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.
- What is the transformation I am offering to clients, customers, buyers?
- What would I personally be willing to pay for that transformation?
- How many years of my business experience, training and successful client work went into being able to offer this transformation?
- 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)
- 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?
- Will I need to acquire new customers or will my current client base be my primary desired end user?
- 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)
- 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?