money and entrepreneurs | setting your prices

 

by Cindy Ratzlaff

Entrepreneurs are people who have a great concept or product and a passion to bring it to market. But they may not be trained in all the areas necessary to survive and thrive in the start-up phase of a business. Not many people come to their own business with experience in sales, marketing, human resources, web design and development, supply chain management, graphic design, copy writing, creating a content marketing calendar and accounting.

So it’s not surprising that determining fair market value and setting the prices of the products or services an entrepreneur will deliver is one of the more challenging aspects of business. Many are not prepared for the fact that money is a culturally loaded area and entrepreneurs are often shocked to find they don’t feel comfortable having the money discussion with clients.  They worry their clients can’t afford them or they fear customers will think they aren’t worth the money. These feelings are normal but until resolved can stand in the way of growing a business.

If they don’t make the money decision ahead of time, entrepreneurs can find themselves struggling to close sales; hesitating over the question “what do you charge?” That hesitation and insecurity can lead the potential client or customer to doubt their own judgment in doing business with you. The best gift an entrepreneur can give themselves is clarity about their fees and confidence in the value delivered.

Resolving to value and charge for the service or product you provide is essential pre-launch work for every entrepreneur.

How to Set Your Prices

I have a formula that helps me set prices. Because I enjoy the creative process of client work more than I enjoy setting fees and prices, I use this formula to help me evaluate my new services and products and to set a price I can feel confident about each and every time.  Here are the steps I use to set the price of a product or service.

  1. What is the transformation I am offering to clients, customers, buyers?
  2. What would I personally be willing to pay for that transformation?
  3. How many years of my business experience, training and successful client work went into being able to offer this transformation?
  4. What is the cost to create and deliver that transformation to a client through this product or service? (creation, packaging, shipping or other technical factors in creation)
  5. Is there a already a market for what I am about to offer or do I need to consider the cost of educating my current customer about the need for this product?
  6. Will I need to acquire new customers or will my current client base be my primary desired end user?
  7. How many units of this product must I sell in order for me to break even and/or earn a profit? (units can be hours of your time for coaches)
  8. Is there competition for this product or service? If yes, what do they charge? Am I willing and able to compete for customers at or below that fee?

Once I have the answer to these questions, I decide on a fee and move on to the marketing phase of my launch.

Many entrepreneurs struggle with charging what they are worth for their own advice, knowledge and experience. The whole question of worth is wrapped up in feelings of fear, doubt, lack, and even empathy for potential clients.  These feelings make it is likely they’ll struggle when setting or raising their prices. Second guessing the worth of a service or the ability of your potential customer base to pay your fee can leave a service provider doubting themselves and that doubt can be communicated to clients and potential clients, leaving them feeling unsure, confused and wondering if they’ve made a good investment.

Give your clients the gift of your confidence, clarity and integrity by setting your fees in advance of your discussions with them. Are you charging what you are worth and feeling good about it?

 

 

Be Sociable, Share!

Tagged with: , , , , , , ,

13 Responses to “Money and Entrepreneurs | Setting Your Prices”

  1. cynthia says:

    great article, Cin!

  2. Deb Dorchak says:

    When Wendi and I first started Blue Sun Studio four years ago, we had clients banging down our doors right out of the gate. We hadn’t even had a website up yet and we had projects coming in! We had to do a lot of our pricing on the fly. In addition to that, we really were (and still are) very self-sufficient. Our skill set is MASSIVE. We’re only two people, but we’re capable of doing the work in almost all the areas you talked about.

    You’d think this was a blessing, but not really. We had to pare down and focus and figure out exactly what we were offering. Being all things to all people is NOT the way to go. Only then could we answer the questions you outlined and it made for a much smoother process.

  3. Mia Rose says:

    Hi Cindy, excellent questions to help in setting a price for programs and services… I believe there has to be a good balance between charging for the transformation and what you are worth, and then over-delivering to your clients. WIN-WIN.
    Blessings,
    Mia xo

  4. Lisa Hines says:

    Another great article. I will have to download these great questions for future reference. I think another one that’s valuable is to ask what is the client losing each month by not having this program or service. Not always applicable, but valuable nonetheless.
    Thank you for valuable blog articles.

  5. Excellent additional question, Lisa. Adding it to my list.

  6. I love the over delivering philosophy Mia and I think that entrepreneurs who love what they do are more likely to do just that.

  7. That could be an entire book, couldn’t it Deb? The process of focusing on some core offers and not spreading yourself too thin is something that trips up so many entrepreneurs. Great point.

  8. Thank you Cynthia. You’ve been one of my mentors in this area, you know.

  9. “Give your clients the gift of your confidence, clarity and integrity by setting your fees in advance of your discussions with them.” YES! Cindy, I needed to hear this. Thank you :)

    I see so many entrepreneurs (myself included) getting caught up in our own heads – the fears, the doubts – we lose perspective of all the GEMS our clients are getting in our programs. I just went through this today, as I sent out a continuity registration link for my coaching program. Then I realized, “Oh my goodness, OF COURSE they’ll re-register. They LOVE the program, and just imagine if they weren’t in it – imagine what they’d LOSE”…

    Cindy, thanks so much for delivering with clarity and confidence once again :)

  10. Brilliant article, Cindy. I’m bookmarking this now. I sometimes find it exhausting – thinking so hard about money and pricing and worth. It’s consuming when I let it be:)

    Thanks for such fantastic, clear, simplistic advice!

  11. My pleasure Kerry and thank you for taking a moment to comment.

  12. That’s the confidence of a well imagined and well delivered program, Miriam! Your clarity not only helps them sign up again, it also models a positive way of presenting yourself in the world. When you’re a coach, you’re also a role model. Bravo!

  13. Pamela Wills says:

    Cindy, I love that you outline a formula for pricing, that is the kind of structure I need. You could do a whole class on just that! I also love your reply to Miriam, “When you’re a coach, you’re also a role model.” So sooo very true! Thanks so much for your expert sharing here!

Leave a Reply