It doesn’t matter what your niche is, how long you’ve been in business or what kind of sales track record you have: pricing is one of the hardest parts of building a business!
There are so many factors to consider. If you have special education, credentials or expertise, you can likely charge more than someone who has less experience, but how much more? You don’t want to set your rates so high that potential clients will rule you out.
What about discounts for friends? For referrals? Is that good marketing or just undercutting your profits?
9 Things to Keep in Mind When Setting Rates and Prices
Look and ask around.
The first step is to see what others in your niche are charging. There will always be a range, of course, but you can pretty quickly determine what the high and low ends are. Some coaches/consultants/experts post their rates publicly (I do! http://makemediaover.com/services)
If not, ask! Most solopreneurs and influencers I know are willing to share some details from their business structure, or at least give a little bit of insight. They may be able to tell you what their current rates are, or how the rates have changed over time. You could always book time with that influencer, so that you know what you’re paying, and use your experience to determine whether you should stay in the same range or go higher or lower.
Keep the market in mind.
It’s easy to fall into the trap of setting rates based on what you think the value of your service is. But the market doesn’t always support what you think you should get. It’s always a humbling internal debate, especially if you’ve put in a lot of time getting educated and becoming an expert, and you want to get paid for that level of experience.
Think of the housing market. You may want to sell your beach house with five rooms, a custom kitchen and movie theater for a million dollars, but the real estate in your area is going for half of that. You can list it for a million dollars all you want…but nobody is going to come to your open house. You can’t force the market to change just because you think you deserve it.What does the housing market have to do with setting consultant rates? Find out!Click To Tweet
Different tiers for different tasks.
There are certain services and tasks that can and maybe should be priced higher than others. For example, if I’m doing any web development or coding, or creating a customized workout for a client, complete with videos, a schedule and a list of suggested equipment, I’m going to factor in a higher hourly rate than if it’s just a consultation phone call.
An hour is an hour is an hour, and one option is to just set a standard hourly rate, regardless of what is done in that time. But I find that it’s better to have a few rates: the more special skills I have to apply, the higher that number is.
Roll in expenses.
Let’s say you’re a makeup artist. You’ll be investing in products to try (so you can review or teach people how to use them), different tools, etc. You can’t charge every client for that overhead, and there is an element of those purchases that are just your costs of doing business.
But you can certainly keep that in mind when setting your rates. Maybe your time is worth $30/hour, but you charge $35/hour to cover some of the ongoing costs you incur. You don’t need to explain that to clients, and there’s certainly nothing unethical about this move, but it can help you justify the expenses you’ll face and also help you keep up to date on the latest products on the market.
Justify your numbers.
You may never have a client ask why you charge what you do, but it could happen. Don’t get caught without an answer! As long as you’ve put in the time to work out your rate (using these tips is a great start!), you can easily respond with something as simple as:
“Great question! I have put in the time and effort to become an expert in this niche, by getting an advanced degree/working in the industry for X years/attending a seminar and I continue to advance my knowledge and education, because I always want to provide you with the best and most up-to-date information. Because of that, I believe that I offer more value to my clients. Having said that, I’ve worked hard to ensure that my rates are in line with others who have a similar level of expertise, and my clients tell me that the’ve gotten a massive return on their investment in working with me.”
Discount as an exception, not the rule.
It is very tempting to offer discounts: to your friends and family. To clients who are facing a budget challenge. To return clients! But be careful. Once you lower the rate, it’s very hard to bring it back up*. There are other ways to give clients a break when needed (rewarding loyalty: see below!) and you can always make exceptions for great causes or projects that you just really want to do, regardless of the revenue.
But when you drop your price, you’re telling clients and yourself that the work isn’t as valuable as you said it was and that, psychologically, can be really detrimental.
*I speak from personal experience because I am a sucker and am constantly fighting the urge to give away my work and my time for free.
So, if you’re not discounting — what CAN you do to get people to stick with you or take on bigger, more long-term projects? Offer bundled packages, so the discount is on a bulk purchase (Book 5 chats get 1 at 50% off; Buy 5 ebooks for the price of 3).
Also, surprise your clients with special discounts and flash sales. These aren’t negotiated or expected. They are your way of saying thank you for sticking around!
(When I re-released Make Your Old Content New Again, I sent out the new edition to all of the people who had previously purchased it, and make sure they got it before anyone else!)
And don’t forget the power of referrals. You may want to set up an affiliate program so that when clients bring in new leads, they get a discount or promo code on their own future chats. You’ll still net more money than if that new lead had not come in, so it’s a win-win.
It’s OK to turn people away.
I think this is the hardest lesson to put into practice and I’ll admit — I still struggle with it! When you’re building your business or working as an entrepreneur, losing a client or having something fall through can feel like money slipping through your fingers.
But there are always other clients, and if you take on projects at a lower rate or outside of your expertise, you may not be available for that perfect client that comes along.
There’s an opportunity cost when you say yes to everything.There's an opportunity cost when you say yes to everything.Click To Tweet
And at some point: you want clients who value your work and are going to take action on your suggestions and advice. The lower the rate, the more likely it is that a client will book a chat with you and then blow it off. You still get paid, but do you really want to build your brand with people who will forget you the moment the project ends?
Ask for feedback.
Survey your clients: how am I doing? Do you think my rates are too high or too low? Have you gotten a return on your investment with me? How likely are you to recommend me to a friend?
And for those who decide not to book you: what would have changed your mind? What was the biggest factor in you deciding not to work with me? Are there other services I could offer that would change your mind?
Rates very rarely need to be set in stone, so if you pick a number and it doesn’t work — make a change! Over time, you’ll learn what prices your audience will pay and that’s one of the biggest lessons in building a business.9 things to keep in mind when setting rates and pricesClick To Tweet