by Dawn Fotopulos on June 26, 2013[edit]
No other variable affects your profits like the price you charge for what you do. If you’re like most small business owners, you’re probably falling into one of these pricing traps and don’t know what to do about it. Here are five tips to make sure you’re getting the price you deserve.
Pricing Tip #1: Do your homework.
If you don’t know what to charge for something, go out into the marketplace as a buyer of your products or services. Don’t just look at competitor prices, look at the scope of what is being offered for the price. Do this with at least five different competitors in your market.
Pricing Tip #2: Know what it costs you to deliver your product or service.
Product businesses are easier. They’re tangible. Service businesses, clients are paying for your time, your talent, your experience and your connections. Know what you’re worth per hour, then offer those services that can cover your time costs plus a 40% premium.
That’s right. If you know you’re worth $100 per hour, you need to offer a service that you can charge $140 per hour for. Why? Your business has so many expenses you need to cover besides your time. These include your accountant, lawyer, bookkeeper, web designer, virtual assistant, software providers and It consultant just to name a few.
If you can’t get at least a 40% premium, you won’t be able to run the business. Don’t be like many small business owners who work like crazy only to be paid less than minimum wage per hour. If your marketplace can’t afford your fees, change your offering or change your target market.
Pricing Tip #3: Don’t apologize for charging a client for your work!
I can’t tell you how many women small business owners do this. Know what you’re worth (see tip #1). Then when the client asks you “how much?”, tell them with confidence “the price will be X”. Drop your voice, don’t raise it. Otherwise, it will sound like you’re asking a question and leaving your price open for debate. If you don’t have confidence you’re worth it, like the old hair coloring commercial says, why should the client think you are? You’re worth it. Say it. And if the client freaks out, go to pricing Tip #4.
Pricing Tip #4: Let the client freak out. Then offer options.
Always expect the client to try to get you to cut your price. That’s the world we live in. Don’t flinch when they freak out. It’s all part of the program. You can narrow the scope of work so they can “sample” before they sign the big contract. You can calculate what it would cost them if they hired a cheaper resource that didn’t deliver like you do. Or they can go away, hire a cheaper resource, then call you three months later to complete the job the other resource messed up. Did I mention if you’re being hired to mop up someone else’s mess at the last minute, you charge a premium for that.
Pricing Tip #5: Every hour of the day has different value.
Michelle Ward is the When I Grow Up Coach.com who lives in New York City.
She helps singers and dancers on Broadway find long term careers. One of her clients lives in Australia and can only get on the call at 10PM Eastern Standard Time. Let’s say Michelle charges $125 per hour for her time. I asked her if she charges the same hourly rate to her Australian client. She said “yes”. That’s a problem.
If a client wants you to sacrifice personal time after regular business hours in your time zone, charge a premium for that, big time. I suggested to Michelle she triple her hourly rate to the Australian client after 6PM EST. The client will freak out. Then when they come to their senses, they’ll realize they have two choices; they can manage their time better to accommodate your schedule or they can pay the freight.
The great news is Michelle is the only coach around who does what she does. She’s brilliant at it. So the client decided to rearrange her schedule to accommodate Michelle. Everyone’s happier.
You don’t have to get caught in any of these pricing traps. If you follow our advice, like thousands of other small business owners have, you’ll make more money within the next thirty days.
