Why pricing is one of the most important decisions you will make in your business
Chances are if you’re interested in learning how to price well, you already know there’s a wrong way to price your services. Pricing wrong can be the difference between breaking even or building financial runway three months ahead. When we price our services well as designers, photographers, copywriters, we invite confidence into our business.
If you’ve ever signed on a new client and you’re immediately filled with joy but then reality sets in that it’s just a small drop in the bucket of what you need to make in order to meet your financial business goals – whether that be profitability or leaving your full time job.
I am going to give you my personal strategy for how I price all of my services and offerings at a very high level, a formula for you to consider as you price your services going forward and a recommendation on how to get clients to convert quicker when they’re ready to buy services from you.
How I set my prices
I have always set my prices different ways over the years and it hasn’t been until about the last year that I have felt overwhelming confidence in my pricing structure. I know how much time each service takes from me, it’s lifetime value for the customer over time, and how it positions me in the market. Before I share the details, I want to be clear: there is no one size fits all. I share this to inspire you and most importantly show you how you can fulfill your goals of replacing your full time salary as an entrepreneur.
When pricing my services, I start with my base, most popular services. Why? Because for me, as a digital coach, I know I have a limited capacity that I can pour into my projects and still deliver stellar quality. I personally like to ensure that my base and most popular offerings cover my life expenses but are also realistic. There’s no point in pricing a coaching engagement at $1M if I know I can never find the right customer for that offering. Instead, I look at my history as a coach and determine what has been steady and what I am known for. You may have goals of consistently selling that $3,000 course but you’re only selling $500 as your core offering. That’s okay. The first thing I do after determining my my core offering is determine if it’s priced right by looking at 3-5 of my competitors. You will always find someone charging more than you. That’s not how we justify competitor pricing. You choose your competitors by looking at who is similar in their offering, quality, and solution. Once you find a few, ensure you’re priced appropriately. If you have a better quality product or deliver greater value than someone who is reliably pricing at $600, start to test boosting your rate to $700.
Raising your prices deserves an extended discussion but I will keep it brief: raising your prices must be intentional, justifiable, and correctly communicated to clients so they realize they’re getting more value than before. If you can’t do that, it’s not quite time to raise your prices.
After I have my core offering pricing, I stack this against my annual finance goals. Let’s use a straight $100,000 figure as an example for this exercise. If I know I need to bring in $100,000 gross (we will talk net profitability at a later time), and my high ticket offering is $500, I know I need to sell 200 within a year or roughly 17 per month. STOP! This is where I see many of my clients get hung up. If you hear 17 (or whatever your number is), and realize you can’t deliver your service offering this many times in a given month and maintain quality, you need to go back to step one and start with your higher ticket service. This is what gives you confidence. Lean in and take the signal as an early opportunity to re-position your offering for more money or to a scalable offering.
If however, this number (in the example’s case, 17) feels right on the money, we proceed. Let me share some rationale.
I always ensure that my base, most popular offering is adequate to meet my income goals. Any additional income on top of that offering such as courses, shop sales, side contracts is added income – not income I am fishing for in order to make ends meet.
A recommended formula for pricing just right
As I mentioned earlier, everyone’s pricing structure will be a little different depending on where you are in your journey but I want to give you a brief outline of what I often share.
If you already have your offering established…
- Step 1: Identify your core offering price point
- Step 2: Compare your core offering pricing with 3-5 competitors of a similar weight class
- Step 3: Determine your annual revenue goals
- Step 4: Calculate how many offerings you need to sell to meet this revenue goal in a year
- Step 5: Evaluate if the offering as priced allow you to continue. If not, proceed back to Step 1 and adjust.
This is just a very high level walk-through of how you can set your prices appropriately for your business and niche. There is one thing I want you to note:
Nothing in this pricing mentions your time. I strongly oppose creating pricing structures that boil your time down to hours. Sure, you don’t want to waste your time but my friend, you definitely don’t want to chain your income to your time.
Why I share my prices
Once you lock in a core offering price point that you believe in and can rely on, you should make the decision if you will publish your rates on your website or not. I commonly see many default to not sharing prices which totally your call but I want to leave you with a final consideration. Within the buyer’s journey, they’ve identified a challenge. Sometimes, they’ve even tried their best to solve it on their own but it didn’t meet the standard. Knowing this, some potential clients may be trying to discover pricing for a professional to solve their chaalenge. When you give a clue at your rates, you allow that person to chew on the investment marker while they explore the value you’ve put on your blog, on your social channels, in your email content. Here’s a scenario:
I am a man looking to propose to my girlfriend of 4 years. My buddy from college says he can photograph the moment for me but his work is sketchy. It works for me but my girlfriend may not love it. I’ll go see what engagement photographers are in the area. Two options both with beautiful portfolios. It looks like Option A has their investment options here and while I can’t afford her mid tier, this offering is within budget. Let me reach out to her to see if I can tell her what I have planned. Option B wants me to fill out a contact form. Sure!
In this example, both get the contact but Option A has already given the prospect a number to chew on and has an ounce of confidence it is at least not going to be spit out immediately. Option B needs to start the value of investment discussion but is already behind Option A if the cards are stacked evenly.
If you are still convinced you don’t want to share your rates publicly, here’s an option: when you secure the contact information for a follow-up call or email, give them something to chew on before you meet again. Give them value, a precursor to lead them deeper into the customer journey while they await speaking with you. You want to take advantage of that idle time because a quick one day turn around is fast for you but may have resulted in your potential client continuing in their hunt for a solution to their problem.
I hope this helps! More than anything I want you to feel in control of your business, reaching your income goals and making your entrepreneurial journey as unique as you are.