Pricing your services as an entrepreneur, whether new or experienced, can be difficult. With several variables to consider, including but not limited to the industry you’re in, the current stage of your business, the services you’re providing, and the prices of your competition, it’s never as simple as choosing a fixed rate and running with it.
Instead, it requires a tedious level of subjectivity and insight into the many moving parts of what it means to successfully operate a business…
Maybe you’re still in the proof-of-concept stage, eager to acquire your first clients; maybe you’re an experienced entrepreneur that boasts superior industry authority; OR maybe you find yourself somewhere in between the two, uncertain as to where you fall amongst your competition.
What that said, in what follows we’ll be detailing how you as an entrepreneur can gain a better understanding of how to price your services. It’s important to understand, however, that the answer will be different for everybody, so take to following advice as a guide and proceed accordingly.
The Importance of Pricing
The way in which you price your services may be the difference-maker between whether or not your business succeeds; contrary to what you might believe, setting the highest possible price isn’t always the most viable option and doesn’t always translate to maximizing profits.
Further, your price is seldom permanent, and can, in fact, be quite fluid. In other words, depending on the rate at which your business grows and how well your services are received, your price may increase on a semi-frequent basis based on demand.
Unless you’re still building a proof of concept (POC) and are open and willing to acquire your first several clients for free, pricing your services too low will ultimately set your business up for limited growth. Pricing your services too high and you run the risk of scarring away your target audience, losing them to the next best competitor.
It’s imperative, then, to find that “sweet spot” in order to maximize growth while still maintaining client satisfaction and demand.
How do you do that, you ask?!
How to Appropriately Price Your Services
As mentioned ealier, pricing your services isn’t as easy as throwing a dart at a dart board and running with the first number it hits, nor is it as simple as choosing the highest price possible.
Appropriately pricing your services is a science that involves a deep analysis of your business and its services as well as a division of strategies to align with your goals and objectives.
As you can imagine, telling you how to price your services requires an intimate understanding of the current state of your business. With that said, below are several insightful recommendations for how you can begin to derive an appropriate price for your services…
Choose a Method of Pricing
Choosing an appropriate price for your services starts with calculating your fixed and variable costs. These include costs such as rent, overhead, and administrative costs involved with providing a given service.
Regardless of where you are on the lifecycle of your business, your price must be higher than these combined costs in order to profit; obviously stated, profit is, after all, the primary goal of any business.
Once you’ve done some quick calculations, it’s now time to dive deeper into the analysis and strategic planning of your pricing structure… In other words, what type of pricing method (cost-plus or value-based) are you going to opt for? Are you going to be implementing pricing tactics such as discounts and promotions? What methods of payment do you deem most appropriate (hourly, per-project, retainer, fixed-rate, etc).
All of these questions and more will help you more accurately derive an appropriate price for your services…
Competitive Analysis
Being acutely aware of your competition and their prices will not only act as a roadmap of sorts but will also clarify whether or not your pricing is appropriately set.
Setting your prices based on what your competition is pricing at doesn’t mean that you should automatically seek to compete on price. Instead, use it as information and proceed to compete on service, quality, and value, allowing the price to speak for itself.
Consider the competitive analysis a stage at which you’re simply seeking to become AWARE of your surroundings without letting it define the course of action with which you take.
Don’t Be Afraid of Change
Once you’re comfortable with the information derived from your analysis, both of your business and its competitors, it’s time to choose a price. Remember, however, that this price isn’t a jail sentence!
Though it’s not appropriate to change your prices on a regular basis, there are several instances to be made aware of where it IS appropriate to do so, or at the very least, to consider doing so… Notably:
- When your competition raises its prices
- If the perceived value is notably high
- If you’ve introduced additives to services
As you’ve learned, pricing is highly flexible and fluid, creating a grey area for which the pricing decision can be made. This, for obvious reasons, can be both a good and bad thing for an entrepreneur seeking to set the most appropriate price for their services.
In any case, as an entrepreneur, it’s not always a black and white playing field, whether it’s pricing your services or otherwise. That’s why it’s important to use your own discretion and be as business savvy as you can be in such scenarios.
Final Thoughts
The bottom line is that the success of your business relies solely on YOU! By being relentless in the pursuit of finding the most appropriate and profit-flourishing price for your services and ensuring that it aligns with both consumer demand and business objectives, you’ll be well on your way to succeeding as an entrepreneur.
Step into the world of efficient freelancing with my Free Guide, ‘Outsource with Confidence‘. Learn from my extensive experience of 1,000+ Fiverr gigs and partnering with 350+ freelancers to enhance your outsourcing strategy.
