You’ve done the research, worked tirelessly to hone your service and now you need to tell the world all about you! But you aren’t FREE so you need to set your pricing – where do you start?
As a small business owner, just starting out or needing to up-level your business, it can feel like a minefield when it comes to pricing. Use these simple steps to l help you get to a happy conclusion quickly.
Pricing your service
If your business is making products it’s a little easier to set your prices. You look at the raw costs, the time it takes you to make the products, factor in overheads and add a little on top for profit.
But, for a service business, there isn’t something that a customer can come up to and touch and feel (really isn’t allowed in this sector!) to gauge how much they think it is worth. A service is a perceived result over a tangible product.
Think about what’s in your head
When starting out, I had the fantastic support from MINT Business Club and especially Nicola Jane Little. She and I did an exercise writing about ‘me’ on a flip chart. In the centre was a little stick version of Moira and off that we wrote about all the work experience I have ever had – right back to helping volunteer at a Stroke Association club my mum ran when I was a teenager, my time at BBC Worldwide, winning Sales Person of The Year, up to running my own small product based business.
The flip chart filled up very quickly.
What Nicola was trying to demonstrate is that I, as an individual, have lots of very unique-to-me experiences that no-one else has.
People would be paying to gain access to what was in my mind – my 30+ years of selling experience. All the training I had received at the BBC, at Hearst UK, even the training I had as a trainee manager at Laura Ashley.
So, first and foremost, I recommend carrying out the very same exercise. Ask a business buddy if they’ll help draw more info out of you, by asking you questions, asking you to expand on what any role you had involved (my volunteering as a teenager demonstrated that I have wanted to help people from an early age).
By doing this you will start to see the enormous knowledge bank you have inside your head which will fill you with confidence to see your value as greater than just a price.
Practicalities of pricing
There are some practicalities to consider also.
- What costs are involved in you delivering this service?
- Do you work out of an office which you need to rent? Or even, as lots of us are now doing, working from home which incurs costs – increased use of heating and electricity, use of home broadband etc.
- Computer software that allows you to conduct your service (for me that is Google Workspace as I use Google Meet for virtual training and 121’s). Your mobile phone – a necessary tool for any salesperson!
- Memberships to organisations or professional bodies; insurances you must have to carry out your services.
They all need to be factored in.
Plus, if your service requires you to deliver a document/workbook these will incur a cost to you also (whether that’s outsourcing graphic design or the paper to print them on and postage to send out, for example).
Really take the time to factor everything in, breaking down the costs.
What if I’m no good at numbers?
As someone who has suspected ADHD this part of the equation is really hard work for me, so if you can get some expert help from an accountant or use an online tool like this to some tools like a sales pricing calculator by Sally Farrant or watch a replay of Laura Cook’s previous MINT training – this will make life a little simpler.
Another factor when looking at your pricing is to look at a couple of competitors – now I’m not saying get into a bout of comparisonitis. Please don’t. But do look at their pricing so you have something to measure yours against plus you will be better armed in a negotiation if your prospect pipes up about this other company.
What you need to keep in mind when doing this part of your research is to remember all the value you have stored in your head, that they don’t. And vice versa – you are working out YOUR prices not theirs.
Different Pricing Models
Lastly you need to consider how you are going to charge clients.
An hourly rate – this helps you receive a good return on the actual time you spend on delivering your service and helps cement that value you offer, the level of expertise and seniority you have.
But some clients want to pay a flat fee – this helps them budget when times are tough and they need to keep a reign on outgoings. If your client does insist on this you need to be clear with them that if a project overruns or incurs more of your time than you are quoting for, there will be an additional fee that they must agree to this before you start the project.
You should also decide if you will offer variable pricing. This can work if you have distinct offerings (e.g. for me I have a 121 price that clients book by the hour and I am happy to discuss a package price if the client wanted to book 6 sessions up front). But I also have clients that book me to deliver training sessions for their organisations. These sessions require time to conceive and prepare the training as well as delivering it – so I work out a flat fee price for them.
What’s important is that you show some integrity and respect for clients when having pricing discussions with them.
As you grow and scale your business you need to factor in increased costs (e.g. will you need to outsource more? Do you need to invest in better technology? etc) so it is prudent to look at your profits on a monthly basis and again enlist the help of experts if this is something you struggle with.
If you see competitors raising their prices, does it make sense for you to follow through – not always a yes, you need to keep a close watch on the mood of your clients. But if your type of services are more in demand now than they were and your competitor is still gaining new clients I’d say it’s a good time to raise prices.
When clients tell you what a bargain you are, or insist on paying you more for your time, then I’d hazard a guess that you really need to increase your prices.
Test out new services if you believe there is a need for them, based on client feedback and market conditions – these can help you create more turnover but keep checking they are profitable for you.
The bottom line is you owe it to yourself and your business to be really vigilant with your pricing. How you set your prices could be the difference between you succeeding – or failing in business. But always remember that clients are paying for your expertise and experience that no-one else can offer them and if they insist they won’t pay your worth – they aren’t the right clients for you anyway.
If you’d like some help understanding your worth, book a 121 session with me and I can help you work out what your unique value proposition really is.
ABOUT MOIRA BARNES
Moira is a long-time friend and founding member of MINT Business Club, who delivers sales training for our members. If you’d like to see more of Moira, sign up to MINT for regular training and content from Moira and other qualified and experienced sector professionals. Moira also offers one to one sessions which can help you get your ideas in order before you sit down to do the hard work. By doing this pre work it means you will have clear objectives and goals you can easily map out on your sales plan.