So how much do you charge and how do you know how much to charge?
How much you charge is based on the value you bring. This has a lot to do with your ideal client as well. If your ideal client is someone struggling with money, then obviously you don’t want to invite them to a $10,000 program. If your business is more boutique, then your prices will be higher. The important thing is to recognize both your client and your value. I have seen many people undercharge their services in order to be competitive. As a result, they end up working long hours, for a little pay, or selling many products, for little profit. I have seen people overprice themselves and then complain when no one will pay for their product or service.
I want you to consider this the famous story of the repairman. I’ve heard the story several times, several different ways. I want to share one of those versions with you now.
There was once a rich businessman with a broken beloved car. Despite several attempts, he was unable to fix the engine of that car. He called several engineers but no one was able to fix it. Finally there was an old mechanic who visited him. That old guy inspected the engine and asked for a hammer. On front side of the engine, he tapped few times with his hammer and brrroomm…brroom…It started Working! Next day, the old mechanic sent his invoice for $1000. The businessman was shocked.
He said, “ This was merely a $1 job. You just tapped the engine with your hammer. What’s there for $1000 that you are asking?”
The old mechanic said “ Let me give you a detailed invoice.”
The Invoice read:
Tapping the engine with hammer: $1
Knowing where to hit the hammer: $999
That was his experience which made him hit the right spot. Always follow the same.
This mechanic knew his value. Know yours.
And remember that people see value in price as well. For example, a friend of mine had gotten a hold of a bunch of fancy wooden canes for $10 apiece. He decided to try to sell them for $20. He didn’t sell a single one. He upped the price to $65 and they sold out. Crazy, huh?
As a coach, I’ve found that many people who come out to a $20 workshop allow themselves to have $20 worth of change, whereas people that come out to $2000 workshop allow themselves to have $2000 worth of change.
The takeaway: Just because you charge less, doesn’t mean you will make more, and it can actually detract from the effectiveness of your offer.
Price by Branding
But wait. There’s more. There’s also branding, which we’re going to talk about in detail soon. Brands have value. If you’re just starting out, and no one knows who you are, your brand will have a very small value. As you grow your business and invisibility and your reputation, your brand will increase in value. The great thing about this is you can increase your prices to match.
Which would you pay more for: a Bic lighter or a Mercedes lighter?
The lighters may be exactly the same, but just seeing the brand names on them changes your perspective of them. Remember this as your business grows.
It’s important to have a consistent brand that aligns with who you are and to find and use opportunities to increase your brand. A good way to do this is to align yourself with people who have a bigger brand. They will up-brand you by association.
When you’re starting out, you don’t have to get your prices right the first time. Decide what you want to charge and see how it goes. And if no one sees value in what you offer at the price you’re offering it, then adjust it up or down.
Now, there are times were you don’t want to charge. This is because the benefits of not charging create growth in your business. The first one may be obvious. If someone with a big following, like a celebrity, is willing to try your service or product then give it to them. An endorsement from them will bring in a lot of business. So, the money “lost” is really a marketing investment. The second situation in which you may choose to not charge or charge very little is to beta test something. The idea here which should be stated to the clients is that you get a testimonial from them in exchange for the discount or free service. This way you build social proof that you can use to justify your regular prices.
This may have given you clarity or caused confusion. I’m hoping it’s the former, but if it’s the latter then just look around at what similar businesses are charging and use that as your starting point. Then look at what makes your business unique, what makes you stand out, and decide how to price it from that.