Is pricing really an art? Yes, and I believe the art of pricing for small service-based businesses is key in hitting the successes you seek for the business.
Pricing is a dynamic and multifaceted aspect of running a small service-based business. Let’s begin by understanding the value of your services so you can set prices that reflect your worth and drive business growth. Keep in mind, the right pricing strategy not only ensures profitability but also communicates the value and quality of your services to clients.
One of the things I help clients with is to understand their offerings and the costs associated with them. Remember, too, running a business has it’s own costs associated with it and knowing those and what your bottom line is will go a long way to supporting you in choosing your pricing.
Make the invisible visible
Unlike product-based businesses, where prices are often dictated by market rates and production costs, service businesses must navigate a complex landscape of perceived value, competition, and client expectations.
How do you put a value on your services? You can start with your Unique Selling Proposition (USP). Ask yourself, what makes my service unique?
Is it:
- specialized expertise
- exceptional customer service
- exclusive offerings
- you and your secret sauce (your track record for getting others results, etc.)
Bring all of this to light. When you can actually see what you offer, it is easy to be able to articulate your USP.
Next, look at your Target Market. Those clients your services are aimed at. When you can understand your clients’ needs, preferences, and willingness to pay you can more easily price your services to meet their specific wants.
So for me, you, a small service-based business owner, is my target market. My services are aimed at helping you simplify and streamline your business for profitability. And that means my USP is helping you create a business that feels good to you. Meaning set up your business in a way the helps you achieve the results you want without having to do things that don’t feel good to you.
By making the invisible visible you have a starting point for pricing.
Understand how a price gets chosen
Often, when working with clients who come to me because they want to make more money, I discover that they aren’t making much, if any, profit. That’s because they really don’t know what it costs for them to offer that service. And instead of making money, they lose money. So it’s important for you to know how much your business costs and what your offers cost.
Numbers tell a story. They tell you that you are 1) making money, 2) losing money or 3) breaking even.
One of the exercises I do with clients is to have them understand what it costs to offer a service. I have a wonderful example in my Pricing Guide which you can download here. All businesses have expenses. Sometimes service-based businesses think that because they work from a home office that they don’t have expenses which couldn’t be further from the truth!
I remember sitting in my accountant’s office one year when she turned to me and asked “where are the records of what the business paid for the telephone line & internet”. I looked at her dumbfounded and said “nothing, I work from home.” To which she said “yes, and you use the internet and phone, correct? So if nothing else, you need to pay your home account for the use of those from the business account.”
Ah so if I’m to pay my $150 each month, I at least have to make MORE than $150. Can you see why it’s important that your prices are chosen appropriately?
Start somewhere
Admittedly, pricing services isn’t as straightforward as pricing products but you have to be sure that you don’t inadvertently underprice because all that does is sink your business before it ever gets out of the dock (so to speak).
Ok, so exactly how to choose a price? After gathering your expenses and understanding what you are responsible for (your costs), you should have a good idea of where to at least begin. If not, you could start by saying you want to make $500 an hour. Knowing that it takes you 10 hours of work to provide a specific service, the price for that particular service would be $5,000. So you have your starting point.
Least I not mention, taxes and bank & merchant fees. Out of that amount you’ll have to set aside money for taxes and bank & merchant fees. Again, you can look at those as costs of doing business. So once you back out those fees, if you don’t like the numbers (remember, they tell a story), you can adjust your fees.
Lastly, I’ll say that the art to pricing is taking a creative approach. Considering what you bring to the table and what clients get from your services can help you determine the best prices for you at this time.
So, what do you think? Are you happy with your prices? Have they served you well or are you thinking “awww, geez, I’m selling myself short?” Let me know in the comments below. And don’t forget download that pricing guide.
As one of my clients put it, pricing sucks. But it doesn’t have to. Learning how to appropriately price your services so that you feel good about them is possible. And it’s pretty important if you want to stay in business. For a limited time I’m offering Business Aligned Breakthrough Sessions for any area of business that is appropriate for you now. Pricing, money mindset, operations, marketing. You choose, if it’s pricing you need the most help with, great but perhaps it’s something else, that’s awesome too. Sign up for yours now right here.
If you want another perspective on path to cash, click here
