The article was written by: Suzy Wraines
Pricing services is a struggle for all business owners. You are not alone. There are several reasons why pricing can be challenging…
- Not knowing the standard pricing in the industry.
- Unclear on how to market your services.
- Not familiar with competitors in your market.
- Lack of confidence in experience level.
- Challenged by the feelings of asking for what you are worth.
I’m sure there are many other struggles that come up when it comes to pricing services. These are just a few.
There are ways to simplify this process removing some of the barriers you may be facing when it comes to setting prices.
So…
Why is pricing so important?
- Calculate income goals.
- Know your profit margins.
- Set business workload (max clients).
- Get paid what the services are worth.
Calculate Income Goals
Let’s start with calculating income goals. In order to have a successful business it’s vital to know how much income you plan on making each year.
In order to calculate your income goal, first you must know what the price of your service is. Therefore, set pricing must be done first. Once your price is set other calculations for your business numbers will be done using these prices.
I know business numbers are scary to some. There are ways to make it easier when it comes to numbers. You can check out my blog article that talks about calculating goals to get a breakdown of these numbers.
Know the business profit margins.
The reason it is important to know your profit margins is for business planning. Knowing how much income is coming in will allow you to allocate profit, pay, taxes, and expenses. This will give you an idea of how much the business will be able to afford in expenses and hiring staff.
Set business workload.
Having set pricing gives you the information you need to know how many clients you can work with. If you are solo in your business, there are only so many hours in the day. You don’t want to have too many clients that cause you to be exhausted.
If you plan on hiring staff, you need to know how many clients each staff member can work with for the same reasons. Having a set price will show you how many clients per person is a sustainable workload.
Get paid what the services are worth.
Once you complete research for the industry pricing standard you can determine how to price your services according to what you offer. If your business services are high end you will price accordingly. If your services are geared towards budget friendly that will determine what price you charge.
This is completely up to you as the business owner. It’s important to price your services comparable to what you offer. High or low depending on the quality of services.
Steps to simplifying service prices.
Now that you know how important it is to set your pricing, I will share with you the steps to simplify the process.- Research industry pricing.
- Write out your experience, education, and achievements.
- List out what is included in the service you provide.
- Compare industry pricing to your experience level and service offerings.
- Set the price that fits the service you provide.
- Set up pricing increase steps if you are starting on the lower end of the industry.
That’s it. Going through these six steps for each service you offer will give you a starting point for what your price should be.
A tip for doing research is to pretend you are a client looking for your services. Search for other business that provides the same service you do. Get pricing from those companies to compare to the services you provide.
Conclusion
Pricing is an important part of starting a business. When you know your prices you are able to:
- Calculate income goals.
- Know your profit margins.
- Set business workload (max clients).
- Get paid what the services are worth.
Simplify setting your pricing by doing the following:
- Research industry pricing.
- Write out your experience, education, and achievements.
- List out what is included in the service you provide.
- Compare industry pricing to your experience level and service offerings.
- Set the price that fits the service provided.
- Set up pricing increase steps if you are starting on the lower end of the industry.
For more pricing information watch my online class.
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