Pricing: The Balancing Act – Service Business Academy

Pricing: The Balancing Act

Waage, SymbolThe Pricing scales

Pricing can be a very sensitive balance; if you price your services/products too high you’ll lose business, but if you price it too low you won’t make enough money to make it worthwhile.  Where do you currently sit on the pricing scales?  The chances are you have priced yourself at the point that you feel is reasonable based on how your competitors price themselves.  Am I right?  

When I work with my clients on their pricing I usually find one of these situations: 

  1. Although they are pricing themselves at a point they feel is in line with their competitors they haven’t actually found out what their competitors charge so they are pricing based on assumptions.
  2. Their “competitive” pricing is resulting in them working long hours as they have to deliver significant amounts of work to meet their revenue target for the month, which also means other important business tasks such as marketing are getting overlooked.
  3. They often reduce their rates before they even provide a price to the prospect (they do the negotiation in their head before they even open their mouth)

Do any of these resonate with you?

Answer this … how often do you lose business based on price?  This is basically asking “how often do you pitch for work and not get it because your price was too high?”.  I bet the answer is that you rarely do.  My powers of deduction lead me to believe you can afford to put your prices up if you rarely lose business on price.

Based on the 3 points I’ve listed above I suggest the following:

  • If you don’t know for sure about your competitor’s pricing then find out.  Yes, it is possible!
  • Working yourself into the ground on a low hourly rate is not a sustainable situation. Put your prices up!  Next week I’ll give you some pointers on how to do this without causing yourself any issues.
  • Stop that negotiation in your head.  Don’t pre-empt the negotiation.  Believe in your offering and the value you deliver. Next week I’ll help with this point too.

Here’s a “no-brainer” statement for you…How much you charge directly effects your bank balance! Your pricing behaviour affects your bottom line.  Don’t do yourself out of the profits you deserve based on the value you deliver. 

Your homework this week is to reflect on your pricing and think about why you do it that way and if that is based on solid data or assumptions.

Next week I’ll show you how to price more confidently.

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