Pricing is tricky and you will never win the race to be the lowest.
What can you do?
Instead, aim higher while delivering a quality result. It’s supremely EASIER to deliver an amazing experience and charge more, than to compete to the bottom. It also doesn’t pay to be second cheapest.
In this episode, I review ways to evaluate whether your prices are too low and how to optimally price your services. Have you thought about all these points when evaluating your prices?
With a little bit of work and a mindset shift, you might find you should have been charging more all along! This episode might also give you some ideas on how to raise your prices if you’re ready to scale your business.
Julie here, and today I want to talk about your prices. Are your prices too low?
This is such a tricky subject, but I want to start off by saying that if you think that you’re going to compete on price, you are wrong.
It’s impossible to compete on price when you are a small business. And there is no benefit to being the second cheapest.
So you might as well go and aim to be the most expensive.
Now that doesn’t mean you need to deliver an amazing product but it’s a way easier job to deliver a supremely amazing experience and charge more than to try to compete.
It’s always a race to the bottom.
So here are a few ways to figure out if your prices are too low.
The first thing is does anybody ever walk away because your prices are too high?
If you are getting yeses all the time without fail, then it’s usually a sign that your pricing is too low.
You want 25% of people to say no and say, “you know what, that’s out of my price range.”
The second thing you can do is look at the low end and look at the high end and look at what the value and quality of what they’re delivering.
So if you are delivering so far above and beyond what the lowest is but your prices are not that much higher, that’s a problem.
Most of the time people under charge. They don’t overcharge.
But it goes without saying that you want to make sure if you are gonna charge a premium that the value you give is there.
The next thing you want to look at is how long are things taking you.
And this is very very difficult to do if you don’t do a time journal. And service providers especially can fall prey to this mindset of, “oh well it just took me 15 minutes so therefore I should only charge for 15 minutes.”
The problem is there’s no value-based pricing in that model. Maybe it took you 15 minutes because it took you five years to become an expert at it.
Or maybe it took you 15 minutes because you have all the programs and subscriptions and equipment that you need to pull it off in 15 minutes.
The problem is you get so close to the things that you do so well that they don’t seem like a big deal when they’re a big deal to somebody else.
So look at your workflow look at what you do whether you’re a web designer, a videographer, an illustrator, it doesn’t really matter- look at all the equipment, all the training, all the time that you’ve given those 15 minutes. They’re worth a lot more than 15 minutes if you were to compete based on hourly pricing
So one of the things I recommend is that you actually do know how long it takes you to do something because a lot of people underestimate admin, time, strategy calls, post-production time, maintenance on websites revisions… things like that.
You know scope creep happens so easily when you’re a service provider. And so make sure you count all of that time then you can kind of start to benchmark based on an hourly.
So let’s say you’re a hundred dollars an hour. Remember: a hundred dollars an hour as a contractor is really only 75 when you consider taxes.
And because you’re not employed by anybody, you have to pay all your own self-employment, Social Security, Medicare.
You also have to consider all the other things that you have to do like run your own books, and run your own payroll and all those other things. So a hundred dollars an hour is really not that much.
Then look and see, “all right this project took me 20, 30, 40 hours and then times it by a hundred and see are you charging that because if you aren’t, chances are your prices are too low.
Finally, I want you to think about the return on investment on the product you’re creating.
Not everything is created equal. If you’re building a funnel for somebody that’s gonna turn around and make them a million dollars you need to add an additional price based on value.
So you can’t charge as much for a blog post as say you can for a long-form sales letter.
So look around at the products that you offer and test the ROI because if people are making thousands, if not hundreds of thousands, that needs to be reflected in your price as well.
So I hope this helps… and I know that the best conversations happen after the camera stops rolling. So if you’re struggling to get your pricing up there let me know in the comments below and for more videos like this, you can go to JulieStoian.com.