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Are You Pricing Your Services Right?

One of the biggest reasons you’re not bringing in the money you want is because you’re not pricing your services correctly. Too often, entrepreneurs sell themselves short and set prices too low because they want to make a sale.

When you underprice, you’re doing a disservice to yourself and your clients. You’re not making enough money so you start to feel resentment toward the clients you’re supposed to be serving. That’s no way to run a business.

I recommend you take a step back and evaluate your pricing at least twice a year. Here’s how.

Work Backward

Start by thinking about how much you want to make—and how many hours you want to work. We’re all capable of that six-figure business, but our rates may fluctuate depending on how many hours we want to put in each day or week.

Decide what you want to earn in a year, then divide that by 12 months. Then decide how many hours you want to work in a month (weekly hours x 4). Take your monthly goal dollars and divide them by your monthly goal hours. That’s how much you’ll have to charge per hour to make your monthly income goal, if you’re booked.

Gather Your Overhead

Of course, you can “make” six figures in your business but that doesn’t mean you’re taking home $100k. Know the cost of doing business, which includes your fees for internet, phone, team member salaries, taxes, online tools such as scheduling software, etc. You should also know what your personal expenses look like—what’s the total of all your bills each month?

Know the cost of doing business. It's a big part of pricing your services right. Click To Tweet

Track Your Time

I track my time, no matter what project I’m working on. I always want to see how long it takes me to finish a project, and if I’m quoting a reasonable project (not hourly) fee. If I end up underbidding a project, I know the next time around to quote more. If you’re paid by the project instead of hourly, be sure to do the math at the end to find out what your hourly rate was. If it varies widely from your goal hourly rate, make adjustments to the next project.

Consider Time Investment

A product or service that takes 10 man hours to produce should cost much more than one that takes 2 man hours to produce. Keep in mind how much time you’ve invested into something. Multiply the number of hours it took to produce by the per-hour fee you determined to help you find a price point that’s fair for you. Also consider your ability to resell or reproduce that product or service.

One of the greatest perks of being a business owner is that we control our income. But pricing can be one of the biggest stressors. Take the time to review your prices and make sure your fees are fair for both you and your clients.

When it’s Time to Raise Rates

When it's Time to Raise Rates
How did 2016 go for you? Did you bring in the revenue you expected, or did you fall short of your goal? It’s easy to blame a slow year on why you didn’t make your income goal, but the culprit could be your pricing structure.

Maybe you were busy, but just ran out of time in the day because of family obligations or big client projects. Again, your pricing structure may have caused you to have to work more hours than you wanted (because you weren’t charging enough).

Raising prices is a little unnerving, especially when some of your clients may not be able to afford your new prices. But you’re doing them (and yourself) a disservice by having to work more hours that you want to, just to pay the bills. Here are some of the top reasons to raise your prices in 2017.

When you have a waiting list.

People are waiting to work with you and putting down deposits even though their start date is two months off. This is an enviable position to be in, to know that you have client work two months from now. But it could also be a clue that people can’t wait to work with you because of the great quality that they receive from you, or the fact that your prices are so low that they want in on the steal.

Raising your prices will help to weed out some of these potential clients so you don’t feel so overwhelmed with your work load. It will also allow you to cut back on your hours while providing even better service to the clients you work with.

When you’re working too many hours, just to make ends meet.

There’s nothing worse than working for peanuts, and having to work more hours than you want just to keep the doors to your business open. You’re constantly tired and even grow to resent your clients because you don’t feel like you’re compensated fairly.

Raising your prices will ensure that you’re making what you need to make, while only working the hours that you need to. You can make the same amount working 60 hours a week at $40 an hour as you can working 40 hours a week at $60 an hour.

When you’re not working with your ideal client.

In my experience, the clients who are the most difficult to please are those who want to pay the least for services. When you raise your prices, you start to weed out the clients who just want your service at the least expensive price point possible. And you start to attract clients who value you for the quality service you provide and are happy to pay for it.

When you’re undercharging, compared to competitors.

If your pricing is far below your competition’s prices, you’re doing two things: undervaluing your abilities and setting yourself up to look like a fly-by-night one-off service provider. Sure, your clients want value. But they also want quality. When your prices are very low, you look cheap. And no one wants to look cheap.

Raising your prices sets you up as a professional in your industry and raises your value in the eyes of your ideal clients.

If you’ve never raised your prices before, what’s stopping you from taking the leap? With so many reasons a price increase is beneficial, the first of the year just might be the perfect time!

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