Creating a pricing structure is one of the greatest challenges that business owners face when starting a new business.
However, it can also be difficult for seasoned entrepreneurs who realize that, without restructuring their pricing or making changes in their business, they have hit a ceiling with what they are capable of earning.
In many cases, and possibly with a little help, pricing structures can be modified and/or the business can be scaled to overcome those obstacles.
Here are my Top 5 Mistakes Self-Employed Professionals Make When Setting Their Fees:
1. Looking at what others are charging
This is the first thing that many entrepreneurs do when creating their pricing structure. They look online at their competitors’ websites and see what others are charging for similar services.
While it may seem like a reasonable strategy, there are some flaws in this. The first is that you have no idea what other people are basing their pricing model on. Without knowing this, you could be basing your fees on a competitor who offers much less value.
Looking at what others are charging also gets you into the competing on price game rather than owning your value and expertise, which is a big mistake.
It’s possible that the businesses you're copying are, in reality, struggling to make ends meet. By copying their fees, you could find yourself headed down that same path.
2. Undercutting others
The idea that you can undercut others’ pricing at a higher volume and then upsell them to bigger profits works extremely well in some industries.
However, the service industry is not one of them.
As service providers, our time is very limited and if you’re constantly undercutting others’ prices in order to get business, you’re seriously crippling your earning potential.
You’re also devaluing the quality of your service which will make it challenging, if not impossible, to get the ‘champagne’ clients you desire.
3. Making assumptions as to what others can and cannot afford
We are living in a day and age when it’s nearly impossible to know what people actually have to spend. The reality, though, is that people are going to invest their money in the products and services they perceive as having value.
This is why discounting your services to match what you believe others can afford is such a mistake. As is the case with undercutting others, discounting your fees just devalues your work. It also will lead you to needy, demanding clients.
Have confidence and stand in the power of your own fees.
4. Charging by the hour or bundle of hours
There are a number of problems that result from charging by the hour, the first being that it puts an automatic cap on what you can earn because there are only so many hours in the day.
It also equates value with time, which is shortsighted.
You may be able to resolve a client’s problem or identify a new revenue opportunity in a very short amount of time. The fact that it only took you a short period of time is irrelevant. You've delivered exceptional value and should be compensated for your expertise and results, not your time.
I recently had a 30-minute phone call with a client that resulted in over $60,000 in new revenue. We were only on the phone a very short period of time but I was able to help them achieve fantastic results during that call. The client was ecstatic and more than happy to pay my fees.
Instead of focusing on time, wouldn’t it be more valuable if you could just focus on delivering amazing results?
5. Fear based pricing
I find that women are particularly guilty of falling into this pitfall. They fear judgement, not being able to get clients, what others might say, that they aren’t good enough to command higher pricing....the list goes on and on.
If this is something you struggle with I would encourage you to remember that perception is reality.
People believe that you get what you pay for. The knowledge that you’re paying higher fees puts in the prospect’s mind that they’re going to be paying for better quality services, greater expertise, faster results and overall better service.
If you worry that your pricing might be holding you back from achieving your income goals you aren’t alone. I can assure you that pricing and packaging of your services is something many entrepreneurs struggle with...
While I understand that charging high fees can be daunting, remember that perception is reality and you will attract better clients with a higher-end pricing structure. Also, don’t hesitate to hire a coach or mentor if you know your own fears are holding you back. An outside source can be pivotal in helping you break through those barriers and set up fees that will allow you to reach your goals.
I promise that if you price your services with confidence and connect with the right clients, those who see the value in your services, you can overcome any financial hurdle in your business.
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