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Pricing - Why it's Hard and What to Do About it
Pricing products and services is always a tricky business. It’s particularly hard when you’re just starting out and securing new customers is your top priority.
It’s also tempting to leave prices where they are for far too long because the thought of charging more makes us uncomfortable. But running your own business is incredibly hard work. Compared to traditional employment, there’s often more stress, less financial security and fewer benefits (such as sick pay, maternity leave and pensions). Your pricing should reflect this and generate an income that’s suitably compensating.
Why Pricing Matters
- Pricing sets the tone for the kind of business you want to be and the kind of people you want to serve.
- The prices you charge need to sustain your desired profit margins. If the cost of running your business begins to creep up, you must adjust prices accordingly to protect its financial health.
- Charging too little or failing to increase prices when you can, could mean you don’t have enough revenue available to scale or develop your business when you need to.
Why You Should Be Wary of Charging Too Little
We’ve all heard the saying ‘you get what you pay for’. If you price an item too low, buyers may think it’s no good. Bargain prices can also attract customers with no loyalty to anything other than their wallets. If you’re busy with these not-so-good customers – for example, people who complain or are slow to settle invoices – you may miss out on working with the good ones. Attracting the right customers should be what matters most to your business.
The Benefits of Charging More
What you charge is an indirect statement about the quality of the product or service you provide. If you charge more, low-quality customers go elsewhere, leaving those who know your worth. Good customers tend not to mind about minor price increases, especially if they know you provide a service that reflects what you charge.
Charging more also plays a key role in fostering growth and development throughout your business. For example, it can allow you to invest in your professional development, provide a more personal service for your clients or create higher value products.
What to Do If Asking for More Makes You Uncomfortable
Our thoughts and feelings about money can be complex. They’re often connected to things we’ve experienced in the past or the beliefs and expectations of others. For example, the pervasive image of the ‘struggling artist’ means creative people often feel guilty about making money from their art. It’s important to understand your ‘money mindset’ and work through any limiting beliefs so you can prevent them from affecting what you charge.
Remember, price is what you pay, value is what you get. Ask yourself whether you’re undervaluing what you do. Your education, training and experience should all factor into your pricing. In almost every industry there are always people with different budgets. Who are your people? Where do their spending habits sit on the scale from high end to low end? Make sure you’re pricing yourself accordingly and marketing your business to the right people.
Finally, you may find it helpful to think about pricing as an experiment. Adopting a growth mindset makes it easier to try new things and learn from them. Higher prices can always be adjusted. What’s the worst that can happen? If someone says you’re too expensive, would that be such a bad thing? What would happen if you offered to let them spread the cost instead of charging less?
If You Do One Thing This Week…
Spend some time looking at the financial health of your business. Ask yourself whether you’re earning enough money to live off and create the life you imagined when you were just starting out. If not, try journaling about money to see what comes up. What would earning enough look like for you? How does asking for more make you feel?
- 6 Little Money Mindset Shifts that Pay Off Huge
- Profit First: Transform Your Business from Cash-Eating Monster to a Money-Making Machine
- 10 Ways to Raise Your Prices Without Losing Customers
- How to Know Your Value and Name Your Price