First off, let’s get this straight: When it comes to setting prices, do not worry about your competition. In the first place, you have no idea how much profit your competition makes. So if you’re pegging your prices on theirs, you might just be following them down fast-tracked hit to bankruptcy. Again, do not base your rates on your competition.
So how do you set your prices? Here are some steps to take:
1. Decide how much revenue you want to earn per month, and how many clients you are comfortable servicing.
First off, you want to decide what you want to be earning per month in the business. What revenue do you want the company to be taking in per month?
Next, think about how many people do you want to be serving per month? With those to numbers, divide one by the other. This method informs you of a price you need to charge per person per month to deliver that level of revenue that your business wants to achieve.
2. Factor in all the costs of delivery.
How much is it going to cost you as a business to deliver this service to your clients? Is there going to be things that are layered in so that each new client that you take on will have additional costs? For example, things like Stripe fees, potentially some of your virtual assistant’s time, and advertising costs, all add up to a sometimes surprisingly significant amount. Thus, doing this ensures that you get a clear idea of the cost of delivery.
Don’t forget to layer in tax and an element for profit. You also need to be able to allocate some amount that each client will contribute to the fixed overhead of your business, plus your own take home. This is so that you can get a full idea of what the costs are for each client that you have on board. Your price should work on both covering costs and earning you profit.
3. Match the value you provide with the price you set.
What is it that people come to you? What value do they expect to get? Is your pricing according to that? Are they linked, or are they disjointed? In ensuring that you are providing massive value, you also need to make sure that your intent for that is reflected in the price you quote.
Here’s a little exercise you can do to craft an excellent value package:
- Look at your current price point, and write down everything that you deliver on that price point, looking at all the value that is laden in there.
- Double that price, and write down everything that you might give in value for that doubled price
- Double that doubled price. What value would you give for that doubled price? What would you deliver, and what does that look like?
Is there any way that you can deliver that last value, but the price is only in the middle, or the first doubled price? In other words, you’re giving them more value than the price, but at double your current rates.
It might not be done immediately, but it starts to get you thinking about that link with price and value and to make sure that you are giving massive value, but you are charging appropriately as well.
4. Test your prices.
The thing is, you’re not going to know if people are going to pay your prices until you speak to enough people and quote your prices.
Be wary though of getting discouraged when a couple of people find you too expensive. Don’t use this as an excuse to scrap it straight off. Speaking to one or two people are not enough to make a judgment on whether your prices are set to the right place. Speak to enough people to get that data to make that decision.
One of the essential traits of an entrepreneur in running a business in today’s world is the adaptability and willingness to change. As you plan your pricing and decide on the inclusions, keep this in mind: “Prices may change without prior notice.” Visit and revisit your packages to ensure that both you and your clients are winners at your price point.
For more expert tips on how you can scale your business profits, follow Annette & Co. on social media. We’re on Facebook, Twitter, YouTube, Instagram – and even TikTok! We also air Podcast episodes LIVE so be sure to hop on when you have the time!