When you first open a service-based, coaching or consulting business, one of your first questions will be “How much do I charge?” I know this because I see this question asked all the time, and everywhere. It was also the first thing I wondered when I began as a copywriter four years ago.
You will be tempted to set up a formula to determine your fees. It might look something like this: I think it will take me Y hours to perform this work. I want to make $XX or $XXX per hour. I will multiply Y by XX and get my project or package fee. Or if you are a coach and think you will work “by the hour” you will find your ideal hourly rate – a good estimate based on what your competition is offering and what you are comfortable making – and set that as your fee.
There are many things wrong with this strategy. But beyond the practical stumbling blocks you will soon discover – you rarely adequately estimate your time, time actually spent is dependent on so many factors including the needs (or shall I say “neediness”) of the client – there is one BIG reason why this strategy seldom works out well in the end.
Burnout. When you quantify your “worth” by the number of hours in your workday you will max out your earning potential rather quickly. Being busy is good, right? But you are only ever going to make X x Y. If you want to earn more, you need to increase one of those variables.
But what if you adopted an entirely different pricing strategy. What if instead of measuring the cost of your offering by the number of hours it takes you to actually do the work, you considered a strategy that actually values the countless other hours you have spent learning your trade, gaining experience doing it, not to mention running your business – the practical bits of work that never make it into your project quote. And what if instead of looking at what you are worth to the client, you instead approach pricing from what the SOLUTION you offer is worth to the client. To make what you do valuable to others, you need to show improvement in their life or business: your solution should save them time, save them money, earn them more money or create greater wellbeing. When we value the solution, we see the purchase as an investment and not as a deduction. You need to get your clients there.
This is a mindshift, but a necessary one if you are going to avoid burnout but still arrive at the revenue potential you deserve.
So how do you price your offering with value, and not time in mind? Find out first what your client needs from you. What is the solution they are seeking. As we are all unique human beings, and businesses are all different, this NEED will vary client-to-client. If you are a website developer, you might think you sell website design. You don’t, you sell the result of a powerful new website. And the result your client is looking for is exactly what you need to know BEFORE you quote a price so you can create a very clear line from A where they are to B where they need to be, using your solution or offering as the route. When you can quantify this improvement, say in dollars and cents (maximize their revenue) or feel-good (improve their health) you make a compelling argument for why your project fee is worth it to them.
You might ask: Don’t I need to be comparable to my competition? Nothing you do should be comparable to your competition! You are unique, and so is your business. Knowing how to price your offering is as much about looking within, to see what unique qualities and offerings you can bring to solve problems for you clients, as it is looking without to see what alternatives are out there. What makes you unique – the collection of skills and talents you have, as well as your approach to the project at hand – is what creates your brand. A strong and consistent brand aligns itself with a particular pricing strategy that is not comparable to others. Starbucks doesn’t justify it’s pricing based on a cost per unit analysis. Pricing your offering actually begins one step before: in nailing your value proposition and knowing what makes you MORE than …. a designer, web developer, copywriter, or parenting coach. And sell the solution – the transformation, the better life – not the work itself.
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