Pricing’s Million Dollar Question: How Much Should You Charge?
Deciding what you should charge is one of the toughest elements of business – whether you’re large or small, established or just getting started.
And, to increase the pressure, what you charge is a huge factor in whether your business succeeds or fails, with almost every studying showing financial issues being among the top 3 causes for business failure.
It’s literally the million dollar question!
I will do a deep dive into how to set your prices in other articles in this series, but we need first to deal with the psychology of pricing.
And contrary to popular belief, the real psychological question is NOT how much your customer is willing to pay…
It’s how much do YOU Think You’re Worth!
While this applies to some degree with physical products, it is especially true when you’re selling services like coaching, consulting, speaking or done for you work.
I’m going to be blunt with you here:
Whenever you listen to your gut, you’ll almost always underprice yourself.
Because there’s a part of almost everyone’s self esteem that spends its day constantly searching for current evidence and reminding you of historical “data” tells you that you’re “worthless.”
This translates into your feeling “worth less” than your customers are willing to pay.
So your “gut” (which is highly influenced by your self-esteem) will almost always tell you to underprice yourself.
So how do you solve this problem?
The solution to this problem is one of two things:
1. Figure out a way to turn off the internal recordings that cause you to undervalue yourself (through self-esteem work, getting rid of the negative influences in your life, forgiving yourself, etc.), or
2. Using math to counter those self-destructive behaviors.
Method #2 is much easier. I encourage you to do it this way:
1. Figure out what you think you should charge.
2. Double that number.
(That’s the lowest amount you’ll be willing to work for if you end up negotiating with your client.)
3. Triple the number from step 1.
4. Give that number (from step 3) to your prospective client.
(Note, we’ll discuss negotiating strategies in a separate article.)
5. As soon as you land a contract, take that contract’s number and double it again.
6. Give that number to your next prospective client.
7. Continue with steps 5 and 6 until you don’t make the sale because of price for 10 straight proposals.
8. When that happens, work on improving your marketing until it demonstrates that you’re actually worth that price.
9. Go back and continue with steps 5 and 6 until you fail again based on price for 10 straight proposals.
10. Reduce that failed price level by 20%.
You’ve now reached the point where your price is consistent with your marketing, your experience levels and the market perception of your value.
Note that by this time, your price is probably 10 to 20 times what you origianlly thought you were worth in step 1 plus you’ve gotten lots more experience under your belt and you’ve made a lot of money in the process of setting a price.
And, you’ve just set yourself up for a very successful business!
Or you could just cut to the chase, take whatever you think you’re worth and multiply it by 10 to 20 times. That’s probably your real market value!
In short, it’s key to recognize that:
1. Unless you’re a total egomaniac (I know a few) you ALWAYS think you’re worth less than your clients are willing to pay based upon what they think you’re worth.
2. It’s up to you to get over your fear of rejection and build a business that can actually support your dreams.
What do you think? Am I totally out in left field? Or is this accurate in your case? Leave a comment below, and don’t forget to like, share, tweet, pin, and +1 this post!