Are you a business owner trying to work out the best pricing strategy and failing?
Do you wonder if you’re making pricing mistakes in your business – and what kind of harm they’re doing to your bottom line?
Pricing is a challenge that SO many business owners face. Even if you’ve been in business for a while, I’m sure that there are some sneaky pricing mistakes that may be hurting your business.
That’s why you need to have a clear strategy in place so your clients can easily understand your pricing and get value from you.
I’m Rosa Jakobs, an International Business Coach and Mentor who helps business owners like you to create, price, and sell your high ticket offers using my D.I.A.M.O.N.D Framework.
And in this post, we’ll talk about the 3 most common, incorrect ways business owners price their services.
I see this happen all the time with my clients, so I wanted to break down these common errors and show you how to get it right! 🙌
The Impact of Wrong Pricing
Pricing is one of the most important tools for business owners: setting the right price can lead to quick sales and a good monthly base of customers.
Though almost every business owner knows that pricing decisions are crucial for the company, there are still lots of online service providers that don’t set prices correctly.
And pricing can make or break a company.
According to the US Bank, 77% of small businesses go out of business because of a pricing mistake. SEVENTY-SEVEN PERCENT!
So why should you, a business owner, care about this?
Because there’s nothing worse than mistakenly pricing your services and suffering as a result.
The 3 Most Common Pricing Mistakes
The 3 most common pricing mistakes I’m going to share with you will help you evaluate where you’re at right now, and what you need to shift so that you can:
- Get a higher return on your time investment
- Counter competition
- Create huge profit margins that will allow you to expand and grow
- Build a sustainable business
It’s easy to forget the impact pricing can have on you and your business.
By learning from the 3 pricing mistakes, you can earn more each day by choosing a pricing strategy that puts a higher value on your time and expertise.
Let’s take a look at each!
1. Charging For Your Services by the Hour
If you’ve recently made the transition from employee to business owner, you might be making this common pricing mistake.
When you were an employee, you were used to getting paid hourly.
But listen up…now that you’re an entrepreneur, a business owner actually, it’s time to STOP trading hours for dollars.
Payment as an employee is wildly different than it is when you’re running your own business.
You, the business owner, need to be aware of the additional costs when owning a business – such as taxes, investments, tools you use to run your business, and many more.
If you don’t consider your prices, at the end of the year, 2 things can happen to you:
- You won’t be profitable as a business. Rather, you’re under-earning because you didn’t think about all of the other elements that should be considered in the price for your services.
- Your income reduces. At the end of the year, it’s tax time. If you’re not properly considering taxes, your income further reduces due to the taxes you have to pay as an entrepreneur.
Charging per hour can also be a mental thing. If you’re still thinking in terms of hourly work, you may still be trapped in an employee mindset. I find that the biggest difference between being an business owner and being a freelancer is this:
When you change your mentality to think that you’re a business owner, you’re more than likely to treat it as an actual business and charge accordingly.
What you need to remember is this – you’re charging for the value you create for your clients, NOT the number of hours you spent on their work.
2. Setting Your Prices Based on Your Competitors
Another common pricing mistake is setting your prices based on your competition in your field.
If this is you, you’ve probably spent one too many hours scrolling Instagram or lurking the pages of other providers in your niche.
Using this strategy for pricing is based on the fear that you don’t want to be too expensive, because you believe it will be harder to get clients. You think your clients will just go find someone cheaper, and so you hold yourself back from stepping into the price range you ACTUALLY want to be charging.
But the reality is, when you price based on your competitors, you’re setting yourself up to blend with businesses similar to yours. You’ll just be one more out of 1000 designers, or 1000 copywriters, or 1000 coaches.
If you’re looking for a way to stand out, set your prices based on what your market will bear.
Believe in your services and in the quality you provide. When you do, your ideal clients will be signing up asking how they can get on your client roster.
3. Using “What Feels Right” to Charge Your Services
Finally, the third common pricing mistake is charging for your services based on your guesses, intuition, or by what “feels right”.
I understand the rationale of doing this as I’ve used my intuition to guide me and make business decisions. And your intuition CAN be a powerful tool to advance your business.
However, it’s not recommended to just guess when deciding a number or amount for your services, especially if you’re not backing your prices up with the appropriate numbers and data.
When I see so many business owners like you take a guess and say, “Well, yeah, I think that number sounds okay to charge”, I know you’re not considering the hours you’re putting in to do that service. And as a result, you’re under-earning.
The bottom line is that pricing based on your feelings won’t guarantee that you’ll be making a good profit, or that you’ll reach your income goals.
How to Correctly Price Your Services
Pricing strategy is one of the biggest hurdles business owners face.
The reason why most business owners make common pricing mistakes is that they don’t spend enough time doing pricing strategy. They overlook this key step when launching their programs and services.
To see if you’re on the right track with your pricing, let’s look at an example. Say you need to reach your income goal and you calculate that you need 20 clients per month to do that.
Realistically, this isn’t humanly possible due to the workload and how many hours there are in a day. So to evaluate your pricing, consider these 2 things:
- How much is my income goal?
- How many clients are you willing to serve per month?
Then based on those numbers, you can set your pricing. The two most important things to remember are this:
- STOP trading your time for money
- And START charging for the true value your provide
When you create a high ticket program, you’re selling a transformation.
Your client is NOT paying you for your time. They’re paying you because of the results they’re going to get by working with you.
It doesn’t matter if your client work takes 2 hours or 20 hours of your time. As long as they’re receiving a specific result from you, the investment is worth it!
So often, we discount our expertise or play down the value we bring to the table. When things come naturally to you, you may not even realize JUST how valuable your skills and knowledge are to your clients. The work you do is incredible, so don’t forget it!
A Gift to You: My Pricing Guide and Mission
To further help you price your services based on the VALUE you provide, I have a free resource that will help you realize this. You can download my FREE Pricing Guide here!
This simple worksheet will help you find out if you can charge more for your current service or offer. With this guide, you’re going to go through a simple, 15-minute self-assessment exercise that will give you SO much clarity on your pricing.
This exercise is the same one I do with my 1:1 clients, and they often receive great results! Some of them have more than doubled their prices using this powerful exercise.
Now you may wonder why I’m giving this to you for FREE!
I’m actually on a mission, to support 10,000 women by the end of 2030 so that they charge according to the value they receive.
I know that for some of you business owners out there, this exercise is enough for you to realize the real value and for you to charge more. So in part, I’m fulfilling my mission, just by giving this away for free.
Download this free pricing resource, and you can see the value that your client is receiving with your current offer.