Fix Your Price Model Mistakes With the Help of These Six Tips
Service-based business owners tend to make mistakes when it comes to developing their price models. Discover how you can set a price model that will work well for your business.
As a business owner, one of the most important decisions you have to make is determining how much your services are worth.
This is where many service providers make mistakes, which typically have a negative impact on their business.
Now, there could be many reasons why business owners fail to make an adequate price model for their services. Regardless of those reasons, know that any mistake you make with your price model can result in profit loss.
However, with the right mindset and technique, you can fix the price model mistakes you’re making and get your business back on track.
This article will cover six ways you can fix price model mistakes to develop a fee structure that will meet your company’s needs.
The 6 Tips
Your price model should be based on a carefully-planned fee strategy, which aims to maximize your revenue and bring success to your business.
But as you know, forming a proper fee structure is more challenging than it seems. The good news is that these six tips will help you create a price model that will work well for your business.
Tip #1. Make the First Sale to Yourself
In order to be able to view the perceived value from the client’s point of view, you need to make the first sale to yourself. This will help you realize how much your services are really worth and whether your current price model is helping your business or tanking it.
This rule can be applied to a wide variety of businesses in the service industry. And it’s a brilliant practice, too.
If you aren’t convinced about the value of your service, how will your clients ever be?
Making the first sale to yourself will allow you to take a step back and identify issues that you might not have noticed otherwise.
Tip #2. Know That You Are Responsible for Low Fees
One of the first steps to fixing your price model mistakes is realizing that you are responsible for your low fees.
But what does this mean?
It’s that no matter how low your current fees are, your business will never stand the test of time unless you raise the prices by yourself.
It should be clear to you by now that your clients are never going to overpay you. You can expect a tip here and there, but they will never pay more money than they have to, which is common sense when you think about it.
In situations like these, you need to take responsibility for your free structure. This will help you realize that your fees only reflect the perceived quality of the client.
Tip #3. Have a Clear Process
When setting a price model, it’s imperative to do so with a clear process. This will help you feel more self-assured and grounded in what you have to offer as a service provider.
Picking arbitrary figures out of thin air and throwing them at your client will do you no good.
If you aren’t confident in the value of your service, neither will your clients be, which could be a deal-breaker. Worse, if you don’t feel solid about your choices regarding fee structures, you will end up feeling resentful towards your clients somewhere down the line.
Tip #4. Lean Into the Belief of Value-Based Pricing
Value-based pricing can be traced back to that old saying: “You get what you pay for.” In other words, your customers will always associate high prices with high quality and low prices with low quality.
This is where quality and luxury become intertwined.
If we want to purchase or own something that’s considered a luxury commodity such as designer label clothing or sports cars, we expect to pay a lot of money for it, no questions asked.
This rule can also be applied to service-based business making.
For example, if you are ill and need to see a specialist, it’s only natural that you would want to see a highly-regarded professional.
But if you were charged a small hourly fee for the doctor’s service, you would probably doubt their qualifications and skills.
Tip #5. Establish Value With the Client and Yourself
Don’t forget why you went into business in the first place - you wanted to make a profit beyond just breaking even. And if you want your business and your services to be profitable, establishing value with the client is key.
The entire point of a newly built partnership is that both parties are satisfied with the fees.
So, the client should walk away feeling happy because they will receive value and because you will help them reach their goals.
And as the business owner, you should feel content that your work is being valued and that you will be properly remunerated for your services.
Now, we mentioned that service providers tend to feel resentment towards their clients when they work for a fee they aren’t satisfied with.
In all honesty, if you aren’t charging as much as you believe your services are worth, chances are you won’t do your best. Such behavior is human nature - we simply won’t step up our game if we don’t believe our work is being valued as it should be.
Tip #6. Understand That You’re Trading Life for Fees
When you devote yourself to your business, it’s very important to remember that you’re not only investing your time but chunks of your own life as well. And if you value your time and how you spend it, it also shows you value yourself.
In today’s fast-paced, busy world, being present is seen as more rewarding than actually doing something valuable with your time. And keeping busy but not providing any value can even be considered productive.
But is it, really?
If you work in an office, productivity is usually more about the hours you put in, not the results you produce. Consequently, your value is being measured during eight-hour working days.
When in reality, busy work can equal ineffective work. That’s why it’s important to remember that it’s not about how much time you put in, but how you use it.
Develop Your Pricing Model Wisely
Pricing models are more relevant to a developing business than you might think.
Determining the right prices for your services could boost your company’s value and make you more accomplished and satisfied as a service-based business owner. It can even help you attract more clients.
Unfortunately, many business owners make beginner mistakes when setting their price model. And this results in low revenue, profit leaks, and no customers.
Luckily, there are many ways you can fix your fee structure. And these six tips will help you figure out what you’re doing wrong and how you can form a price model that will make your business more successful.
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