3 Easy Steps to Pricing Your Services or Products
When starting out as an entrepreneur, one of the biggest challenges can be pricing your products or services. It’s easy to get overwhelmed with what is already on offer in a seemingly crowded market and how you fit into it all. Don’t let this discourage you. If you are having a difficult time placing a value on what you have to offer, below is advice that I offer my mentees, all of whom have found this incredibly valuable on their entrepreneurial journeys.
1. Market Research
One of the first and best places to start is to look at the market. Search out your competitors and see what they are offering, what their business model is and if there are any gaps. Is there something that your competitors are lacking that you could offer?
Most importantly, how are their products or services priced? There will always be a varying degree of price in any market, from cut-price to premium. Take into your consideration your expertise and experience. Do not discount this! You are the brains behind it all and you must value what you offer first and foremost. Remember, it is okay to start out with an initial price and to tweak it as you grow and learn.
2. Factor in Costs
This is often times forgotten but is a crucial step in pricing. What are all the associated costs in offering your products or services? Calculate the time to provide the service, materials involved, travel costs and any preparatory or follow-up work. You may even want to factor in marketing, back office functions (such as invoicing or bookkeeping), and software costs. This will provide you with an accurate profit margin.
Because at the end of the day, we should all aim to make a profit off our passions! It may be helpful to work backwards, for example, if you know you need to take home $5,000 per month, you will need to ensure you have enough for taxes, bills and expenses. This exercise is a good opportunity to review your budget if you haven’t already done so.
A common pitfall is to underestimate the time it will take to complete a project or task. This is primarily applicable for those who provide services and charge an hourly rate or flat rate. This can be particularly challenging especially if the client changes the scope of the project, therefore requiring an increase in the time required to complete the extra work. Be prepared to make an allowance for this or feel free to raise it with the client as it arises. Again, don’t undervalue your expertise and experience and realistically assess the time commitment for each project.
If you’ve run the figures and are thinking, ‘I CANNOT charge that much!’ – I’m here to tell you that YES YOU CAN! You are worth it and people are willing to pay for your expertise and experience. It’s a matter or honing your marketing to talk to your ideal buyer persona.
I would love to hear if you found these points helpful or please share what you have found worked for you below.
If you are interested in being mentored by me, whether you are an aspiring entrepreneur or are wishing to optimize your current business, I would love to help. Find more details here.