Correctly knowing how to price services and packages is something many business owners struggle with. Often, pricing by the hour is the default option for service-based industries and new businesses. But if you want to have financial freedom, this needs to change - and fast!
There are so many reasons why pricing by the hour isn’t a good option for you. Primarily, you’re tying yourself into the time for money trap. You’re limiting your earning potential by the number of hours and days you can work.
But also, pricing by the hour punishes efficiency. As you get better at something, you get faster. The faster you get, the quicker you can deliver things - and if you’re charging by the hour, the less you’ll earn. Someone else can produce a lower standard of work over a longer period of time and get paid more!
You’re the CEO of...
So many business owners love making sales but hate the selling side of things. With email marketing, you can use psychology to generate sales without actually having to sell to people.
Email marketing gives you the ability to generate sales and inquiries that can turn into clients. I’ve been speaking to Rob and Kennedy, who run Email Marketing Heroes, about how pricing and email marketing can combine well together.
When it comes to pricing, we often think in terms of being competitive. We want to be competitively priced. It’s easy to start thinking about undercutting others or charging less because you’re new. You’re desperate to get out there and get some experience.
Another option is to charge the same as others in your industry. This keeps it ‘nice and fair’. Or you could go with a higher price if you want to look more exclusive and expensive.
But if you want to stand out, it starts with your...
Pricing and niching go together hand-in-hand. Having a niche improves your opportunities with pricing. But it also means you’re talking to the right people all of the time. Amy Caiger specialises in helping businesses get clear on their niche and how they can communicate that in their messaging, their marketing and their services.
Niching is essential as it enables you to have clarity around what you do. This helps you know how to communicate it in all you do, the world, and your ideal clients. Because it’s not enough to know your niche, you also need to communicate it clearly.
People often panic at the idea of niching. Often though, this is down to how it’s portrayed. A lot of people think they need to choose a specific demographic of person. They then panic when they don’t have that and resort to making things up.
And of course, when you start to make things up, and it's something that's not happening in your...
Hourly billing isn’t a good pricing option and it’s something that Jonathan Stark, former software developer and author of ‘Billing is Nuts’, is on a mission to rid the world off. The problem with hourly billing is you’re always putting an artificial ceiling on your income. You’re limiting yourself, based on the hours and days you can work, along with the traditional standard hourly rates associated with your industry. It’s why value-based pricing is so much more effective for you and your clients.
It often allows you to get started, long before you really know what your client wants. But it’s also not designed to build trust either. If a task takes longer than your client thinks it should, they question your efficiency and wonder if you’re padding out the hours.
The hourly billing model also penalises you for being good at what you do. The slower you work, the more...
Should you benchmark your services?
Benchmarking is an important part of setting your prices. Looking at your competitors can give you a good guide as to what people are paying for the sort of service you offer. It can help you see if your prices are in the right ball park and see what you are likely to make.
But it's not the whole picture. Some industries are very cagey about pricing (why I don't know, as if you wanted to be a client, it would be obvious) so it can be hard to benchmark.
If there is intense price pressure in your industry, it can be hard to have higher prices, but it is still possible. But also make sure you are not too cheap, as the perception is that you are not very good or that you are new at it.
Personal brand and pricing
A key part of pricing is thinking about yourself as a personal brand. I found this really hard at the start of my business, as I'd worked for corporates for over 20 years. There it's never about you, but always about the...
In some ways, pricing a product is no different from pricing a service. You take your cost of sales, and then work out your business costs and how much of your time it takes to produce an item and there you have it!
But it's not usually that simple. You have to buy minimum amounts of materials, and you have to deal with stock, which can really affect your cash flow.
And if you are dealing with retailers, often big ones, you can take a long time to get paid.
If you are in bespoke, handmade industries, it can be hard to charge what your time is worth to you. Communicating that people need to pay more for an individual item can be tough, but getting the customer to understand the value of something is critical.
It's also easy for product businesses to be a hobby and not a profitable business. The margins are often much smaller than in service businesses and there are lots of extra costs to take into account, along with buyers and price pressures. So it's...
It's often tempting in today's world (especially after the year we have had) to think that you have to have an online course or membership.
But they are a lot of work. Memberships are a long term thing and you need to have fresh content to keep members once they are in. Courses are a lot of work up front, and you still have to promote them and decide about live elements.
There can, shockingly, be easier ways to make money in your business. And you need an audience to sell to. So there is a lot to consider.
In this episode:
Creating online products – what to consider.
Courses or membership?
Pricing strategies for online products.
Janet discusses what factors you should consider before deciding to create and sell an online product, is it worth your time and effort?
Janet advises selling before you create anything to test the market and demand. Starting small will help maximise the use of your time and help you decide if online is for you.
We discuss the...
In this week's podcast, I talk to Amy Mitchell about how to be more productive and streamlined with your time. Areas we covered included:
The importance of time-tracking
Identifying opportunities for systems
What to outsource
Setting business boundaries
The pomodoro technique
Amy is an online business strategist that develops systems to ensure a business’ day-to-day actions align with their big dreams and end goals. We discuss the importance of time tracking to tackle endless to-do lists and incorporating this into your pricing strategy.
Amy encourages centralising to-do lists for better prioritising, identifying areas for systems and batching or time-blocking tasks to create boundaries in your business.
We chat about what business boundaries we put in place ourselves to help manage distractions and maximise use of time to ensure you’re always present and at your most effective.
All our friends and family expect special treatment don't they? Even though they don't really know what you do or how to run a business, they all want a deal!
Do you discount for friends and family? I think the answer is no, you shouldn't discount for friends and family, particularly if they're taking up space that another client would be taking and a paying client. And there's a whole thing about whether you should work with friends or family anyway.
You could say I'll do it for you for free or I don't do it at all. Because they are still a paying client and they want the same level of service. If you're entering into professional relationship with a friend or a family member, you want to keep it on a professional footing.
There is always a risk that as a friend, they push the boundaries, and it is always a bit muddy.
I have a general view that you shouldn't discount anyway, if people can't afford you offer them something like a Power Hour, where they're...
Osmaan Sharif is a business and mindset coach who works with ex-corporate professionals to help them overcome obstacles and grow their own business. Osmaan talks to The Pricing Queen about his rapid transformation formula which involves focussing on the big picture of your business by understanding three fundamental foundations:
Design (includes business model, vision and goals.)
Mindset (overcoming your internal beliefs and understanding your value)
Strategy (or, as Osmaan refers to it, your entrepreneurial superpower.)
Take Osmaan’s free quiz so you can see how strong these foundations are in your business in less than 2 minutes. Sally and Osmaan discuss understanding your upper limit to overcome imposter syndrome and what you need to consider when looking at setting and increasing your prices. Also, why you should be wary of competitive...