Pricing Strategies - When Can You Charge More?

Whenever I ask “Are you charging enough?” I get a blank stare or an awkward moment of silence. 

It’s a touchy subject, deciding how much to charge for your product or service.  If you don’t charge enough, you will constantly struggle to pay your overhead.  If you charge too much you won’t have much luck getting new clients.

I think what strikes me most about pricing is that it doesn’t matter whether you are an architect, financial advisor, or small business owner – entrepreneurs the world over struggle with what to charge and rarely charge more when they should.  

E=MC²
Deciding what to charge is like creating a price equation. You must account for overhead such as rent, electricity, phone, and insurance.  You must provide for your own health insurance, federal income and payroll taxes, and retirement plan contribution.  When you work for an employer, they pay these costs -Your paycheck does not reflect the actual cost of employing you.  When you are the boss, you pay these expenses out of your own pocket - It’s all your responsibility. Besides overhead, you must add a reasonable rate for your product or service to complete your price equation.

Charging Hourly: A good rule of thumb is to charge an hourly rate that would give you enough to cover your expenses and provide for a decent living. 

Charging by the Project or by the Month: You must gather all the information to determine what you will charge and what will be included.  Be very clear in your contract about what the client will receive as you don’t want to be including change orders without charging for them.

Keep this in mind: Although you may work forty plus hours per week you will most likely bill 25-30 hours as you will find that managing your business will take you at least ten hours per week.  If your fee is too low, you will constantly be under-funded and will have a tough time making ends meet.  You’ll be playing catch up and you’ll never get ahead.

Time Management Tip: Professional business owners keep track of their time whether they charge by the hour or by the project.  This allows you to see where you are wasting time.  Create an excel spreadsheet where you track the time spent on each of your projects/clients so that you can see where you spend your time. This is especially useful if you charge by the project because it allows you to see your true hourly rate.  If your hourly is worth $100/hr but your timesheet shows that you spent 80 hours on a project for which you charged $4000, then you really only earned $50 an hour.  You either need to charge more, be more productive with your time, or put limitations on the changes clients request.  Read this great article Time Management Worksheet – How to Find the Time You Didn’t Know You Had for tips and tricks.

How do you decide how much to charge?
A good starting place is to find out how much others in your field charge for similar work.  Also find out if competitors provide the same deliverables that you do. If you give more, you should charge more (provided what you give is in demand in the marketplace).

Don't charge less thinking you'll get more clients - this strategy could backfire.  Charging less than the competition won’t allow you to live the good life.  You’ll find that clients who shop on price are difficult to service and not fun to work with and you’ll have a tough time paying the expenses to run your business. You’ll need more clients because you’re charging less and you’ll wear yourself out.  Low price strategies work for the Walmarts of the world who provide high volume products for the masses. 

Make sure you're worth what you charge
I once remarked that a client’s pricing was low and that we should work on strategies to increase his hourly fee.  The next week his price was suddenly 25% higher.  I cautioned him.  You must base your fee on the value you provide in the marketplace.  You have to work at improving the value you provide before you raise your fee.  If nothing’s changed in the way you deliver your product or service, you can rarely charge more. 

So the big question is: When can you charge more? 

• When you have completed extensive training above what's customary in your field – This shows you have skills others don’t have, so you CAN charge more. 
• When you have completed a credential – The knowledge you gain from a credential allows you to position your business uniquely to attract higher net worth clients that are WILLING to pay more. 
• When you have established a track record – If you've helped many satisfied clients over the years you will have a track record that allows you to showcase testimonials to show you get RESULTS.
• When you have cornered the market on a unique technique or skill – If very few people can provide a skill or technique that is exclusively yours, clients will have to go to you.  Creating DEMAND in the market place will allow you to charge more.
• When you BELIEVE you are worth it – Even if all the above applies to you, you must still believe in yourself.  Do you do a good job? Do your clients love you? If you have the confidence that your skills and service are exemplary then for goodness sakes, CHARGE MORE
• If you don't have the confidence, what will it take to get it?

What's the next step?
You have to take a stand and charge what you are worth.  This is applicable to each and every type of business out there – it runs the gamut in terms of business types and professions. I've seen financial advisors give away their talent with free financial plans and time spent on tasks they don’t get paid for, all of which would be perfectly justifiable to charge a standard fee.  I've seen CPAs dispense free advice that is worth upwards of $200 an hour – wouldn't that be a nice revenue stream?  I've seen architects spend time researching building sources and techniques where they could have charged the client an hourly fee.

How do you charge what you're worth?
Create a Price and Services List and provide it on your website and in your brochure. Most of the time clients are fine with paying your rates.  You just have to take a stand and act "as if".

If you’re charging the right price for your product or service, but you simply don’t have enough clients, you need to create a marketing plan that forces you to take massive action.  All the knowledge in the world won't help you unless you take action to get new clients.  That's where I can help. Call me to help you take control of your business and your profitability.  After all, you can't live the good life unless you charge what you're worth and most of the time that means charging more.   

About the Author
Suzanne Muusers is an ICF-Certified Business and Marketing Coach who believes that her clients should create a business that supports them in living a wonderful, balanced life with plenty of income and free time.  The first place to start in living a balanced life is to charge what you are worth.  

 

Suzanne Muusers ICF-Certified Business Coach Prosperity Coaching LLC

Read marketing tips and how to's on Suzanne's Blog – The Prosperous Entrepreneur

Suzanne is also the creator of the Two Page Mini Business Plan™ - The Secret to More Business Income and the Financial Advisor Marketing Plan E-Course - How to Get More Ideal Clients

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