When one starts a business, pricing the services can feel like a nightmare decision.
How much is too much? Or too little? And how can we stand out in a saturated market?
From my experience working with small businesses in the UK, people tend to feel pricing is a reflection of:
- Their experience
- Qualifications
- Self-worth
- The state of the economy
- How they feel about money in general
All of these can result in a price being too high, or more commonly – far too low.
Below are some of the ways you can look at your business to come to a satisfactory price that will be good for you, the future of the business, and your customers.
Cost analysis
Calculate the total cost of delivering the service, including materials, labour, overheads, and a profit margin. This is common with trades such as electricians, mechanics, upholsterers and so on.
Make sure to account for all expenses, both direct and indirect. That means all of the fiddly bits in between the job, like answering calls, replying to emails and tidying up at the end.
Market research
Instead, you can research your competitors’ prices, some look for averages. What can be helpful is determining your unique selling point and how this might affect your price point. Averages can help you understand what the market is willing to pay and where you can position your services. This is especially true when considering location (think services in and around London).
Some people will put their prices somewhere in the middle to start with – provided you’re meeting your overheads and labour costs, there’s nothing wrong with that.
Do not undercut the market. It pisses off your competition, and lowers the expectations of the market which leads to . It will make business bad for everyone, and your competitors will resent you. Better to price too high and come down later, than to fluff up your reputation before it’s had a chance to get going.
Value pricing
Consider the value of the outcome your service provides to your clients.
If your service solves a significant problem or generates significant revenue for your clients, you can charge a premium price. Of course, when choosing this model you do need to really make what you do “worth it” to the consumer.
Your service has to feel 100% indispensable. That means on time, wonderful to work with and that extra special “something” that no-one else is offering. This can be where a well-planned USP leap into action.
Cost-plus pricing
This is the most common method of pricing services, where the price is determined by adding a markup to the cost of the service. The markup should reflect your desired profit margin.
Beware undercharging. Many companies tack on minimum wage due to “just starting out”, or fear of rejection at a higher price.
Do not undervalue your time – if you run a good business, it will be worth more than you think.
Hourly or per-project pricing
Determine whether to charge for your services on an hourly basis or a per-project basis. Hourly pricing is best for ongoing services, while per-project pricing is best for project-based services.
Ask a pro
The key to pricing your services accurately is to understand your costs, the market, and the value that you provide to your clients.
Sometimes we all need a little help with that. I’m here if you need help getting started.
About the Author
Catherine Jarvis Clothier is a digital marketer and online presence specialist living and working in Kent, UK. She has worked in unusual UK businesses for over 10 years across the South of England, particularly in automotive and therapy-based enterprises. Catherine specialises in social media, SEO and web design. She can be contacted here for online business consultations.
