5 Strategies to Help You Set the Right Price
One of the biggest questions coaches and service pros have asked us at Clients Oasis is how much they should charge for their services. Most of the questions start thus: “Kennedy, how much should I charge for my program?” and lots of other iteration of the same question.
The biggest disservice you can do to your business and your clients is setting the price of your service without adequate consideration. This is regardless of how desperate you are to get clients for your business.
As a business owner, you don’t just set your prices by making a wild guess or using your competitor’s price list. You may offer similar programs, but your trainings are different, so are your approaches and end results.
You also should never undercharge for your services. If you decide to undercharge, because you want to gain more clients than the competition… you devalue your expertise in the process. You are telling clients and prospects that your services isn’t all that.
In the case of overcharging for your service, you may not get clients at all. This is in exception to the case where you’re a celebrity authority in your market, or your service has several edges over the competition. If you are the one who makes a wild guess and slaps a price on, then you don’t know what you’re worth at all.
The coaching business is a profession of rendering help, but it should also be able to give you a life of relative comfort. But this is unachievable if you cannot get your pricing right.
Yes, I know you are confused already, because I just countered every turn you could take. The question on your lip is how then do I price my services and get more clients without having to chase them all over the place?
The following is how…
1. Establish Your Target Income
Be candid about the amount you want to make and how much profit you want to go home with at the end of the month. Not just an amount that will keep the lights on. You should be able to separate your net income from your gross income.
The gross income is not totally yours, as you have to pay tax, but the net income is yours. It is from your net income that you make your budget. This is the first step to setting your pricing fee, because your profit has to match your budget. Do an all-encompassing calculation of monthly or yearly budget.
This should include personal budget, family budget, and emergency budget, project budget and miscellaneous. Your level of comfort, self-development, professional development and lifestyle should also factor in your planning.
All your income does not have to go into the good life or a wish list. There are professional courses you want to take, or you are already thinking about scaling up. There are the business expenses, maintenance and new hires which you need to put money away for. If you have college bound kids, you need to prepare ahead for that. A retirement plan is also very important. All these are things you should prepare for in advance.
This will help you understand your expenditure after which you should be able to set some savings aside. When you do this, you have a clear idea of what you should charge so as to make profit which can hit your set financial goal.
2. Explore All Fee Options
- To explore your fee options, you have to start with the cost of your training. Where did you train and how much did it cost you. Remember, the higher profiled the place you trained ranks, the costlier it gets.
When setting your price, you have to put that into consideration, as recouping your money is paramount.
- The second factor is your skill level and the type of outcomes you help your clients get. You trained at a reputable institution because of your love for quality. You want the best and want to give only the best. In the course of practicing, you could have bagged other professional certifications.
All these are upgrades which boost your skill set. Your skill set in return scales the kind of results you help your clients get. These results may be of such value that people are ready to pay anything. All these put together will keep you at a place where you can charge premium rates from clients. Clients will be willing to pay for costly quality over cheap quantity.
- Your specialty is another one to consider. Not all specialties come at the same price; some are pricier than the others. Although, a business coach and life coach are in the same coaching industry, you do not expect that they’d both charge the same price for their services.
Both niche markets are in high demand, but one takes more efforts and active strategic planning than the other. And in most cases, third party sources are engaged to take up some tasks which will help the clients get their outcomes. So you see, your specialty is a great determinant to how fast you can pull in cash and hit your financial goal.
- Next thing to do is check what gives for similar services in your industry. There is an average price point and pricing structure in charges for every industry. The price point is a range between the highest and lowest charges. Find out what that is before establishing your fees.
If for example, everyone in your industry charges at the most of $4000 for their program, and you go charging $6000 or $10,000, better have something extraordinary to offer. If you charge that much without any uniqueness to you, you’d close shop sooner than you think.
This is not saying you should sell yourself short. Rather, upgrade your skill set to a level that you will not feel embarrassed demanding for what you are worth.
Only some level of expertise above others will make clients come your way, and even at that, they’d only be elite clients. This is because, not everyone will be able to afford your fee, except those who cannot compromise on quality.
- Last to consider is location and target audience. Your location and target audience matter a lot when setting your pricing. If your business is situated in the suburbs, you may not be able to charge as much as those in exclusive locations. You will put the earning power of people in your location into consideration, before setting your fees.
Decide on the type of audience you want to target. The high-ticket clients, exclusive clients, the average income earners, conglomerates or small businesses. This will determine how you set your pricing fees. And in the process, you will get clients for your business who are ideal.
You can work on all these factors at your own discretion, because you understand your business better. But the wise thing to do is to talk to a qualified business coach that knows your industry well.
