Pricing is a hot topic for so many business owners. It’s an emotive and divisive topic; everyone and their dog’s dog has an opinion. Anything relating to money often stirs emotions for business owners, to the extent that there is now a whole new emerging market for coaches and mentors. Money is an area people find incredibly difficult. Their attitudes, beliefs and desires have driven the demand for a whole new cohort of coaches who specialise in helping clients with money mindset.
I often see people struggling to set their prices and discuss them confidently with potential clients. To begin with, I thought it was just those in the early days of their business who struggled with pricing. As time has gone on I can see that it is something people struggle with whether they have been in business for five months, or five years.
There are a few common reasons I’ve seen people struggle with setting or owning their pricing;
- You want to be “affordable”
You want to be nice. You want to help and make your product or service affordable so the people you can help aren’t priced out. You’ve turned your back on the ruthless, corporate, money grabbing machine and YOU want to HELP people.
- You don’t want people thinking you’re too big for your boots
Heaven forbid people should think you’re expensive or not great value. That feels personal so instead you design your pricing not to shock anyone. The thing is, it’s none of your business if people think you’re expensive. Stella McCartney doesn’t care whether I can afford her handbags. She isn’t sitting there designing her next handbag specially for me. She didn’t go into fashion to make sure that little old Jacqui Jagger could swank around with one of her handbags. Stella’s job is to make sure that if I can afford that bag and do eventually choose to buy it, then I feel good about that decision. Whether it was loose change or I scrimped and saved to be able to afford it is none of her concern. Meanwhile there are plenty of cheaper places I can buy a bag that will do a good enough job of carrying my “necessaries” about.
- You have twinges of self doubt
You feel sick at the thought of telling someone how much you charge. The mind monkeys tell you that you’re not experienced enough yet to charge as much as other people who’ve been doing this for years. Now sometimes this can genuinely be the case, but more often than not I hear it when people haven’t worked out the value they can add with what they are offering. Just because you’re pretty new in business doesn’t mean you lack skill, talent or experience. You may be new to the business but not the trade. Most of my clients have amassed a great deal of experience from their employed career, but they don’t always recognise the value of it when they are offering a new service. They have strengths that mean they can make a massive difference in a short space of time but they lack the conviction to ask for a fair reward for the difference they make.
- You’re making assumptions
Your finances are a struggle at the moment so you make an unconscious assumption other people will be the same. If you’re bootstrapping and £100 is a lot of money, then asking someone to pay £2000 for anything feels like a big ask. It’s not all about you. It is about them. If they see the value in what you’re offering and they want or need the service badly enough they will make it happen. Don’t let your own ‘stuff’ get in the way.
- You don’t want to “price yourself out of the market”
You base your prices on what the competition charges rather than on what you needed to charge to be profitable. When I’m working with clients and we’re talking pricing, I ask what they need or want to earn. I am still amazed at how often this is the first time they have calculated what they NEED or WANT to earn. Often, this leads to the realisation that in order to cover the bills, save for a house deposit or live the dream life they need to charge a lot more.
- You are afraid your price will drive away clients
You think it will be easier to make a sale if the price is lower. If you’re in the early days or your business is struggling, you may be desperate to get some cash in the bank. It is easy to fall into the trap of thinking your low prices may make you an attractive option. You believe you are more likely to get a “yes” from those prospective clients if you charge half the amount.
There are 3 big issues with this strategy;
- To make more money you need higher prices not lower prices. More clients = more work. Higher prices = more money. Imagine you are making shoes. Would you rather sell one pair of shoes for £20 or twenty pairs of shoes for £1 each. You’ve earned the same amount of money but if you’re charging £1 a pair you’ve had to work a damn site harder to earn it.
- Low prices will not attract your ideal client. Customers who could afford more might rule you out if they think you’re too cheap. The assumption is cheap equals poor quality. A Prada shopper doesn’t tend to nip into Primark for the odd bargain. They are different people.
- Every sale is a converted lead. If you charge half the amount, you need to find at least twice as many potential customers to buy your stuff. Getting and converting a consistent stream of leads is one of the biggest challenges for lots of business owners. Why put pressure on yourself to need more?
Take your time to get your pricing right.
Here is my takeaway advice;
- Do not listen to your Aunty Gail who thinks you’re charging too much. I’m sure she’s lovely but she is not your ideal client.
- Don’t worry about what your competitors are charging. Rolls Royce and Ford have very different ideal clients and very different price points yet there is space for them both to exist. It goes without saying that making one and attaching the price tag for the other is a recipe for diaster
- Don’t try to appeal to every budget. You’re either Waitrose or Lidl. You can’t be both.
- Start with what you need or want to earn and work out the rest from there.
If you are struggling to get your price point right or feel like pricing is a reason your business is not doing as well as you’d like, you can book a power hour with me.
During this hour we will get right to the nub of the problem. I will help you review your prices and your sales process, ultimately getting you more cash in the bank. Click the link to book.