Of all the challenges you face when setting up your own business, getting your price point (charging for your service) just right is arguably the most important. What you charge is an indication as to the value that you attach to your business and the service/s you provide.
Get your prices right and you’ll be on the road to success, but get it wrong and the consequences for your profitability (and business) can be severe.
If you’re charging too much, there is the real potential that you’ll put off potential clients in contacting you. After all, everything is only worth what someone will pay for it.
Conversely, if you’re charging too little, this can also put people off. The old adage of “buy cheap, buy twice” rings true for many products and services.
Setting the “ideal” price for your services is key; this will enable you to maximise your profit margins, while keeping your prices attractive.
Newly formed small businesses are often guilty of setting their prices low as a means of securing contracts. This often sets that new business down a slippery slope because whilst appealing to the prospective client, low prices (and consequently minimal profit) simply aren’t sustainable. The danger here is that you will find yourself working long hours just to keep ticking over.
Sometimes, the price you advertise will determine the clients that you attract. Clients who focus on nothing but the price can often be the most demanding.
Added value is often far more important than price alone. If clients get better value from you, then charging them more than your competitors will be justifiable. If the value you offer is better, or more comprehensive that your competitors, then most clients will be happy to pay more.
When setting your prices, you need to know what your clients want, and how much they will be prepared to pay for it. A sound understanding of how much your competitors charge is also crucial. If you don’t know the answers to these key questions, you will struggle to find the “ideal” price point for your services.
Keep in mind that the prices you offer are never fixed. Just like every other business, you’re able to alter your prices to suit; offering special deals is also perfectly acceptable. Review your prices regularly and compare them to your competitors to ensure that you stay viable and competitive (whilst not selling yourself short!).
Our course “Starting Your Own Bookkeeping Business” has a unit dedicated to price setting and has proved a useful tool for new businesses working out their value in the market.