My very first client was a wealthy non-profit that paid me $50 and a Target gift card. I was so excited to finally have revenue. I thought getting some money, any money, was all that mattered! Like many entrepreneurs, I didn’t like talking about money or pricing. I’ve even heard and experienced conversations with business professionals do not like discussing money and end up undervaluing their skills and services. Yeah, that was me. It took me the first year of running my business to understand the value of “charging enough.”
Lexus, BMW and Acura charge a premium for their cars. A Chevy Malibu still transports people from Point A to Point B, but consumers pay extra for the experience and the status of these import vehicles. I had to realize the experience Scientifically Speaking provides is similar. My company trainers have knowledge and understanding that most businesses and people do not. We deliver presentations in an engaging, comprehensive and memorable manner. We deliver the Mercedes of technology training, and I decided to value our services accordingly. Here is how to decide what your products and services are worth:
- Price for Value – People expect to pay for quality. If a service is free or cheap, it is not valued. Let’s call this the Wal-Mart Syndrome (confession: I made that name up). People shop at Wal-Mart because they don’t see extra value in the products. Sugar is sugar is sugar. Beans are beans are beans. Wal-Mart celebrates the fact they are the price leader. Set your price based on value means you are going to lose some prospective clients. However the ones who agree to pay your price, pay because they find value in you. Rule: Understand your value
- Price for Everything – I first set my price based on an hourly rate. I completely made it up without considering other aspects of running a business – insurance, my time, retirement, savings, equipment, research, etc. You need enough money to fully run a business, not just get by. Many people only think about payment. Set up a spreadsheet and list ALL of your costs – fixed and variable. Calculate how much your business needs to make per year including all of these expenses. Rule: Understand the BIG picture
- Price for Pain – I asked one of my top clients what one of his pain points was and he told me a popular speaker charged $10,000 for two one-hour presentations – in the same day! Great for the speaker; bad for the client. They could only use this speaker’s services once every other year. My client and I agreed on a price they could pay consistently. We built a strong enough relationship that he began to refer me to his counterparts across the country. Rule: Understand their pain point
- Price for You – I eventually realized that after 20 years of successful work experience, I have value. The skills and knowledge I possess are extremely valuable. When you think about all of the conferences you have attended, books you’ve read and knowledge you’ve acquired, you are valuable. You are not charging your clients for the 4 – 5 hours you are speaking. Your clients are paying for the 20 years of reading, studying, meeting, writing, analyzing and listening you have done…adjusted for inflation. Rule: Understand your worth
I started increasing my price from $50/hour to $100/hour to $200/hour. When companies hire me for the day, it’s the cost of quality service, knowledge and training. When prospective clients ask my price, I tell them and I don’t flinch. My advice? When the price is high enough that the client wants to negotiate, you’re in the right ballpark.