“What’s your rate?” It’s a simple enough question, but one that many service-based businesses struggle to answer.
Sure, we all like being paid, but determining what your services are worth – and asking for it – can be challenging. There’s the back-and-forth with clients, runaway projects that go way over budget, and unexpected expenses that chip away at your earnings. That’s why a well-defined pricing strategy is essential for improving business efficiency and profitability. Nearly 1 in 5 startups fail because of pricing or cost issues, according to a recent CB Insights study.
Katie Lord, a Chicago-based business owner, remembers getting stuck in “conversation ruts” with prospects over the cost of her design services. Eager to find a better approach, she developed a points system for her pricing. Lord’s clients now buy a set amount of points and apply them to specific tasks – a presentation design might be three points, while a review meeting costs half a point. Since each task has a defined number of points, the system lets clients modify their project scope easily and has helped Lord drastically reduce how much time she spends on proposals.
“Transparency is key in client relationships, and this model has allowed me to bring a new layer of transparency and flexibility to my work,” she says.
Presenting Your Pricing with a G2 Crowd Branded Profile
When done right, your pricing model can help you quote your services more efficiently, set consistent expectations with customers and generate predictable revenues that support business growth. In addition to deciding how you’ll charge, consider when and how to share your pricing details. While some businesses balk at revealing too much, publicizing your pricing can improve efficiency by qualifying leads right off the bat. After all, no one wants to spend an hour on the phone with a prospect who is lacking the budget.
G2 Crowd’s branded solution provider profile helps businesses present their pricing strategically by adding rate cards, details on packages, or other collateral to a separate “Pricing” section of their profiles. Paired with information on your services, value proposition and customer reviews, a provider profile is a simple way to connect with more businesses actively looking for the services you offer.
When creating your pricing strategy, keep these pointers in mind:
- Consider your pricing method carefully. Each pricing approach has its pros and cons – hourly rates can give some clients sticker shock, while flat-rate projects can blow your budget faster than you can say “scope creep.” Think about what’s worked well for you in the past, talk to others in your industry, and don’t be afraid to go your own route, like Lord did.
- Do your research. Time is money to service providers, so taking an honest look at how much time a project requires is essential for pricing that won’t give you heartburn later. If you’re an attorney who creates wills, for example, look at how long your last 10 wills took to complete and if anything was out of the ordinary. A detailed scope that spells out deliverables, timeline and communication also protects you and your client.
- Don’t tell too much. If your prospects can see your pricing, so can your competitors. Techniques like using a “starting from” figure for rates or project costs can give clients a sense of costs without giving away the store.
- Don’t go too small – or too big. Be careful of pricing services that are so small it takes more time to quote them than they’re worth. On a related note, don’t try to be all things to all people. A tightly defined set of services will make your pricing easier to manage while helping businesses understand exactly how to use you.
- Be wary of discounting. Sure, you could knock 5 or 10 percent off your rates for a friend or a long-term contract. But your prices are there for a reason, so don’t change them without thinking about how it will affect your future prospects and long-term profitability. In the same way, premium B2C brands have a higher price tag for a reason – people equate it with quality. Don’t forget that your price tag reflects your quality and value.
By developing a pricing strategy that reflects your value, you can make sure you’re earning what you’re worth. It takes less than an hour to build a branded solution provider profile on the G2 Crowd site, where you can make maximize your strategy.