I know I write a lot about product-based businesses so today, I wanted to delve a little into pricing for service-based business. The copywriters, the photographers, the SEO gurus, the social media mavens, this one is for YOU.
It’s such a sticking point for many and it’s easy to see why. You don’t have a product, therefore, your overheads are likely a whole lot lower than traditional product-based business. So, how do you come up with a fair, marketable and profitable price? Stay tuned because I’m about to give you some actionable strategies to price your offerings right.
Common Sticking Points
Before we get into the juicy bit, I want to tell you about some of the common sticking points I see in the industry. These are generally mindset related and the good news is, you have the power to do the old switcheroo to get yourself on the right foot.
- Imposter syndrome: responsible for undercharging, overdelivering (thus short-changing yourself) and halting your growth.
- Bending to suit your clients’ needs and budgets rather than standing firm: usually results in varied pricing, frequently not at the right rate. Also see: imposter syndrome.
- Strategy overwhelm: there are so many pricing strategies out there, how do you know which is best for you?
Were you nodding your head through all of those? Don’t worry, I’ll show you how you can price with confidence!
Income can be a little on the irregular side when you’re providing services. That lucrative client that increased your income by 20% could be gone next week. You could get a slew of retainer clients. Basically, it can be unpredictable. Which is why you need to take charge my friend!
Here’s a basic formula* to get you in the green and beyond.
- Work out your ideal salary:
- $120,000 for example
- Add 30% for tax:
- Add 9.5% for super:
- Add 10% for expenses:
- Total Income Required
Divide your total income required by 12 months to get your target monthly income of $14,900. Whoa, that sounds like a LOT doesn’t it? See how saying you want to make $120k per year is very different from actually making it when you’re in business for yourself?!
Take a minute to calculate YOUR ideal income & percentages before we head to the next bit.
*Adjust the % to suit you, your business and financial situation.
How To Charge
My number one piece of advice? Charge for the value you add rather than the time you give. For example, a one-hour strategy call may only be a measly hour but what do you think your client get out of it? Clarity? Direction? A new-found pep in their step? Correct me if I’m wrong but that’s worth a LOT more than $80. In fact, I’d go so far as saying it’s more like $499. Don’t forget the work you put into landing that call, researching and providing your insight.
When you are selling services, you are selling what’s in your brain and that’s really hard (dare I say impossible) to quantify!
Keeping that in mind, a great pricing strategy has 3 elements:
- A mid-point offering
- A basic offering
- A top tier offering
You should price each accordingly. For example, your top tier offering should be 3 x the cost of your basic offering.
- A mid-point offering $1200
- A basic offering $500
- A top tier offering $2000
The strategy here is to entice your audience to choose the mid-point offering. It’s more robust than the basic but it’s much more affordable than the top-tier. Make sure each touch-point is profitable! When you feel like they need the Rolls Royce of services, up-sell them into the top-tier offering or if it’s the opposite, give them the option of the no-frills service.
You can have many, many services under each but keep your levels clear.
The great news is, the new year is in full swing which means…now is the perfect time to raise those prices! Remember, the cost of running a business increases each year: tax, subscriptions, insurance, hardware…you name it. Along with that, you’ve likely invested in yourself through reading, paid courses and even networking. Those things cost money!
If you want to make more in 2021, you either need to work more hours or, up your prices. I know which I’d choose!
If you’re a bit stuck on where you’re at either income or expense wise and want us to get your numbers all shiny and organised to help you make these pricing for service based business decisions, book a free discovery call to have a chat with me.
PS – If you don’t already have my Free Pricing Calc grab it here!