How To Guide: 4 Key Factors for Setting your Prices

Setting your prices for services (& products) is, hands down, one of the most difficult things to get right. If you are a sole trader, micro business or freelancer, it is very challenging to sell yourself and your services at the right value. Added to this….it is more likely that you will be asked to haggle, reduce your prices or negotiate.

So what do you need to consider when you set your prices. How can you make enough money but be competitive? How to do you gain enough courage to charge what you should for what you do?

Here are 4 key factors to consider when setting your prices.

  1. Be absolutely clear about what you are selling. Too often when we think about setting our prices, we break it down into the stuff we sell. It might be that you will run a 3 hour workshop or provide social media support for a week or perhaps a box of 3 and made items. Convert these things into experiences. Think about what your customers have already said about what you do. Maybe you are actually selling peace of mind or a unique gift that no one else can buy. This helps you set the context in which you are selling and helps you begin to understand the ‘value’ of what you do.
  2. Write everything down that you have to pay for to do what you do. This includes your time, materials, tax, staff, building, car, phone – everything. Divide this into a 40 hour week. This isn’t necessarily your price set right there – BUT it starts to give you an idea about what it costs you to get out of bed in the morning.
  3. Decide how you want to charge.
    1. If you are selling products then you need to work out what each things costs to buy or make and then double it. If you find that the going rate is way lower than you price then you have two choices – either jump to our next point or reduce your costs.
    2. You could decide to charge hourly. This can work well but you will need to absolutely clear with customers about how long something will take. This takes skill and if it takes longer or your client is demanding, then you might quickly be out of pocket.
    3. You could decide to charge a flat fee for something. Again this might work well for clients who are concerned about cost but doesn’t include all the changes that might happen. Goal post moving or lots of customer interaction could again reduce your profit.
    4. You might want to consider value based charging. This is when you start to talk to customers about what you will bring to them with your services. Imagine that you are asked to quote to run a workshop for someone. Start your conversation about what the outcomes of their investment will be. Maybe you will say that all delegates will leave with knew knowledge about x or y. Perhaps you let them know that each delegate will leave with 2 new products or with a new qualification. Using this value based charging immediately focusses on value rather than price. If you can sell your value then the price will be easier to set and your clients will pay the right price.
  4. Find the right customers. Again and again when speaking to small businesses suffering from bad feedback or customers wanting to haggle prices down or questioning pricing it stems back to their marketing. Often customers have made a value judgement about you, your business and your abilities. As such, they have already decided what they expect from you. It might be that they expect a lot and complain when it doesn’t work out. It could be that they think you are a little relaxed and laid back and therefore they can get you cheap. It is possible that they think you are so friendly and warm that they can get a ‘mate rate’. Think carefully about how you talk about yourself, your services and business. If you add value, are professional and make a real difference then say so. The outcome will be better clients, who understand your value and will pay the price you quote. Less haggling, less missed work, more good paid jobs.