Do you find it difficult to set the correct prices on the services you sell? You are not alone.
Price setting is no exact science. It is often about psychology, and in the smallest companies, setting the correct price can be especially difficult.
Why? Because product creator and seller is often the same person.
Marketing and selling your own services is challenging. I experienced this myself at the beginning of my career as a company owner.
It is essential to give yourself a professional role and practice setting the correct prices for your services.
1. The base for the correct price
There are three main requirements for someone to be willing to pay for your services:
- You need to have something that potential clients are willing to pay for.
- The potential clients need to know that you have it.
- You need to be able to deliver the service by the time you and your client have agreed upon.
If you have all these in place, you can ask yourself these questions:
- What kind of competence and experience do you have?
- What do you have that makes you unique?
- What can you give your clients to make their everyday lives more comfortable, cheaper, and/or more fun?
It’s about bringing out arguments that you have what it takes, and that you are preferable before your competitors.
Once you have spent a few minutes thinking through this, you are ready to set the correct prices on your services.
2. Traditional price setting
If you are selling your services in an established market, the price will often be somewhat defined. The general price level will help you decide your price, even though the prices can, to a certain degree, vary. It’s about what the market expects and is used to.
NB! Be aware that cooperation that restricts competition is illegal.
If you are running a livelihood business, you can calculate the price like this:
Direct costs (connected to the delivery)
+ indirect costs (e.g.: electricity, rent, accounting)
+ profit (your livelihood, including taxes and buffer/deposition)
= sales price (turnover)
This is a classical way to think about price setting, but it is also about how your feelings affect your choices.
3. Setting the correct price is also about psychology
Many people who go from being employees to being self-employed struggle with the transition. It is easy to forget that the price needs to be higher if you are delivering a service (business income) than if you’re employed (wage income).
As a self-employed, you take the risk and the responsibility yourself. You spend more time on the administrative, and you make the job easier for the client.
Therefore, the price needs to be higher, and how you utilise the resource time is crucial.
4. Avoid this mistake when setting the price
Many newly established people set the price artificially low to “get on the market”.
This can be a wise strategy, but make sure to show what the actual price is, and give a clear discount. Otherwise, the market will think that the discounted price is the actual price.
The question is whether you get to a level that gives you a viable business over time, or you have to work day and night to earn an income you can live with and for.
5. Dare to lose clients
If you increase the prices, you risk losing clients, but it can be worth the risk. You can also see this as a step towards a more profitable business.
A higher price can make you more attractive to new clients. The price reflects the value and quality stamp you put on yourself. If your offer matches their request, they are also willing to pay.
Be aware that there are rules for the enlightenment of price on both services and goods when selling to consumers. These rules don’t apply when selling to companies.