Don’t Let Your Pricing Cost You

Too often, female founders undercut themselves when determining pricing for their services. We know we’re experts at what we do. We know our services are incredibly valuable for our clients. And we most definitely want to be successful. Why then do we often end up setting rates that don’t add up?

Pricing isn’t just about getting the business. In fact, in some cases, you may not even want the business (more on that later). It’s also about setting yourself up to thrive, because you’re worth it and because it’s what successful business owners do. But it’s not a simple rate-times-hours formula. There’s a slew of factors to consider when determining your pricing. Here are some of the big ones.

Knowing your numbers is critical because it stops you from lowering your price in a panic when you shift into “survive” rather than *thrive*. Take the time to determine what you need and use that knowledge to make decisions that make sense.

• DON’T: Set your rates according to what others (or worse, one person you know) in the industry charge. What if that rate doesn’t meet your income needs? What others are charging is irrelevant compared to what you need to make to reach yout *thrive* goal.
• DO: Ask yourself the tough questions. Do I build something that’s worth more? Do I target a niche market so I can charge more for being a specialist in my field as opposed to a generalist? Do I scale my business in a way that lets me stack profits off other people on my team to get to the number I need to make?

All targets are not created equally. What you can and should charge has everything to do with who you plan to sell to (among other things), what they value, and what their resources are. Would you try to sell a seat on a private jet to someone who always flies budget economy? Of course not.

• DON’T: Waste time marketing to people who can’t afford your services. You’re never going to meet your price point if you’re fishing in the wrong pond.
• DO: Decide on your numbers then find the fish who will bite. It’ll be a much easier sell and you won’t waste time knocking on bricked-up doors.

Read our blog on 5 essential Target Markets to Consider Before Selecting Your Target Customer for more guidance on this topic.

Your business model has everything to do with your success or failure. And your pricing needs to support it.

• DON’T: Be all things to all people at all times if you want to scale. How can you possibly focus on business development when you a) don’t have time for it and b) take a financial hit you weren’t prepared for when you decide to hire staff? Spoiler alert: you can’t.
• DO: Develop a business model that makes bank then determine what price you need to charge to cover it. Consult with your financial advisor (which you absolutely need) and leave room to grow.

There are all sorts of brands—discount, mid-tier, luxury—and each has its place. But your pricing needs to match the category of brand you create.

• DON’T: Charge Nordstrom prices if you have a Walmart brand. You wouldn’t expect to walk into a wholesaler and see Rodeo Drive prices. And if you did, you certainly wouldn’t pay them.
• DO: Decide where your brand fits in the market and price it that way. There are no wrong answers in the shaping of a brand (okay, there may be a few, but mostly it’s whatever you want it to be). Just stay true to the image and expectation you set.

Ah, the age-old question posed by every founder everywhere. There are arguments in favor of each of them. But there’s only one logical answer: NEVER, EVER HOURLY.

Avoid hourly rates—period. There are two very good reasons for this:

1. With an hourly rate, working more efficiently actually reduces your revenue, unless you take on more work to make up the difference. It’s simple (and unfortunate) math.
2. Most people don’t understand entrepreneur hourly rates versus hourly rates of an employee. The outcome of this limited perspective often is nickel and diming in the form of questioning hours spent. Ever heard a client ask why something took so long? We all have. And it’s frustrating because, as professionals know, it takes what it takes to do it well. Save yourself the hassle and sell the value of what your time delivers, rather than your time itself.

Consider all these factors and see what you come up with. If you still aren’t sure where to start, want to learn more about the factors that affect pricing, or want an expert opinion on where you landed, schedule a discovery session now.