The idea of taxes shouldn’t stop you from putting up your prices. And neither should it keep you from growing your business. I’m a firm believer that you shouldn’t let tax or accounting dictate how you run your business. You should consider it, but it shouldn’t be the main driver behind how you run your business.
You shouldn’t be playing small by keeping yourself under the VAT limit. In the UK, the VAT limit is £85,000, and once you get to that level, you have to charge VAT on all your sales. It does mean you can claim back some VAT, but it often means in a service-based business that you will also be paying VAT.
Many people don’t want to be VAT registered as it’s seen as a bit of a pain. That’s not a reason not to do it! You shouldn’t be limiting your business growth to that £85,000 threshold and having to put 20% on everything. You should be preparing for it once you get to...
Raising your profile is something all business owners want to do. Gaining exposure and media coverage can make a real difference to other people's perceptions of you and how in-demand you are. And I know I’ve personally found that when you put yourself out there, people start approaching you about things, and you can then command a different level of pricing.
Recently, I was chatting with publicity expert Rachel Spencer about raising your profile to help you raise your prices. So if you’re wondering how you can use PR to raise your profile and your prices, read on!
No matter what type of business you have, you need to think about raising your profile and gaining exposure. But when you put yourself out there, you can feel quite vulnerable, especially when you’re putting yourself out there as an expert. It can feel quite scary telling people what you do, as it’s all about you and your personal brand....
Moving from hourly billing to fixed pricing is a big step towards pricing more effectively in your business. There’s a real fear that if you move from hourly billing to fixed pricing, you’re not going to charge enough. But when you’re billing per hour, you’re only billing for the hours you work - and that doesn’t cover everything!
One of the big problems with hourly pricing is you’re not billing for everything. There’s the time you’re thinking about the task, the initial client set-up call and emails, the background research work you may do.
And there’s another big issue. If you’re used to doing the work, you’ll naturally get quicker at it. If you then charge per hour, your billable hours may end up going down for each client you work with! Check out the podcast I recently did with Jonathan Stark for more details on how value-based pricing can help you bring...
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...
Everyone's selling an online course or membership these days aren't they? They are the best way to make "passive" income in your business, right?
I think it is something to think about, but it's not for everyone. There are a few things to consider first.
Is it right for you?
Do you want to run your business online? Or are you likely to run your business in person (once we can)? Do you want passive income in your business?
We all think a course or membership will boost our income, but it's generally not a short term fix. If you do most of your business via referral or word of mouth, you likely don't have a big email list to sell to, which will take time to build.
Do you enjoy creating content or do you find it a chore? Some people would rather do 1:1 coaching and not have the hassle of creating something and having the tech to go with it. Although it can be low tech to sell a course (you just need a PayPal button), over time you might need to have a website for them to go to.