Aug 7, 2020 in Business Coaching
How to price your services
Are you a service-based business? Knowing how to price your services can be one of the hardest things to do. Here are 6 tips
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Knowing how to price your services can be one of the hardest things to do when you run your own business. Set your prices too low, and you might end up not being taken seriously by prospective customers and clients. Price too high, and you risk losing a potential sale. So how do you know what’s right for you and your business when setting your prices? How do you come up with the right price for your product or service?
1. Calculate your monthly income
Knowing how to price your services isn’t easy. When setting prices for your products or services, a good place to start is by looking at real, actual figures. Don’t go into the process of setting a pricing strategy completely blind. Before you make any sort of decision on setting or raising your fees, be clear on exactly how much income you need and want to make on a monthly basis.
Take some time out and have a look at your bank accounts (personal and business). Also check your credit card bills, any additional income sources or relevant resources, and work out how much you’re spending every month. Figure out how much you need to cover your expenses, but also anything that helps you achieve your lifestyle-related or saving goals. And don’t forget to calculate and include your profit margin too!
This exercise will give you a clear idea of how much income you want your business to generate on a monthly and then yearly basis. And once you know that, everything will feel easier and less daunting.
2. Do the maths
Once you’re clear on your income goals, it’s time to sit down and figure out how many clients you can handle. In order to do that, you need to know exactly how much time you have available to work. If you’re a service-based business and are trading time for money, for example, be realistic.
As you’ve probably realised by now if you’ve been in business for any amount of time, being an entrepreneur is more than just serving your clients. So when you do your calculations, be sure to take into account the time you spend on marketing, lead generation, business development, networking, admin, and anything that comes with running a successful business!
And let’s not forget that on top of all that, of course, you also have a life! The key is to work out how many hours you can dedicate to your clients (every day, week, and then month). So ask yourself: how will you provide a great level of service while still maintaining your ideal lifestyle?
If you want to work 4-6 hours a day and never work evenings and weekends, or if you want to take Fridays off for the foreseeable future, for example, how many clients will you be able to serve while adhering to those terms?
When doing this exercise, be as specific as you can. Think about:
- How many hours do you want to work? Per day, per week, per month, and then per year?
- How many weeks off will you be taking across the year? And on average, how many working days and hours can you fit in every month? Do you have set holidays or commitments at specific times of the year?
- If you have any childcare requirements and need your work to fit around school schedules, don’t forget to include these in too.
The last thing you want to do when working out your pricing models is to lose money. So be clear about what you need to make in order to ensure that your business is profitable and still allows you to lead the lifestyle you want.
3. Don’t sell time, sell results
A mistake that I see a lot of service-based small businesses make is to price their services based on the time it takes them to complete a task. For example, if an hour of coaching costs X, two hours of coaching cost Y.
This works in theory, but it’s not best practice when it comes to how to price your services. Your potential customers and clients aren’t buying your time. They are buying the solution and the results that you provide to them with your product or service.
Of course, when setting your fees or considering a price increase, you’ll want to make sure you put together a great value proposition for your clients. But know that pricing yourself competitively doesn’t always mean offering the lowest price. Being the good-value choice for your clients doesn’t mean giving them a total bargain!
Instead, focus on communicating the value you deliver to your clients by ensuring they understand what they will be getting for their money. When you offer a service, your clients aren’t just paying you for the time it takes to complete a specific task or that you spend on a session with them, for example.
Buying your services is an investment that will deliver benefits (financial or otherwise) to their life or business. It’s not about what they buy from you. It’s about what they will be able to do, achieve, obtain, or earn as a result of working with you. That‘s what counts.
4. ‘Package’ your knowledge
When setting your prices it’s important to look at your income goals, consider the solution you’re offering, and the true value you provide to your customer base.
But don’t forget to also take into account your knowledge and experience. If it only takes you an hour to complete a highly-skilled task at a fantastic standard, it’s because you have the relevant training and expertise to allow you to only spend that one hour doing that job. And that’s exactly what your clients are paying you for – that’s why they hired you to do the job instead of doing it themselves.
When your prospects are looking to work with someone to solve a specific problem, they’re looking for a specialist. So don’t be afraid to position yourself in that way – use your prices to reflect that you’re the best candidate for the job.
Also, when looking at the problems your target market is trying to solve, offer plans and packages, rather than one-off services. This helps you generate loyal custom but also allows you to provide a better service and guarantee more long-lasting results.
5. Practise, practise, practise
Once you’ve set a fee or price that you’re happy with, practise saying it out loud. If you find it easy to blurt out your prices in a sales conversation, chances are you’re underpricing yourself. But if your prices feel a little uncomfortable at first, it’s a sign you’re on the right track.
If you’re just starting out, or if you’ve just increased your prices after a while, you might feel the need to ‘grow into them’. And that’s exactly why I recommend you practise saying your prices out loud. So repeat them while walking around the house or stand in front of the mirror – the choice is yours. Just make sure you put that practice in. It will pay off, trust me.
6. Be confident in your services and prices
Be confident in what you’re charging. If you’re not comfortable with the prices you’ve set for yourself, it will show. Doubt will creep into your marketing. It will be clear in the way you handle yourself during a sales conversation – and believe it or not, even on email!
So spend some time reflecting on the results you help your clients achieve. Look at testimonials and case studies from previous projects. Collect evidence and proof of the amazing value you deliver, put it all in one place, and look at it often, if that helps.
Your prospective customers and clients will believe in the value of what you do. But in order for them to see beyond the price, you need to do so too. Your clients want a price that they can justify. But it’s up to you to help them see that value and to quantify the results that you help them achieve.
So stop doubting yourself. Right now, the only thing that’s in the way of you charging the amount you want is those little voices in your mind. They might be telling you that whatever you want to charge is too much. But those are your limiting beliefs. And they don’t know what your clients will or won’t pay! How could they? So ignore your limiting beliefs or (even better) challenge yourself to prove them wrong.
Do you want to know more about how to price your services?
If you’re struggling to get the results you want in your business, I can help. If you’d like to find out more about how to price your services or get help with your mindset, your business model, or anything that could help you achieve the goals and lifestyle you’re after, get in touch. I am always happy to hear from you. So if you have any queries or would like a FREE 30-minute telephone consultation, please complete the form on my website, and I’ll get back to you within 24 hours.