Are you pricing your services at the rate they deserve?

Pricing services can be a good deal more difficult than pricing a product. You need to consider both your worth and the customers and their expectations – which can be a bit tricky to quantify. So, if you are a coach, or you offer any other services, my question to you is, are you confident with how you’ve priced your services? For this blog post, I want to bring forward a very important question: are you pricing your services at the rate they deserve?

The thing is, the way you price your services could be holding you back from achieving success. It could be the reason why you’re not able to start scaling your business. You could even feel like you’re in some kind of never ending hamster wheel – one where you keep working and working, always busy, but your business is not actually growing. And if that is you, then the reason for all of these issues could simply be that you’re not charging enough for your services.

In my experience working with various types of services businesses over the years and mentoring, I’ve come to notice that not pricing your services accordingly is the biggest reason why so many businesses fail. In fact, the prices you choose can make or break your business.

This is an issue I’ve had myself when I first started out. I would get clients quite easily and I was basically working around the clock to keep up with all the work, keeping me from my family and my daughter, plus I felt like I wasn’t growing at the rate I wanted to. And then, it hit me – maybe the simple solution is that I need to charge more. So, I made some changes and started charging more – now, I can actually take a few days off here and there, I have time in the evenings and on weekends to spend with my family and my business is growing.

Changing your services’ pricing can not only help you grow your business faster, but it can even change the perception people have of your business; in some cases, charging little for services, compared to your competitors, can give off the impression that you don’t believe in your work and that you don’t have the knowledge to back up a bigger price.

On the other end of the spectrum, if you price your services too high, people might perceive you as an elitist who is only working with an exclusive clientele who can actually afford your services.

Another issue with under-charging for your services is the types of clients you will usually attract: people who want a quick, cheap option and not necessarily the best quality of service, while also complaining more if they’re not getting everything they want.

This is not only losing you a lot of money, but it can also be quite demoralizing and it could even make you hate your job, eventually.

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So, as you can see, the way you price your services can have a big impact on your success, in a few different ways.

How do you know whether it’s your pricing that is holding you back?

One of the ways that you can tell that your pricing is holding you back, is if you’re constantly working around the clock, but your business is stagnating and it’s not showing any signs of growing.

Another useful way of finding out if your prices are too low is if it’s very easy for you to close business. You might not know it if that’s how it’s always been for your business, but in most cases, it’s not that easy to close even a large majority of the people who are enquiring about your services. Don’t get me wrong, being able to close business easily is definitely a good thing, but most businesses have a conversion rate of between 1% and 4%, so if your conversion rate is much higher than this, it could be another sign that you could afford to boost the pricing for your services.

Here’s what you should look into to set the right price for your services:

Research the competition and the market

The first step should be researching the market and your competitors. Start by identifying your main competitors, that are offering the same services as you do.

What prices are they charging and what are they offering for that price? How does your competitors’ pricing differ from one another – and how is that affecting your perception of them and their business?

Try to compare both their pricing, as well as their actual services, i.e. the exact benefits they’re offering and what each one brings to the table.

One of the things that you should keep in mind when performing this research, particularly for services, is the location of the competitor you’re researching. The prices you’re charging can vary a lot based on where you’re based and operating – for example, you wouldn’t be able to charge the same prices in Hull as you would in London, or, if you did, you probably wouldn’t be able to find as many clients.

Calculate the resources you use – costs & expenses, time and effort

What you also really need to consider, is the resources you’re going to use when performing a service.

Make a list of everything that would need to be done for a client – everything from direct costs, to how much time you would need to spend, and how much effort you will need to make to get things done. Then, evaluate how much all of these different resources will cost you, realistically – you will want to charge quite a bit more than the sum total of your costs in order to be able to scale your business.

And most importantly here, in my opinion, is that you shouldn’t underestimate the value of your time. There’s a reason why so many businesses will ask you to pay extra if you want them to respond to your queries immediately, or why they put a cap on how many emails you can send them – because time means money and every little thing you do, adds up to more money being lost.

What is your USP?

Another important thing to consider is what makes you unique, what makes your service stand out.

Make a list of all the benefits that people would get if they worked with you and then, when evaluating them, be realistic: what are you bringing to the table? What makes you stand out from your competitors?

Who are your target customers?

Next, think about your ideal customer: who are you targeting?

The reason why you need to look into your target audience is that you need to find out what they can realistically afford. Even if you might deserve to make a lot more money from your services, if your target customer can’t afford it, growing your pricing too much will likely result in a big loss in customers.

That being said, that doesn’t mean that you can’t ever grow your prices. In fact, there is always a demand for higher pricing from every target audience, but in this case, it may be a bit smaller.

So, it’s still worthwhile pricing higher (just make sure it’s not aggressively high for your particular target audience) – you’ll most likely have quite a bit less clients in your roster, but they will also be paying more; meaning, you will be that much closer to achieving that work-life balance that so many entrepreneurs and SMEs work towards but ultimately, fail to achieve.

High-ticket items vs. low-ticket items

Now you also need to consider what you want your business to be about. Do you want a more exclusive service, catering only to those who can afford big prices, assuming they also get amazing service in return? Or do you want to focus on low-ticket items, that are more affordable, so that you can make more sales?

As I mentioned earlier, if your prices are too low, it can actually have a negative effect on the perception of your business – namely, that your services are not good enough if they’re so cheap.

On the other hand, with very steep prices, you will need to thoroughly demonstrate why these prices are worth it to a potential customer. In some cases, even if they can’t necessarily afford it.

Low-ticket items might be a lot easier to sell than high-ticket, but you also need to keep in mind that you need that much more volume, which in turn can incur more ad costs.

In my personal experience, it’s much better to sell high-ticket items, for a few different reasons: you can afford to advertise your services, you don’t have to work at selling as many as you would of low-ticket items and the best part, you end up doing the same amount of work (or less work!), but for more money. To me, it’s a no-brainer – but, I can also understand the fear to go after those high-ticket items.

Change your mindset

The final point I want to make, and I think it’s an extremely important one, is that you might also need to change your mindset first; namely, that you shouldn’t charge more, that your services are not worth it, or fear that you will lose a lot of business and fail.

But the truth is, if you’re already struggling keeping your business afloat, or you’re constantly working and your business isn’t showing any signs of growing, why not just take the plunge and try a different pricing strategy?

I’ve found that most of the entrepreneurs and small businesses I’ve mentored along the way that don’t want to change their pricing, are actually being held back by fear, primarily. Even with facts handy, fear is still prevalent – so in order to start growing your business, try to change your mindset, and confront your fear. Don’t be afraid that you’re not going to get as many calls and inquiries, because that means you’ll work less, but for more money.

After all, it doesn’t matter so much how many inquiries you get, so long as you get enough to keep you busy full time and to make more money than you did before changing your pricing, so that you can start scaling your business.

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Conclusion

The way you price your services is a very delicate discussion. In order to grow and scale your business, though, you need to make sure your pricing your services at the rate they deserve – otherwise, you’re probably wasting a lot of time not making enough money to actually start evolving as a business.

Are you having issues with pricing your services? What are your methods for deciding on an appropriate price for your services – both for you, as a business, and for your customers? Let me know your thoughts and please share:)