Common sense would tell you that as a professional you should ask a “fair” price for your services. This fair price should neither be too high or too low. What this actually means is not really very clear and certainly open for debate.
Should I Price Low to Attract Clients?
Entrepreneurs who have bought and sold several businesses will tell you not to undersell yourself. Another reasonably successful service provider will say, “Don’t charge too much or you’ll scare people away.” A coach who coaches chief executives once told me that he wouldn’t get any clients if he charged less than $1,000 an hour. His high fee was verification to his clients that his service was extremely valuable and that he was well credentialed. There is a correlation between value of service and price, particularly in a service business.
Consider the Results of Discounting
The buyer is in the driver’s seat when the price is being discounted. If you do not feel you have sufficient value, this may be the way to go, but do not assume it is the best place to start. It is very difficult to bounce back from discounting and generally creates a downward trend in income. Once it becomes generally known that you discount, you will have a very difficult time trying to raise prices later on.
Don’t Under-Price Your Services
Falling into the discount trap is one of the biggest mistakes new consultants and freelancers of all types make. Too many have such an urgent need to win customers that they are too quick to set their price and then set it low. Unfortunately, this leaves the impression that they are really not up to the job. It is important to build and create belief in your customer’s mind that you are capable of doing the job and to project the image that you can provide something of value to your client. If you set your price to low your customer may think you’re not up to the job. It is far better to set a price that is non-negotiable because you believe you can deliver what you have promised. This instills confidence in the customer. This is not always easy to do. A limited track record and the going rate being set by competitors makes it difficult to stray too far outside of a certain range of prices.
Don’t Assume Your Competitor’s Price is Reasonable
Sometimes following the prices being set by your competitors can have its disadvantages. They may be just offering a low price to generate business. Some may have sufficient financial backing to offer very low prices in order to win future clients and absorb the expense. They may also have alliances or affiliates that sweeten the pot that you may not know about.
What about a Cost Analysis
When you are dealing with a product that is manufactured, it is relatively easy to determine the cost of the product. But when it is a service, such as that offered by consultants, coaches and freelancers, it becomes much more difficult. The cost of such a product, a product that is often delivered via the internet or the phone, is not obvious. You still can consider the cost of overhead, communication costs and the hidden cost of the work that goes into preparing for the service. Therefore, it is necessary to have what is called a sound value proposition.
What is a Value Proposition?
All top notch salespeople will tell you that the way to sell yourself or your services is sell the benefits they will provide to the customer. This is the one method that will assure a maximum fee. Price is only part of what customers are interested in. They are often more interested in what you can give them and ultimately cost analysis is more about perception and customer satisfaction that anything else. It is therefore extremely helpful to know what your customer’s level of satisfaction is and to know what value they are willing to place on your services.
Pricing Your Services
Most all coaches and freelancers want to build a customer base and to optimize their profits. There are several different ways of pricing your services.
Consider the following points:
1. Very often coaches and freelancers do not factor in overhead or consider the cost of running their business. There are many hidden expenses such as depreciation of furniture and equipment, accounting costs and administrative costs.
2. Too many freelancers, consultants and coaches opt for a home-based business and price themselves as such. They run the risk of losing customers who want to deal with a larger firm. It is therefore important to have an office outside of the home. You might consider sharing it with another independent service provider.
3. Thinking too small can be detrimental to consultants and freelancers who only charge what they think they are worth and ultimately undercharge. Establishing your value becomes extremely important.
4. Offer a money back guarantee. This will give both you and your customer peace of mind. Allow them three months to request a refund if they are dissatisfied with the results.