One of the more challenging aspects of business in both sales and service is setting your rate. Here’s some good advice on determining what the ‘right’ rate is.
How do you set the right price for your products and services?
The “right” price is the price you are happy with and the price which clients are willing to pay.
Now, I know your price can and will evolve over time, but the same guidelines apply, even if you offer your services for free (or at a low price) when you are just starting out.
My suggestion is to put your pricing through the “Right Price Test.” This test involves asking 2 questions:
1. Are you happy with your price?
2. Are clients willing to pay your price?
You need a “yes” to both these questions for it to be the “right” price.
Are You Happy With Your Price?
Just suppose you were able to get as many clients as you wanted at $x, ask yourself:
- Would you be happy?
- Is $x a fair exchange for the value clients will receive?
- Will you resent or appreciate your clients at this price?
- Will you be inspired to go the “extra mile” in service at this price?
- Would you attract your ideal client at that price?
Suppose you charge $50 an hour and the standard is $200 an hour. Imagine that you ended up being booked solid working 8 hours a day at $50 an hour. Now, ask yourself the same questions.
- Would you, at the end of several full weeks in a row, be happy that you were only charging $50 an hour?
- Is $50 an hour a fair exchange of value?
- Will you be resenting or appreciating these $50 an hour clients?
- Would you be feeling like going the “extra” mile in service?
- Do you think you would be attracting your “ideal” client at this price?
To work out your own “right” price, that you are happy with, assume that there is an abundance of clients for you.
Now pick a price for one of your products or services and ask yourself the same set of questions. Keep changing the price until you get a “yes” to all the questions. You will need to do some work to determine the value you deliver before you will be able to answer the “fair exchange of value” question.
Now you’re probably saying this is great in theory but even if there was an abundance of clients, would clients pay my price?
That question is the second question in the “Right Price” test.
One tip here: If you have the confidence to stay firm on your price, then clients will pay. So much of setting your price is having the right mindset.
Are Clients Willing To Pay Your Price?
Part of working out if you are happy with your price was to work out all the value you achieve for your clients. The value and the results need to far outweigh the price you are asking people to pay. This is a fair exchange of value.
If I asked you to give me $1 and in exchange I would give you something worth $1000 would you give me $1? You would, provided you wanted $1000 and you believed me.
So the answer to the question “Are clients willing to pay your price?” is “yes” provided:
- they are qualified (have a need/want, money, etc.)
- you know that the value clients receive outweighs the price and you can articulate this
- potential clients can clearly understand that the value far outweighs the price
- potential clients believe you can deliver the value.
I encourage you to put all your pricing through the “Right Price Test.” The rewards will then follow for both yourself and your clients.
Pricing can sometimes be a sticky issue for business owners, so here are two resources packed full of information that can help anyone think through their pricing.
1. Harvest Field Guide to Pricing – FREE
2. Freshbooks – Breaking the Time Barrier ebook – FREE – The CEO of Freshbooks wrote this and has received awesome feedback.
Photo credit.
Thanks to Tessa for her help here.
