Pricing is one of those business areas that business owners worry too much about when the answer to the question is simpler than they think. I’m going to save you some time from reading this whole article.
The answer is: whatever you want, what you feel best about [period]
Of course, I’m not going just to leave you hanging; there are a few considerations to make and questions to think through. There are two-side to the equation, the more logical/financial side and a more mindset/confidence side.
Money Goals
What income do you want/need to make from your business?
If you have multiple offers/services, then you can spread your income goal across offers. But we are going to keep this simple and assume one offer.
Revenue – Expenses = Net profit
- How much of this net profit do you want to take home as income? [don’t forget to take out any tax to come out when considering take-home income]
- To figure out the amount of revenue you need: expenses + income target + (approximately 30% on income for taxes*) = how much you need to make
- How many clients can you comfortably manage?
- Divide “How much you need to make” by “ # of clients you can manage” = Gives you a base amount to start from.
Let’s say my yearly estimated expenses are $4,000 I want to make $20,000 gross income {$6,000 taxes} = $30,000. This would be $2,500 per month, and let’s just say I can manage 2 clients per month, so my service price would need to be at least $1,250.
Of course, this is a very simple way to look at this. This is not an exact formula, but it gives you a structured way to start looking at your pricing. And it’s only one part of the formula.
*tax-rates vary your’s may not be that much, and it depends on many factors, including business legal structure; I picked a high rate for this example.
Pricing of Comparable Offers
You can do some market research on pricing for comparable offers to consider where you might start your pricing around. This can easily be done if you have an offer that is easily compared with a quick internet search.
BUT don’t put too much weight into this research. You don’t know their audience, their experience, their business structure/team structure if they are even selling their offer at that rate very successfully (high or low), or if their offer is really comparable to your offer.
Again, just a piece of data you might use to help you make a decision.
Since we are small business owners, I don’t recommend spending too much time researching/surveying your audience for pricing; it’s better to experiment in action (aka set a price and make the offer).
Pricing Too High
Aka, What are you comfortable selling?
At the end of the day, it’s really hard to promote an offer if you feel uncomfortable promoting it because YOU think the price is too high.
If you don’t feel confident about the offer or the pricing, it’s going to make selling it less successful. You need to be able to confidently talk/write about what you offer and what it costs.
There is 100% a mindset piece that comes with marketing, and while you don’t want to “hold” yourself back, you also need to find the balance between pushing yourself too much “outside your comfort zone.”
Being too much outside your comfort on the pricing of your offer can often result in a self-fulfilling prophecy of you not selling your goal for the service.
Keep reading because I do have more suggestions for experimenting with this.
Pricing Too Low
Aka, Do you feel resentful?
On the flip side of too high, if you feel resentful about fulfilling your service because you think/feel you aren’t making enough. You can also have a hard time finding the motivation to market that service.
Who wants to bring on more people that you feel are eating up time from your business/life; when you don’t feel like you are making what you want?
Also, along these lines, “charge what you’re worth” is not good advice. It should be charge what you feel good about, charge what inspires you and makes you feel like you are moving towards your goals (and not just money goals).
The Real Answer: EXPERIMENT
As your business grows, it will evolve in many, many, many different ways. Your price is only a small part of your overall business equation. What you price your service(s) at will and should change.
Pricing is also not the only way to make your money goals, you can also structure your offer differently to be able to take on more clients or expand your services to better/continue serving clients you might already have.
There is never one way or one “right” way to do anything in your business, including your pricing.
Also, consider what else you “gain” by taking on clients beyond just the money transaction. While all of us need to make money from a business, sometimes it’s more beneficial to gain experience, contacts, confidence, etc.
If we look beyond just the money goal, it may be more beneficial for us to lower our price to reach other non-financial goals and gains.
When experimenting with your pricing, remember the number on your sales page is not the only deciding factor. It can be your marketing, your messaging, your target audience, and, yes, your own mindset.
Remember, you can change your pricing at any time you want.
If you took on 3 clients at a lower price, that doesn’t mean you need to be “booked” out at that price. You can change it as soon as you get those 3 or 1 or whatever.
There is also no “perfect” time to change your price or way to change your price.
At the end of the day, you don’t know until you try! Put that offer out there!
ONLY you can really know if that price is of service to YOU! Ask yourself:
- Are you able to market your offer with conviction and confidence?
- Is this price benefiting you at this time and at this level of your business?
- Are there other pricing options that might help you reach goals beyond transactional goals?
Only you can choose the right price! You got this!
And if you need a little inspiration and motivation in the money mindset department, here are two books I recommend:
You Are A Badass At Making Money
Find more resources to help you make the most out of your business in The Hustle Happier Hub Of Operations 👇
