The Pricing Gap
Ever measure the gap between how much you make and how much you’d like to earn? Your money deserves attention. Research states 82% of businesses fail because of cash flow problems.
Don’t simply consider production costs, your competitors rates or an arbitrary hourly rate when setting your prices. These pricing models can significantly lower your profits.
You deserve to be well-paid for your services. Unlike the traditional pricing methods, value based pricing highlights your expertise. Because this model focuses on your knowledge, it’s possible to earn many times more than your hourly rate.
How does that happen? First you need to figure out why your clients want to hire you. What do they value? That insight influences how much you charge.
Sandy does tax preparation for wineries, but never considered the end value from her services. She could easily outline the workflow. But, she was uncertain about the end value.
So we rolled up our sleeves to figure out three key deliverables.
- She reduces the tax bill for wineries.
- Her clients receive peace of mind that everything’s accurate.
- A very small percentage of her clients get audited. She stands behind her work and represents her clients at audits.
We discussed the 6 value based pricing factors.
- Economy – People spend more money during a strong economy. They’re more likely to outsource their taxes when business is good. During a downturn, they may do their own taxes to save some money.
- Seasonality – Sandy’s phone rings off the hook during tax season. January to April includes many long days with few days off. Of course, she makes most of her money at that time.
- Pricing Limit – Some clients may highly value your service, but unable to afford your fees. Sandy’s fees attracted price sensitive clients. Targeting higher income clients is one strategy that would increase her income.
- Urgency – A handful of clients always procrastinate. Then they panic right before the filing deadline. I showed Sandy how to adjust her prices, similar to airline tickets. Early birds get the best rates. Procrastinators pay a premium fee.
- Scarcity – As the go-to expert for wineries, she doesn’t have much competition.
- Quality – Sandy looks out for her clients all year long. Her perceived value has grown along with her solid reputation. It’s now time for her pricing to reflect her value.
Evaluation of Value Based Pricing
Value based pricing isn’t something she’ll calculate once and forget. Her rates evolves with time and need constant re-evaluation.
Here are some ways Sandy started to understand her value:
Surveys: Once tax season was over, Sandy sent out a survey to her clients asking about the client experience.
Feedback: Sandy took several of her best clients to lunch. Much of the conversation focused on their needs and specific desires. Several suggestions were immediately implemented.
Underpaid service areas: Some services were given away for free because she didn’t know how to charge for them. Her new packages fixed that issue.
High-value Clients: The price-sensitive clients were time consuming. As a result, Sandy is now choosy about who she takes on as a client. The wineries who value quality over price are a better fit for her.
Offer Variety: Of course, client needs vary. Startups don’t have the same needs as more established wineries. It’s not one size fits all. Her packages reflect their unique needs.
Ideal Client Evaluation
Who is your ideal client? What’s their biggest challenge? Do you know exactly why they value your service?
Consistently re-evaluate your ideal client. As your business grows, your ideal client changes. Stay ahead of your clients wants and needs with value based pricing.
Value Based Pricing Conclusion
Stop leaving money on the table. Charging by the hour or calculating according to your costs undervalues your expertise.
To charge higher prices, it is crucial to understand what your clients need and value in your services. Value pricing is a paradigm shift.
Shifting to value based pricing isn’t easy. Follow these recommendations for a 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.