One of the universal problems I continue to see with many small professional consultants is that they still don’t know what to charge for their service. I’ve been there and I know how hard it can be to really want to work on a project but yet at the same time be apprehensive about charging too much or too little.
I can tell you from experience that when you are not clear about pricing it creates uncertainty for your clients. Think about it, if you are not clear about your pricing, your clients may wonder what else are you not clear about. When you are confident about pricing, just the opposite happens; you tend to attract the customers who are the best fit for your firm.
Here are my top five tips for setting the right price.
- Establish a breakeven: if you have not already gone through the exercise of figuring out how much income you need to sustain yourself and your business, then that is really step one. You need to know exactly how much money you need to generate monthly and then divide that by a multiplier. For example if you need to generate $1,000 per month – how many clients would you need to bring in to do that? Is it one or is it ten? Are you charging by the hour, by the day or by the project? You can play around with this equation to create something that works well for company.
- Research: you should have a general idea of the pricing models that are customary in your industry and in the marketplace you are pursuing. As part of a business plan class that I am teaching, I have found an abundance of resources available through the local public library. At the library you can research trends in your industry including average pricing – and a business librarian can easily guide you through the process. Industry associations are also a great source of information. I should also mention the importance of researching your industry and market place – pricing you charge for your private clients may not be appropriate for government clients or outside of a particular geographic region.
- Identify Your Target Audience: one of the reasons I see a lot of consultants struggle with pricing is because they really don’t know who their ideal clients are – they don’t know who they are, and they don’t know what they are willing to pay for a particular service. This is another area where research becomes important. When you know your target audience, you also know what they are willing to spend on your service.
- Cheaper is not always better: research shows that people tend to associate higher prices with better quality. You should consider this when establishing your prices, and position your services accordingly. Also know that if you are going to charge more, then your clients will expect more – that’s okay, but make sure you deliver amazing results and provide exceptional value along the way.
- Consider Offering Packages: in an effort to serve varying members of your target audience, you may want to offer them different ways that they can work with you. Many of my coaching friends offer gold, silver and platinum packages instead of charging hourly rates, a practice that I have adopted in my own business that works extremely well. By offering packages, you can still work with clients with varying budgets while having greater control over your own cashflow.
Bottom line is you need to be confident and comfortable when talking about your pricing. We all have a number in our heads that we want to charge, so do the research and figure out if what you want to charge is in alignment with industry standards and if you can deliver what is expected.