How To Set Your Price
If I had a $ for every time……
Small business is a wonderful ecosystem for people, who show an appetite for risk taking by doing their own thing and transforming their idea into a business delivering value to others i.e. problem solving
If I had a $ for every time…. I have observed or I am asked by a small business about how to price what they do and deliver…..well, I would be way “less poor”!!
6 critical elements of price setting
The 6 critical elements of price setting should focus on the investment you have made and will make for the client:
1. Your experience and training: this is prior to starting the business and also since you started the business. You will surprise your self just how much you have invested in your experience (good, bad and ugly) that underlies your business proposition.
2. Your fixed costs and how to recover them: these are rent, wages, car, bookkeeping, equipment, finance, marketing systems etc etc that grind away at your bank account each month regardless of whether you have clients or not.
3. Your variable costs: these are specific to a client and may be your time spent on the job (usually way more than you price for!), travel time and distance, materials required and subcontracting out elements of the work.
4. Working ON your business: Your time and investment in developing the right number of leads to convert into the right number of interested clients (proposals) and then converting some of these to actual paid work.
5. Scoping the job carefully so your "spend" on time and resources is understood so you recover costs and margin. Incorporate in your client agreement the right to review out of original scope work so you can vary the price where justified.
6. Your Margin: this is the amount above your costs to be recovered and represents "your worth and the value you deliver to clients"….this is often the most underdone part of pricing.
7. BONUS: align your pricing not only to your worth but also to the client more likely to value and pay for your worth ie re visit your targeting of clients
Check Your Price Logic
So, check your pricing logic by reviewing your approach to the 6 critical elements above. I am confident by doing this you will find that your "value is worth" more than your current pricing. If you then do a better job is demonstrating this value, your price will be far more palatable to your market.
Give it a go and seek help from a mentor to test and measure your new approach.
Its worth it and is fundamental to a viable and sustainable business proposition.
Need some help to check your pricing strategy? Contact Leigh today!
Leigh Powell is a business mentor and strategist with Your Time Matters which facilitates business networking and professional development. yourtimematters.com.au