Deciding how to price your services is one of the most difficult parts of running a small business. There are many factors that should go into pricing and they all need to be considered. Price your service too low, and you will be doing more work for less money. Price it too high, and customers won’t be interested. This guide will go over the methods you can employ to ensure you price your services right.
See What Your Competition Charges
A good strategy for deciding how much to charge is to do some research and see how much your competition is charging. For example, you can try searching for “best carpet cleaning company near me” to find who your competitors are and how much they charge. Perform your search for whatever services you provide. Look at several companies to get a good idea for the services they offer and the price range at which they’re offered. You should not always attempt to beat your competition on price. For example, your service might offer additional value that could justify the higher cost.
Consider Your Operating Expenses
When deciding on pricing, you must consider your operating expenses and your personal income needs. These factors will help determine how much you might have to charge for your services to break even. Remember to start out as small and minimalistic as possible to keep expenses from ballooning out of control. This can include not hiring additional employees until you absolutely need them as well as looking for ways to keep operating costs low.
Try Different Pricing Brackets
Your company should always try out different pricing brackets. That way you can analyze which products sell best at which price points to come up with an ideal pricing structure. One of the best strategies is to offer different pricing options. Some customers will always want a more premium service and the cost of that service will make your other services look more affordable by comparison.
Ask Your Customers
This method doesn’t always work with utmost accuracy, but one option you have is to simply survey your customers to see how much they are willing to pay for a service. This is especially helpful if you are looking to launch a new service and want to know what your existing customer base would pay for it. You can give them incentives to answer the survey, such as a discount coupon. Take the opportunity to ask your customers any other questions. The answers you get can determine your business strategy going forward.
Consider Different Pricing Models
There are also different pricing models to consider. You may decide on charging by the hour, charging a flat rate or some form of variable pricing. An example of variable pricing would be if you gave customers discounts for the quantity of work they are buying from you. A flat fee pricing structure is undeniably the simplest, but it can leave you putting more effort into a project than you are getting paid for. The downside of charging by the hour is that customers might become irate when their final bill is larger than expected.
Consider Asking For Payment Upfront
Another factor to consider when deciding on your pricing structure is to ask for a percentage of the total payment upfront. This strategy is actually quite beneficial because it helps ensure you are only working with serious clients. It also helps prevent non-payment at the time of completion. Companies usually charge a set percentage upfront – twenty up to fifty percent is common. This strategy may be more viable in some industries, such as creative professions, than others.
Choosing the right price points can be tricky, but it’s something you need to do. Use the above tips to determine the best price for your services. It can be a challenge to change pricing structures later, but it’s always an option if your original ones aren’t working well. An ideally-priced service will keep your customers coming back for more and pay you what the service is truly worth.
by: Vincent Stokes