When I first started my business five years ago, I admit I was a little naïve about what I could charge for my company’s services. When we sat down and crunched the numbers it was clear we either needed to cut our costs of doing business or charge more per project.
Here are three things I learned the hard way about pricing:
Think about your client and what they can afford.
Your target market has everything to do with how you price your product or services. If you’re trying to target a customer who may need your services or product over and over again, you know you can keep them coming back if you charge a reasonable price. But if you believe your customer will only need your services once (think wedding planners), you may be able to charge more. Also, think about what the client cares about: Do they need it now, so they are willing to pay more to get the job done in a hurry? Would they prefer to pay in installments instead of paying the full price upfront? The nature of your business and who your clients are makes a big difference in how you price.
Think about the long-term effects.
Maybe your customer can’t afford to pay top dollar but they’ll return to your business again and again and recommend your business to their friends and family. Sometimes charging a little less can be good for you in the long term. Another option is to get them to like you with a special lower introductory rate. You could even issue coupons for first-time customers only.
Cut your costs of doing business.
This isn’t always possible if your supplies or overhead won’t allow budget cutting. But you can often think of small ways to cut back such as videoconferencing instead of business travel, doing an energy audit to slash your electricity bills and buying business equipment so you don’t have the leasing costs.
Part of pricing is trial and error. As your business grows, learn from your experiences and discover what works and what doesn’t.