finaIt's the age-old question every self-employed person has asked: “What price should I charge?” Pricing services is difficult. So difficult, that it's by far one of the most searched questions online in relation to self-employed service businesses. It's also by far one of the biggest topics I cover with my own clients.
Partly because many of my clients come to me specifically wanting to focus on their pricing.
But mainly because one's pricing is central to everything else. So even for those clients who don't think their pricing is an issue, we ultimately end up focused on their pricing strategy….
Because pricing your services right is the way you become truly successful. But not only in terms of profitability: your pricing strategy is the way in which you achieve success in all those other things you wanted to achieve when you decided to become self-employed. Things such as freedom, flexibility and fulfilment … which all depend not only on how much you earn, but how you earn it.
So pricing is far more complex than only getting the price right for your clients.
It's about getting it right for YOU, too.
Pricing Services From Your Perspective
I've covered different methods for pricing services – looking at cost-plus pricing, competitive pricing, and value-based pricing models – in other articles.
Here, in this article, I want to get clear on how your pricing decisions affect YOU, the service provider.
You may think you've already nailed your pricing. Or you may already have a number of happy clients, paying a rate you feel is fair and worthy of your work … or a rate you know works in the market.
And if your clients are paying these prices, sure, they must be happy with the price … from THEIR perspective all is good.
But what about from YOUR perspective?
Are you happy with the way you've priced your services just because your client is?
Are you happy with your prices just because that's what your competitors are selling at?
Are you happy with your prices just because you think they're a good, fair price? Or the “right” price?
Or are you happy with your prices because they're giving you everything you need?
It comes back to the core principle of my 3Fs theory:
The purpose of your business is not to keep you busy … it's to give you ALL of the 3Fs: Financial Security, Freedom and Fulfilment.
So if your clients are happy with your prices but you are working yourself ragged trying to service them all … or your clients are happy with your prices but you aren't earning enough – or consistently enough month-to-month – so as to have peace of mind, then your pricing isn't working for YOU.
So instead of thinking about pricing your services from your client's perspective, think about what price YOU NEED to charge so that you don't end up so busy that you lose all your freedom.
And what is the best way to go about that? I'll tell you….
Pricing to Achieve Financial Security
I call it your FSTN – your “Financial Security Target Number”….
What do you need to earn in order to have financial security? Everyone has a different number, depending on their lifestyle, their needs, their ambitions.
It doesn't matter what your number is, the important thing is to know it.
Rather than an annual figure, focus on the “every month” figure. How much do you need to earn every month to reach your own level of financial freedom and security?
Let's say its £5000. Ok, so FSTN defined. Now you need to look at the different ways in which that is achievable. And when it comes to service-businesses, that ultimately comes down to how many clients you have, and what they each will pay you.
Essentially, what is the “clients x price maths” that will get you to your £5000 FSTN?
It could be….
1x £5000 = £5000 (we call this “a job” ;-)
5 x £1000 = £5000 … you'd need just 5 clients who will each pay you £1000 per month.
20 x £250 = £5000 … an “easier” rate to get clients to commit to monthly, perhaps? … but can you support 20 clients in a month?
The number of clients we have impacts our freedom. Finding clients that are prepared to commit to £250 every month may sound more achievable than finding clients prepared to commit £1000, but is it, really? Especially if you need to find 20 clients, instead of just 5?
Finding clients takes time, pitching to clients takes time, and servicing clients takes time. Pricing your services at a level that means you have to do that 20 times over will more than likely mean you are spending more time ensuring you are hitting your FSTN each month than if you needed fewer clients.
£1000 per month is a higher amount, but every client that commits to that – giving you the security of that monthly recurring revenue – will be doing so because they are getting something of value in return.
And they'll be able to see the value because you will have had the time to focus on defining it … on illustrating it … and to committing quality time to servicing that client and guaranteeing they receive it. Which also means they are likely to stay around for longer….
Start your pricing decisions with the reality that the NUMBER of clients impacts your FREEDOM, and you'll be pricing your services at a level that not only achieves your financial goals, but also your personal ones….
So work out the price you NEED to charge to have the LIFE you want to have … and then your next task is to ensure that price represents great VALUE to your clients – so that they will be jumping at the chance to work with you and committing to that ongoing monthly relationship – bringing you full circle with achieving your business goals.
And how do you ensure your price represents great value? Well, that's the topic of my value-pricing article … amongst others.
It's also at the core of everything I do with my clients, and in my groups … so if you want to be a part of that, just get in touch!