sure you would think, if someone didn’t purchase the item when it was one price, they definitely won’t buy it if the price is higher. It's actually the complete opposite. It increased the interest.
Humans have been hard wired to believe that more expensive items are the best.
We equate price with value, meaning better quality, so when you lower your prices for someone, it’s unconsciously showing them your stuff isn’t really worth it.
You definitely don’t want that!
If you have someone who is telling you, your prices are too high or that’s too expensive (who can blame the? we’re always looking for a bargain), try responding like this:
- “My prices are set at this point because of the things you will receive such as….”
This is your chance to brag on your services and your unique offers that will benefit them extremely.
- “Yes, you’re right and that’s because of the quality that you can’t find anywhere else.”
Here’s another opportunity to explain to them that the services they will receive are because of the detail and attention you give your service or product.
- “What’s your budget?”
You can take this approach and help create budget-friendly plan just for them.
Keep in mind, you will not be adjusting your prices but you can help them benefit from your services by discussing options in their price range.