Most entrepreneurs are more terrified of pricing than they are of Freddie, Jason, Chucky, Norman Bates or Honey BooBoo. When asked, ‘How much?’, they squirm in their socks and twist their intestines into embarrassed loops. Then they apologise and offer a discount, without having been asked for one.
What they don’t realize is that their value is perceived in relation to their fee. Low fee, low value.
A great many entrepreneurs actually undercharge. Position yourself as the cheap alternative, and, ironically, you might find yourself doing less business. People largely judge value and quality based on price, which, in turn, is why Mercedes-Benz hasn’t gone broke, in spite of its premium pricing. It’s part of the reason Apple rules the world.
Your starting point is to show pride in what you do. Your business is your baby, after all. You spend a significant percentage of your life growing and cultivating it. Don’t disrespect it with miniscule profit margins. Practice healthy profit margins that recognize and reflect your input and expertise, and then have the sense of self-worth to charge correctly with confidence.
Of Course, You Have to Be Worth It
Pricing and positioning are art forms. The danger is that you are simply seen to be overcharging for an inferior product. Not only is that unethical, but it only takes two or three clients getting burned before the word gets out and your business falters.
No, you have to actually be the quality for which you charge. But if you are the Mercedes-Benz of your industry, you are entitled to charge a premium. And your market will expect it and pay it.
It’s an interesting psychological game: The more you put your price up, the more you will be seen as a quality offering. The higher the quality of your offering, the more you can put your price up.
So if you’ve hit a ceiling of income-to-capacity in your business, and want to earn more, consider whether you are simply too cheap.
Here are four suggestions on how to go about raising your price:
1. Start by firing your low-paying, high-input clients
They are a drain on your time, they are not worth the financial reward, and perhaps most importantly, their high visibility in your own consciousness will keep you believing that you operate at that level. After all, if you see them often, they are your norm.
Give them up to the entry-level operators. Choose instead to own the top end of the market.
If you’re having difficulty with this idea, think about it this way: Doing one job for 30 coins is worth more than doing three jobs for 10 coins. How do I reach this seeming mathematical impossibility? Consider: Each job implies a certain amount of cost.
If you do one job for 30 coins, you will incur one cost. If you do three jobs for the same amount of money, you will be down by three instances of cost. Doing less work for more money is exponentially more lucrative.
2. Dump the bricks and carry gold
What do you offer that is high-input on your part, but low yield in remuneration? Are you scrambling to sustain the small profit margin part of your business? Perhaps it’s time to dump it and focus on the high-yield stuff. You don’t have to be all things to all people. Rather be the thing that generates high income.
3. Research your competitors
Find out what the top-level operators in your industry are charging. Try to position yourself in the middle-to-upper cost range of your industry. Never position yourself in the lower cost range. If you do, you become a commodity, which means that you are interchangeable. That’s not clever positioning. Also, it will become remarkably difficult for you to raise your value later on.
However, don’t be the most expensive option until you know you are worth it. Keep it as a goal and work toward it.
4. Put the word out
Knowledge alone will not cause your market to see you as the leading name. Nor will mere competence. These qualities are important, but in isolation they do not create a valuable reputation. Add publicity to the mix and suddenly your knowledge and competence become renowned. Keep publicizing yourself, and you may ultimately become iconic.
Experts and iconic names are able to charge more, because the business comes to them. They are desired and sought out as unique and valuable. Price becomes a secondary concern in acquiring their services. In fact, sometimes a high price even means bragging rights for the buyer.
I advocate finding forums in order to achieve high-level status by design. Appear on radio talk-shows with interesting messages pertaining to what you do. Appear on TV. Get into newspapers and magazines. Speak in public as often as possible. Create and publicize new ways of doing what you do. Be unique. Be the best, and let the world know about it.
The next time you have to state your fee, state it with confidence. Don’t cringe. Don’t blink. Don’t rush to offer discounts. You are building a business, growing a brand. You are on an upward trajectory, and pricing is an important tool in your propulsion. Don’t be afraid to use it.