Don’t Sell Yourself Short!
Pricing can be really tricky for many entrepreneurs–especially when you’re just starting out. On the one hand, you want to offer affordable pricing for your customers, but on the other hand you still need to earn a profit. For many of us, the topic is simply overwhelming. We think there must a magic-formula but can’t find it.
So how do you manage to face this anxiety-inducing but critical issue head on, set your magical rate, make an impact on the world with your business and still get paid based on the value you deliver? How do you avoid being boxed into a lower than ideal hourly rate or entering into a pricing war with your competitors?
The danger of pricing according to your competitors
A lot of sellers will choose a number lower than their competitors to win the sale, but unfortunately these numbers not only rarely reflect the value provided—they also almost always involve reduced profits, sometimes no profits at all, and in many cases (far more than you’d expect) pricing with this method can actually result in a loss.
Cheaper isn’t always better. Solid pricing is serious business and shouldn’t be picked arbitrarily. If you’re smart about it, you can have a serious impact on your bottom line, but it involves mastering the art of “Intelligent Pricing.”
Zee Worstell, pricing expert and creator of AccelerateHer.com, teaches how to skyrocket revenue and confidence by setting a price that reflects the true value of what you offer clients.
Worstell says, “Sometimes the chase of a sale or the comfort of consistent pay makes us vulnerable in business, but there is never a just cause for us to be taken advantage of – especially when we’re producing good work.”
People shy away from money talk. We think pricing is embarrassing, hush-hush business not meant for decent ears. But the truth is, we deserve to earn our worth. We should be able to talk about all aspects of our worth – pricing included – with pride, confidence, and mastery.
In order to accomplish that, though, you need to know your business – your numbers, your market, your goals, and your spirit.
Worstell teaches that each price set must have a reason behind the figure. If your numbers are tracked well, you should be able to adjust prices according to inflation, market changes, demand, etc. Intelligent Pricing is an incredibly integral part of any business because it can protect your margins through any storm – but only if you’re paying attention.
Intelligent Pricing is powerful
According to the Small Business Association (SBA), pricing is one of the top three reasons businesses fail. Buyers are conditioned to search for the bargain, the better buy, the steal of the century. But lower prices can actually work against you because when you lower your price, you remove value from what you’re delivering.
Smart buyers realize the old adage “you get what you pay for” rings true and they’d rather pay a bit more to be ensured of a quality product. This is a huge reason why we as buyers stick to name-brand products as opposed to the knock-offs because they are safe. We can trust them and we can justify spending extra on them. The same principle applies to you when you’re on the opposite side of the exchange as a seller.
Time is (serious) money
For entrepreneurs, time is your most valuable resource. Worstell also provides great insight on margins and client volume: If you were to double your prices, you could afford to lose half your clients because you’d still earn the same amount of money but from half the time and effort.
Eventually, you’ll find that your time is worth more than the number of projects you’ve taken on. Crunch the numbers, draw the line, and then figure out how to turn that extra time into profit. When you know the worth of your time, you protect yourself from burnout and revenue loss.
Own your value. Own your price.
You need to understand every level of your business well enough to explain to others how it works and the reasons behind your pricing methods without fear or shame. When you own your value, your sales proposition is always in order—there’s never a disconnect between you and the customer as to what is provided and what it’s worth.
When you have this information readily at hand, you’ll find it’s much easier to confidently negotiate a deal. You can present to your client a menu of services that’s broken down into easy, manageable parts. If they don’t want to pay for something, rather than decreasing your price, simply remove that service and cost from your proposal and move forward with the deal rather than “throwing one in on the house.”
When you know your business, when you have a reason behind every price tag and every service offered, you’ll be able to operate outside the realm of “more sales, more money.” You will enter the arena of quality products and fair value, a place where character and condition surpass price.
Focus on displaying your worth so that others can understand just what they’re paying for. You’re the mastermind behind your business, so don’t shy away from educating your customers about what you do and why you do it. Sometimes all it takes is simple, honest explanation about how you go about a process for others to see the worth in it.