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Figuring out how much to charge causes a lot of stress among Accidental Entrepreneurs. And that’s too bad, because when you aren’t comfortable with what you charge, you avoid talking about it. And that means you aren’t having very many conversations with prospective clients.
The notion that there is a right way to set prices is responsible for much of the stress. If you believe a given method is right, but the price it generates feels wrong, what do you do?
You can charge the right price that feels wrong, with the result that you avoid quoting the price or, when you do quote it, you feel awkward and sound defensive. And if the right price feels too high to you, you’re likely to quote a lower price and then kick yourself for it.
The Right Price Feels Right
What’s obvious is that the right price feels right to you. (How it feels to the other person is none of your business. Your job is to make the offer, not to carry on both sides of the conversation.)
Given that few Accidental Entrepreneurs are comforted by this, there must be something else going on. Something that makes getting to the “right feeling” so difficult.
Why Pricing Is So Uncomfortable
There’s a reason why pricing is uncomfortable (scary, maddening, tedious): Too often we set prices without knowing what function the price is supposed to serve.
You might think the obvious function of a price is to bring money into your bank account when you sell something. But that’s not reality.
Prices have more than one function. Here are some examples, each a legitimate function of pricing.
To bring in revenue. To qualify clients. (Clients who want to pay a lot more or a lot less will go elsewhere. “Qualify,” in this sense, means “determine if they are a match, financially.” To establish a brand. (Some expensive cosmetics are no more effective than inexpensive ones. But they would actually sell less if they lowered the price.) To enhance prestige. To free up time (higher fees x fewer clients = more time) To fund development of new offerings. To gain experience and credibility. To become known in a new field. To increase or decrease sales volume.
Some of these functions are contradictions. If you need to set a high price in order to be credible but you need to charge a lower price because you are new to the field, what should you do?
How to Resolve Pricing Contradictions
When two functions of pricing conflict, it’s because you haven’t decided which functions are important and which are not.
If you’re starting out in a field, getting experience may be more important than generating revenue. In this situation, setting lower prices can be a smart move.
If you sell fine handcrafts, your prices need to not only cover your costs but also carry the message that your work is unique. In some markets, it’s easier to sell the more expensive products or services. Not everyone is hunting for a bargain.
When you think about what you and your business really need, most pricing contradictions vanish.
The Right Price Does What You Want It to Do
When you are clear about the function of your price, you can feel good about what you charge, whether it’s more, or less, or just the same as other people in your line of work.
After a year and a half as a coach, I was teetering between 7 and 10 clients. I sensed a block around working with more. I wanted to challenge that block, and I invited a few clients to work with me for three months. I chose talented, successful people who would not bother with coaching unless we could make it worthwhile.
Here’s what “giving away” my work did:
It expanded my client list so I could get accustomed to working with more folks. It challenged my self-talk that I had nothing to offer this kind of client. It educated valuable referral sources. I got to experience the value of coaching to clients who did not have “issues.” At the end of the three months, several of them hired me at my regular rates.
When I launched the first Authentic Promotion course, I offered a “beta” to 45 coaches. The price was something like $79 for a course that eventually sold out at $240 and $300. The 29 spaces sold out in 48 hours. I made over $2,000, which was a lot of money for me at that time (still is). It wasn’t what experienced teleclss leaders were charging, but I was ecstatic. That income underwrote the costs of developing the course.
You Can Feel Good About What You Charge
If you are confused about how to set prices, stop and think about what prices can and can’t do for you. When you are clear about the function, you can set prices that feel right and trust that they are right.
