Pricing is one of the hardest things most local business owners have to do. You need to price your services high enough to make a living, but not so high that you price yourself out of the market. You need to compete but pricing your service too low will mean you have to work long hours to earn your worth.
It’s tough, but there are a few things you can do to make it a little easier.
Here are a few important tips.
Consider Your Actual Costs
Every business has costs and overheads – even new local businesses. Your costs include anything you spend to run your business (like internet and phone costs, software, stationery and so on) as well as your salary. Calculate what it will cost to run your business every month, and don’t forget to factor in annual costs like a business license and your website domain!
In many cases, new local businesses start as home-based operations, so you can probably keep your overheads low to begin with – but it might not stay that way, so be prepared to recalculate.
Research the Competition
Even if you’re starting a new local business, you’re probably not the first to be offering a similar service in your area. Find out who your competition is, and then call or email from a non-business email address to find out what they charge. You don’t have to match their price exactly, but it will give you a good idea about what you should be charging.
Figure Out Your Salary
If you’re starting a new business, there’s a good chance you’re leaving a job to do it. You’re still going to have all your personal expense to worry about, so you need to make sure you’re including your own salary in your pricing.
You might not have the same amount of travel or commuting costs, but you also don’t want to short-change yourself and be forced to work longer hours as your own boss! Don’t forget that you won’t get paid vacations and other perks as your own boss, so you need to make sure you include those things in whatever you decide to pay yourself.
Once you know what your competitors are offering and what they charge, and you know what you need to earn to make your business worthwhile, it’s time to figure out how you can make customers an offer they can’t refuse.
The answer is to add value. Maybe you’re the only accountant that does their books via the cloud, or maybe you throw in services your competitors charge separately for. Even using the latest technology or equipment could be seen as adding value, particularly if it does the job better or more accurately than the competition.
If you can add value to your service, you don’t have to compete on price – because you’re already giving your customers more bang for their buck.
Decide How to Price
There are many ways you can price your services. You could charge by the hour, or by the task. Some people also choose to provide detailed quotes upfront for fixed price services. Different kinds of pricing also work better for different kinds of businesses, and some people choose to offer a hybrid, with some services priced one way and others priced another way.
You also need to decide whether you plan to compete on price, offer market related pricing or price your services at a premium because you are adding so much value for your customers.
Pricing local business services is never an easy thing. It’s one of the most challenging things most people will do when they are starting out. However, the good news is that you can change your mind – in fact, it’s encouraged! Test your pricing ideas for a few months, and if you find that something else will work better, feel free to change your prices accordingly.
Your pricing is not written in stone. You can make changes whenever you feel they will benefit your business. So don’t let yourself worry about it too much. You’ll soon see where your business fits into the landscape and can price accordingly.