From location to branding, to management, and everything in between, there’s no question that business ownership comes with an array of difficult decisions. But settling on the right price to charge for the services you provide can be one of the most overwhelming decisions for many business owners.
Pricing will play an incredibly important role and prompting factor for your customers. At a glance, the price of your services will suggest the quality of service customers can expect from your business and may be the reason many clients will choose your business over your competitors.
Given the importance of charging your worth as a business owner, here are some points to consider when setting your prices:
1. Understand your value
Understanding your value comes down to the nature of your expertise. Your expertise consists of your professional qualifications, such as your continual professional development and the experience you have putting it all into practice.
Depending on how long you’ve been in the field, you might find that certain aspects of your work will come easily — almost automatically. Those are called unconscious competencies — what you are good at without even thinking about it. Don’t discount them. Being unconsciously competent is a value you bring to your business and something you should consider when determining a price.
The concept of understanding your value is particularly important for businesses that charge on an hourly basis because the better you get at something, the less time it will take for you to do the task. If you charge an hourly fee you can end up billing less than what your work is worth and end up losing out on big earnings. That’s why it’s important to understand your value and charge accordingly.
In the same vein, it’s also critical to know your competition and not overvalue yourself. If every business in your field is charging less than you, it may be challenging to market your services and persuade customers to choose your business.
2. Understand the pain points of your clients
The fact of the matter is that people use professional services to solve problems. When you’re determining what prices to charge for your services, it’s important to consider why your customers are hiring you. Ask your clients what they need to be done and why they are inquiring about your services. Consider what it’ll cost your customers if they don’t fix the problem. Soon you’ll begin to understand where your customers see your value and how much they are willing to pay for it. Remember that some customers will have an easier time seeing and understanding your worth and others won’t, and that’s okay!
3. Understand the difference between value and price
If you center your business around price, you will attract clients who focus on price. Determine how you want your services to be seen, do the upfront work, and help the clients understand the value of working with you. This approach will require some work on your part, but it’ll help customers become acquainted with your work and what you bring to the table. Consider implementing marketing tactics that will help drive this point to consumers, such as free trials, strategy sessions, consultations, and so forth.
If potential clients understand the value, potential ROI, and how your services solve their pain points, they will be ready and willing to make an investment in your business.
4. Understand how to communicate your value to your clients
This point is especially tricky for businesses in the service industry. One common issue is that business owners often get so good at solving a problem that clients often think they are overpaying for their services. It’s understandable. The customer may only see the short amount it took to fix something and not the amount of practice and experience it took to get to that point.
Remind your clients of their problems and how badly they needed them solved. You can communicate this message through clever marketing or by simply stating it in a professional manner. However you choose to communicate your worth, just remember that those who can’t understand the value of your work will never be your clients.
5. Understand money
It’s human nature to navigate away from the things that make us uneasy, so if you are uncomfortable with money, you’ll have a hard time charging your worth. You’ll have to be willing to talk about money, fees, and services without feeling guilty about what you are charging because, as time goes on, your rates will increase or you may add new services. This is why it’s important to take the time to understand your worth and evaluate your work, as well as keep an eye on the rate of the competition.
Final Warning — “Pigs get fed, hogs get slaughtered.”
In business, the meaning of this phrase is that it’s okay to make a profit, but when that profit is the result of price gouging or taking advantage of people, you’ll eventually lose in the end. No one likes to be taken advantage of, and that includes your clients. Keep your business honest and professional and you’ll see how much growth you’ll be able to achieve along with a good reputation. Being a pig (eating, or doing what is necessary for your business to survive, grow, and succeed) is good. Being a hog (overeating, or focusing solely on profits at the expense of the clients and quality) is bad.
Watch co-founder of Mazuma, Greg Nielson, explain the importance of charging your worth in the webinar below, and don’t forget to subscribe to our YouTube channel for more business advice!
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Frequently Asked Questions (FAQs) about Charging Your Worth as a Business Owner
1. Why is understanding my value crucial for setting prices?
Understanding your value, including unconscious competencies, helps ensure you charge adequately, especially for hourly-based services.
2. How can I grasp the pain points of my clients when determining prices?
Ask clients about their needs and the cost of not solving their problems. This insight guides you in understanding the perceived value of your services.
3. What’s the difference between value and price in business?
Centering your business around value attracts clients focused on quality. Communicate the value of your services to shift the focus from price.
4. How do I effectively communicate my value to clients?
Remind clients of the problems you solve and the expertise behind it. Use marketing tactics like free trials or consultations to showcase your worth.
5. Why is understanding money crucial for charging my worth?
Being comfortable discussing money is vital. Regularly evaluate your worth, track competition, and be mindful of rates to confidently set and adjust prices.
