One of the most challenging mindsets to overcome when you’re just starting out in business (and sometimes even beyond that!) is that charging lower prices is the right thing to do — that you can only get into a particular market if you low-ball your way in and then build your reputation.
This concept couldn’t be farther from the truth. There are a ton of perils to being the least expensive, and none of them really have a light shined on them for new entrepreneurs. In this article, we’ll take a look at a couple of the downfalls, and then how to get to work on solving the pricing puzzle.
When you charge low prices for your services, your perceived value is immediately damaged. You’ll attract clients who are preconditioned to place a low value on you and your services because you didn’t value them. If they don’t value you, it’s going to show in how they treat you — and in how they talk about your product or service in the future.
Potential clients may not even engage your services at all because they already have expectations about what services should cost and when your prices are low, then they can be perceived as subpar — even if you’re an amazing service provider. Discounted pricing can hurt your business in so many ways.
If a potential client is bargain shopping and they find you, it’s a fair bet that the client isn’t going to perceive your service as an investment in their business or as a key contributing factor in their success. It’s a two-pronged concern here. You’re attracting clients who don’t see you as a valuable investment, so they won’t treat you as an investment or as a valued member of their team. And you’re putting yourself into an employee position, rather than that of a consultant or service provider. Never a good thing.
The scope of work can become blurred, too, so the demands on your time are greater. Because of this, you can become resentful because you’ll be working your heart out to deliver the value you know you bring to the table and yet finding yourself working for free and sacrificing time that you can’t bill for. When your internal dialogue about a client becomes negative, it impacts everything you do for the client — and it just sucks the life out of you.
Your business has to make money to survive — and how much harder are you going to have to work in order to meet your revenue goals with “bargain basement” pricing? Having lower prices than everyone else is almost a guarantee to a slow start in business, and that’s nearly always a death sentence. You cannot afford to start slow in our fast-paced world. Unless you specifically got into business to become a slave to multiple bosses, it’s a no win situation.
Taking on more clients at lower prices to meet your reveue goals means that you’re actually working more and making less…and it wears on you more quickly than you could ever imagine. This kind of revenue model isn’t sustainable in the long term, and in human terms it’s a drain on your level of satisfaction that will ultimately show in your work and how you show up in your business. When you are charging what you’re worth, you’re much more inclined to show up like the pro that you are and really deliver at your very best.
There are a LOT of ways to find out about pricing in your industry — and you should use them. Get quotes from your competitors or just check out the pricing that’s publicly posted on their websites.
Don’t rely on your competitors alone to establish your pricing, though. You have a unique set of strengths and gifts that no one can bring to the table but you. That’s valuable, and it should be figured into your overall pricing structure.
After you’re familiar with industry standard pricing, make sure you know what differentiates you in your niche. It’s critical (and it’s a whole other article!) and it’s important that you can clearly communicate your value to a potential client or customer.
The fancy name for that is USP — unique selling proposition. The reality is that it’s simply knowing how to have a conversation with a potential client and be comfortable and confident about what you bring to the table and the results you can deliver to them with your product or service.
For me personally, it’s that I’m a web designer/developer with kick ass marketing chops, so I build websites that work for the client instead of the other way around.
Even if you haven’t been in the marketplace and you’re just getting started, knowing who you want to work with and understanding how to communicate your value is critical.
I won’t tell you to “charge what you’re worth.” It’s silly, first and foremost — because how do we place a monetary value on our unique gifts? I can’t do it. And if I could, no one could afford me. I’m betting the same is true for you.
Your “value” and your pricing are two entirely different things. Your pricing is what you charge your clients. Your value is what the client perceives your service is worth to them. How are you adding value to the lives of your clients? How does your service transform their business? Most importantly, how can you communicate that value in your marketing and messaging so that your pricing becomes almost irrelevant?
What I will tell you in pricing is to be fair. Provide amazing value and extraordinary customer service — and charge for what you do. Don’t give your gifts away and don’t put yourself on the clearance rack. You don’t belong there at all.
You have a unique opportunity in your business to create the income, and the life, that you really want. Build in your path to success from the beginning.
Originally published at medium.com