If You Have To Ask, You Can't Afford It.

January 25, 2019

I speak with business owners, service professionals, and colleagues all the time regarding business, and one topic that comes up very often is pricing.

 

How much should I charge for my services?

 

One of the 5 P's of Marketing is Price. Modifying your price can make it more likely for people to choose your service. 

 

Should you charge a lot or a little? The answer isn't simple, but one element of this topic is making sure that you are charging enough.

 

I've had experiences both ways.

 

Set scopes vs. little grey cells

Two landscapers were working on my block, and both were soliciting business from the homeowners. After making inquiries of my neighbors, I determined that there was no discernible difference between the quality of the work, so I ended up hiring the cheaper one. 

 

When it comes to your business, setting a low rate seems like a good idea.

You may feel the urge to compete by being cheaper or at least at the same level as others.

 

"How can I charge X for my design/accounting/web design, when others are charging less? I won't land the project if my proposal is too high!"

 

Discount prices might be well and good for a business like landscaping, that hopes to gain an edge on the competition by offering a low price for a set service (mowing lawns) and straightforward expectation of the scope of the work. But for creative services or less rigid businesses, a low price strategy is dangerous.

 

In the creative industry ("Is changing a color a revision?"), or in businesses where the scope is not clear cut ("Let's change the function of the button on the contact form of the website for the 17th time... that's included in round 1 right?"), even with a clear project framework, project-creep is inevitable.

 

In my experience, if your prices are too low, inevitably your competitive "Price" strategy will end up being a counterproductive Product (experience) tactic. You will feel underpaid, you will neglect the work, and more importantly, you will feel bitter about the amount work vs. the reward - which is truly a shame, as it's your business after all.

 

By charging rates that are low so people will choose you, eventually the work will suffer and you will inadvertently drive customers away. 

 

So what do I charge?

If you have to ask that question, you can't afford to get it wrong. Err to the side of caution.

 

Here are some tips:

  • Charge as much as you think you deserve, and then add some more on top of that.

  • Ultimately, the market decides the price people are willing to pay, not you, so you can try raising your rates until people stop purchasing.

  • Finding the balance may take time and experimentation, but discovering your ideal rate will be a win for you and your customers.

 

When setting your price, remember not to sacrifice long-term success for short-term results. 

 

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