How To Price Services
Along with the standard “how did you start your business” questions, smart new business entrepreneurs often cast the next, and sometimes more important, question of how to price services. It does no good to offer a shiny new business solution if you price yourself right out of the market. Competition is brutal, and there is little room for error in pricing. Here are a few tips with regard to setting your service prices.
- Trade reference guides and associations. Consult those in the know. Most professions are guided by association standards and reference materials specializing in how to price services in that market sector. Get your hands on those materials, join an association that helps you in networking, or align with others in a similar profession to understand the norms of pricing in your service sector.
- Market pricing. The art in pricing services lies in understanding your competition. Do your research and find out what others are charging. If you’re a wedding planner, contact other wedding planners who have similar brand styles, service offerings, and organizational size, and request package and pricing information. See how they handle your inquiry, the depths of information they seek from you, the questions they ask, the format of their presentation—and most notably, the prices they offer. These are the exact same businesses you are competing against. To ignore the opportunity to glean information from them is a missed opportunity. Just don't steal their business model!
- Work backwards. How much do you need to make a living? How many hours per week would you prefer to work? From this, calculate the hourly rate you need to charge in pricing for your services. Be sure this rate works within the range of established market rate. Also, consider your level of expertise and your niche in the market—factors that could elevate your rate above the standard market price.
- Ask for a budget. Sometimes, knowing how to price your services is a question for a specific client. Many clients will offer up their budget. Listen carefully and don’t hesitate to ask outright: “What have you paid in the past for this service,” always qualifying the question with discussion about the client’s happiness with the delivered product.
- Be willing to negotiate. If your client feels your pricing is too high, be willing to lower it, but not without retracting some of the deliverables. For instance, if you are offering a piece of framed art at $500 and the client will only spend $350, offer the art without the framing. There are always concessions to be made, but you can avoid lowering the perceived value of your overall services.
The bottom line in pricing your services is to ensure future business. You want your customer to come back for more, and even better, you want him to refer other customers your way. Be up-front with your pricing, stay consistent in your methods of setting prices, and charge a fair market price for the value you deliver.