How easy do you find it to set your price?
For sure it depends on what you sell. Some items are pretty straightforward, but when it comes to factoring in your time it suddenly gets a lot more complex.
What’s more, if time is the biggest factor on your price (which is common for many service based businesses), you also need to get clear on how much your time is worth.
Tricky stuff hey.
But extremely important if your aim is to run a successful, profitable micro business that enables you to achieve your business goals and personal dreams.
If pricing is getting you tied up in knots and your aim is to make a profit, a good place to start is by avoiding these five common mistakes.
1. Under-estimating time
If you base your price on how long a job is going to take you to complete, you’ve got to get really good at realistically estimating your working pace.
Otherwise, if you’re not careful, you’ll end up doing work either for free or for a ridiculous price per hour.
Another common mistake associated with the time theme is you work out how long a job is going to take you, calculate a price and then talk yourself out of it because “it’s too high”, “a client won’t pay that much” or “I’ll lose the job if I try to charge that”.
Warning: If you keep this pattern up for too long, you’ll end up feeling just a tad frustrated – especially because you’ll have to work a whole lot more to make up for those lost hours.
Now if you consistently find that you overrun on projects, you have to get clear on the cause.
- Do you need to be braver and quote more accurately the time needed for a job?
- Are you sure you’re overrunning? Try using a project timer to record the actual amount of time that you spend on a project. It will give you a more realistic view for when you are charging similar jobs in the future and will also help you calculate appropriate rates per hour.
- Alternatively are you taking too long because you are not managing yourself properly? If procrastination and distraction delay your progress, perhaps it’s time to explore some time management tools and techniques. After all, you can’t charge a client more because you’re working too slow 😉
2. Believing customers are price driven
We’re in tough times.
And that can make it very tempting to convince yourself that all customers are price driven and motivated by a bargain.
For sure there will be people out there to which that is true, but don’t make the mistake of generalising and applying it across the board.
Instead, ask yourself what your target market want.
It’s important to pitch your business in the right way to attract your target market. And if you only compete on price you’re going to be on rough waters. That’s because there will always be someone else who will undercut you.
So if you want to avoid the race to the bottom, distance yourself from price and get clear on the value that you add. In any case, you’ll soon discover that’s what your best customers come to you for.
Your added value will vary on you and your business. It could be:
- Something unexpected like your personality.
- Your knowledge, skills and experience.
- Your reputation and “fame”.
- Your unusual turnaround time.
- Your customer service skills.
- The way customers feel when they work with you.
Whatever the unique characteristic that you offer is, make that the aspect of your business that you emphasis and market.
3. Not understanding your numbers
In business it’s simply not enough to be highly skilled and experienced at what you do.
For sure that will take your business to a certain level, but if you want to achieve the realms of super success (where your business is fulfilling those BIG goals) you also need to have a firm grip on what’s happening behind the scenes.
In short you need to know your numbers. Because when you do, you are able to make much more informed decisions about how you price something. Conversely, when you don’t, you’re at risk of taking “finger in the air” decisions. Risky business.
Specifically, does your business management reports allow you to quickly identify figures such as:
- Your best customers
- Which products / services are your best sellers
- Which products / services are making a loss
- How much profit a particular product / service makes
- How much a typical customer is worth to you over lifetime
- Where you’re getting your leads from (and so which advertising channels are working)
- The average price per hour you’re charging
- Your average customer spend
- Which customers consistently fail to pay on time etc.
If not, perhaps it’s time to review your backend administration to make it smarter and more intelligent.
4. failing to upsell
Upselling is a proven strategy which can boost your profits without dramatically increasing your workload.
What’s more, it’s easy to do. You could inform buyers about related products when they purchase from you (Amazon does this really well). You could suggest a complimentary service when a customer hires you do do a specific job.
Another way is to offer a premium version of some of your best products / services. The Entrepreneur’s Circle does this really well.
Basic membership offers all the essentials including a monthly circular, entry to National Events and access to the monthly Business Growth Support meetings.
But for people who want more access and information you can upgrade to Club, Inside Track or even Mastermind Level. Each level is progressively more expensive but unlocks additional benefits.
What’s more, you’ll find by offering additional levels of service you automatically increase the profit that you make. That’s because if there is a choice, people frequently opt for the middle one.
How could you apply this lesson in your business?
5. Failing to do the right marketing
The type of marketing you do will influence the type of customer who you attract.
It sounds so obvious but often this is overlooked.
For sure you should exploit the various forms of free advertising. Tactics such as social media, blogging and issuing press releases are a great way of raising the profile of your business and getting your unique message out there.
But in addition to that, it’s worth getting creative and thinking about other tactics you could use to attract the right people.
What’s more, if you know how much a customer is worth to you over their lifetime, you’ll have less fear when figuring out how much you can afford to spend attracting the right people.
- Could you explore some innovative, creative direct mail?
- How about drawing up a list of say 30 target customers and getting really specific about how you could attract them to your business?
- Could you offer a juicy incentive to encourage existing customers to refer you?
- What freebie could you offer to entice a new customer to sign up?
It’s important to give your creativity a little freedom here. What ideas could you come up with?
Are you on track?
The price you set has a HUGE impact on the direction your micro business will take. Your price suggests your value. It positions you within a particular sector of the market and it will massively determine your wealth.
Are you happy with what you’re currently charging?
Or are you making some of the mistakes outlined in this article.
And if you are, are you ready to make some changes? I reckon you are. Please share your plans in the comments below.
Today’s Micro Action
Are you making any of these mistakes when you set the price for your micro business product / service? If so, decide today how you will remedy them to ensure you are boosting your business as opposed to undermining it.