3. An In-Depth Understanding Of Your Conversions And Metrics
This basically involves understanding the services you offer and how much profit you make from it. This will help you determine if it is worth your time so you can abandon it, or if it’s very valuable and you are undercharging for it. If this is the case, you’d have to adjust the pricing to fit.
For instance, a fitness trainer may have different programs they offer. One may be doing really well, because it is very valuable, yet underpriced. It is possible that the cost it took to put the program together is almost the same with the cost of the program. This is where you should apply your conversions and metrics.
According to the entrepreneur piece, it says that while you calculate the price of your service ̶ you should apply profit in the same number as mark up on the product cost. For instance, if it takes you a labor and overhead cost of $2000 to come up with a program and you want a net income of 21% before tax… you can achieve your profit goal by adding up a profit factor of 25% to your labor and overhead cost.
This way, you will not do business or render your services at a loss.
4. Consider Tiered Pricing
This is for those whose services come in varied programs. Your clients get to have options of choosing amongst different versions of same product or service. This is because priorities, needs and preferences differ in every client.
Having varied price points for similar programs keep the clients in. This is as opposed to outrightly walking away. Instead of “this is not for me”, it becomes a case of “either or”. Which can I afford right now, which is more important to me, or what are my specifications?
For instance, a person selling jars of body wash will have them in different measures and flavors of the same product. You can choose to buy the smallest jar of the same product or the biggest one. You’d be getting practically the same benefits. The only difference is in the size.
Service pricing can be a bit more difficult to handle, especially when you run programs. In this case, you will keep your price the same for similar programs, but include valuable add ons to the clients program. You may also fix your price based on the project a client brings your way. This is also a part of the program, but a specific activity.
For example, a nutrition coach who has different programs may decide to simply have a flat rate for all her programs. The only difference will be in the price of the valuable add on she includes in her clients program.
She may also decide that she will fix her prices based on the type of project a client approaches her with. A client who approaches her for just nutrition advice may get a lesser charge than the client who wants her to draw the plan by herself. This price will also differ from that of a client who wants the support of the nutrition coach through the healthy diet journey.
Tiered pricing is not a bad idea if it is applicable in your market.
5. Do The Hourly Rate Math
This method is mostly for consultants who spend hours at work. Calculating hourly rates has a standard formula prescribed by business schools. It says you will add up your overhead cost, labor cost, and the profit you want to earn at the end of the month.
Divide this sum by the total number of hours you work every month. This, according to business standard is the minimum of what you must charge for your services. You have the liberty of raising that charge many notches higher. A minimum charge as this is what can pay your salary, business expenses and still give you a profit
By the end of it, you won’t be short changed. You would have set your price fairly, earned your worth and have healthy savings.
Having talked about all the strategies to set your pricing fees above, I want to make an expert recommendation. At Clients Oasis, we do not price our services based on the industry standards, but by the value of the transformation we get our clients.
If for instance, you are a health coach and you help your obese client get back to shape and probably save them from a life threatening disease… how much do you think this is worth? At Clients Oasis, we look at the life changing results the client gets in the process, not based on what any person or competition charges.
So, from our example above as a health coach, you already know that the value of your service is priceless. And since you are certain that you can help this client get this transformation, the next question is how much you think they should pay you for it. How much do you think is decent enough to make you happy while helping the client get results, without breaking the client’s bank?
From our experience, this is easily worth between $3000 and $10000. Now, depending on the city where you live, the coat of your bills and how much you need to have complete financial freedom ̶ you can determine what you want to charge between $3000 to $10000.
If for example, you live in New York City, or San Diego, California, you’d know that the cost of living in these cities is very expensive. You won’t charge the same price with a health coach in Georgia, Virginia. Because you know that the cost of living in these cities is at least twice that of Georgia.
If a health coach in Georgia charges $3000 to get outstanding results for clients, you as a health coach in New York City or Sandiego should be able to charge $7000 to cover your bills and afford you freedom as a compensation for helping your clients achieve these transformations in their lives.
Same goes for business coaches, dating coaches, life coaches, consultants, etc.
So what is the way forward?
The way forward is to apply all or some of the strategies aforementioned. It will take you some work, but it is worth it, especially if you plan to scale up in the long run. Make your research; put your skill set and specialty into consideration.
Your location and target audience also matter, and lastly, consider tiered pricing, have a firm grasp of your metrics, and hourly rates. All these put together will help you price your services right. You’d neither undercharge nor overcharge.
We can offer our support to help you implement this in your business.
To start, click here or use the button below to schedule a free breakthrough call with a business strategist on our team