Stop competing on price
Pricing your services is an art. It’s one of the toughest challenges you’ll face. Consistently underselling your services and giving away work for free affects cash flow. Consider the potential income you’re losing because you don’t know how to price your services. The good news is that your income actually grows when you stop competing on price.
Figuring out how to price your services by checking out the competition is the popular strategy. Those other business owners probably did the same thing, too. They didn’t have a clue about what to charge so they found out the range of fees. Some started out closest to the lowest fee while others chose to price somewhere around the middle of the pack.
Setting an hourly rate isn’t the most effective pricing strategy for growth minded business owners. Blending in doesn’t interest entrepreneurs who want to separate themselves from the competition. They’re disruptive and prefer to stand out. If conforming isn’t your thing, then break free of the traditional pricing models.Value pricing is the way to stop competing on price. Here's why it matters: http://bit.ly/2e2qjki #getpaidwhatyoureworth Click To Tweet
You know your clients benefit from your services. So let’s have your prices reflect your expertise. Value pricing is the way to stop competing on price. You highlight the value a client receives, and is willing to pay, for your services.
Here’s what value pricing is not:
- Time. Your clients aren’t highly concerned about how much time you spend on a project.
- Profit. Your clients don’t care about your profit margin.
- Formula. There’s no set formula to determine the value of your services.
- Importance. Your clients aren’t buying the tasks that you do.
- More work. Additional time spent working is the only way to earn more money.
Entrepreneurs who compete on price overlook 5 factors:
- Expertise. This is known as intellectual property. Your experience speeds up the time it takes to achieve reliable results.
- Urgency. A short deadline means you have to re-prioritize your schedule for rush orders.
- Limitations. A limited quantity exists. Prices rise when availability is limited.
- Complexity. Some jobs are easier than others. How difficult or complex is the job?
- Benefit. What you know and how you make a difference for your clients matters. Your clients choose you because you help them achieve a result or resolve a problem.
Pricing is an art
The art of value based pricing means you develop insight about how much your expertise and intellectual knowledge is worth. The catch is that no hard and fast formula exists. Clients decide to buy from you based upon their perceived value for the service you offer.The art of value based pricing means you develop insight about how much your expertise and intellectual knowledge is worth. Read the full post. #getpaidwhatyoureworth Click To Tweet
Kate and Justin are both local bookkeepers. Kate’s pricing is consistently based upon fixed cost, markup for profit and time. Justin doesn’t compete on price. His prices reflect perceived value.
Kate and Justin have contrary views about their bookkeeping business. Kate believes that she’s selling compliance services. Her services include tracking invoices, reconciling bank statements and providing financial reports. Basic bookkeeping is her job. Like many bookkeepers, she charges an hourly rate.
Justin, on the other hand, advises his clients about how to improve their cash flow and improve their profit margin. Bookkeeping is the tool which helps him understand their cash flow and business model. His pricing reflects his expertise. The amount of actual time spent working on their books is incidental. Creating a strategy which improves their cash flow is his primary purpose.
Kate is happy to make a comfortable living as a bookkeeper. Her pricing formula earns about 25% profit. Justin’s pricing isn’t an exact formula. Since he prices on value, he averages about 75% profit with his clients. Educating his clients about the value of his work positions him as an expert. Because of that, he works with clients virtually. Many of them live outside of his community and he never met them in-person.
Educate your clients
A complete mindset shift occurred when Justin originally decided to stop competing on price. Sometimes Justin lost potential clients because he priced too high. Other times he undercharged. Getting his pricing right is an ongoing work in progress. Feedback and scrutiny help him figure out the sweet spot for his rates. Overall, however, Justin’s profits are significantly higher than Kate’s.
Remember value based pricing is an art. Follow these 5 steps to stop competing on price.
- Discover. Discover what truly matters most to your clients.
- Develop. Learn to ask fantastic questions that uncover the heart of the problem. Ask about motivation, problems, numbers, value and consequences.
- Decision makers. Speak directly to the person who makes the buying decision.
- Detective. Pay attention to the answers to your questions. Listen more and talk less.
- Describe. Practice explaining the value your potential client receives from your services.
Work only with ideal clients
Imagine going through this proven process with your clients. Instead of winging your consults, you follow a systematized discovery process every single time. This way you’re always working with fantastic clients.
You decide who is a good fit for your services. If they appear to be an ideal client, then you present your solution and extend an invitation to work together. When you stop competing on price, you decide who you work with and what you offer. This solution puts you in charge of your business and increases your profitability.
Follow these recommendations for your business to be successful, and grow while keeping your passion alive. Are you tired of doing work for free because you don’t know how to charge for it? Discover how to get paid what you are worth and attract clients who understand your value. Right NOW claim your FREE RESOURCE to create value based pricing.