Finding the “right” price for your services, programs, products.
Most authentic businesses have haphazard pricing.
Sometimes, you just pick a number based on how you “feel” about it. The problem is that your audience might not “feel” the same. No matter how intuitive, you are still a human being, with normal human biases. Pricing from a shoot-from-the-hip kind of way is not wise business practice. You're treating your business like a hobby.
Or, you might blindly trust a business/marketing expert who says that you should “charge what you’re worth” and always go for premium pricing.
Or, you might just go with whatever your niche mates are charging.
In this post, I’ll share a more thoughtful process to arrive at a price that feels right to you and is grounded in reality. I call it authentic pricing.
The aim is to arrive at a price where your ideal client says “That’s a great deal!” ...and a price that you genuinely feel in integrity about.
1. Your Cost (of Living)
One important factor is to look at the cost of running your business.
First of all, are there any costs that are directly associated with the product, service, or program that you are offering? For example, if it’s an event, what are the event’s costs to you? If it’s a product, what are its manufacturing costs? If it’s a service, is there software that automates some part of the delivery?
If it’s simply 1–1 coaching, there might be no other direct business cost.
Also take into account the indirect costs for your business, such as various software subscriptions that power your marketing, any coaching/consulting services you’re receiving, any advertising costs, etc.
The revenue from all your offerings should, eventually, more than pay for all your costs -- direct and indirect.
Compared to all your offerings, how much time and energy does this product/service take up? Let’s say it’ll take up 50% of your working time. Then perhaps the revenue from this offering should pay for 50% of your indirect costs, in addition to paying for its own direct costs.
If you’re a solopreneur, another indirect cost to account for is your own cost of living: rent, healthcare, food, and hopefully some regular retirement savings.
You can, of course, charge a lower rate... if you can lower your costs! If you don’t figure out what is truly enough for you, your natural human appetites will keep rising, and so will your costs.
Because I’ve figured out my “enough”, I’m able to charge a lower business coaching rate than others at my experience level. My clients think “Wow, George Kao is a great deal for business coaching!” and I'm glad.
I hope you’ll also give your clients that feeling of excellent value.
Of course, the perceived value of your offering also depends on what you’re offering as well as your branding/reputation. We’ll touch on that later.
2. Expected Sales
How many units do you expect to sell once the marketing ramps up to an expected level?
For example, if you are doing 1–1 coaching, you might want to find out, from other coaches in your niche: how many billable sessions do they typically do in an average month?
If you’re starting a group program, what’s the number of people you reasonably expect to sign up? If you’re not sure, then what’s the minimum number of people you’d like, in order for the program to run?
The better you understand your audience’s wants and buying behavior, the more accurately you are able to determine the Expected Sales. This is why I talk about the importance of building an audience and getting to know them.
Dividing Your Cost by the Expected Sales will give you a minimum per-unit price that you need to charge for this offering.
To watch a tutorial of this whole process, check out my video on calculating minimum sustainable hourly rate:
To access the spreadsheet, click here, then click File and Make a Copy
3. Market Rate
What does your audience expect the price of your offering should be, based on what they already know (or can quickly research)?
For example they might expect 1–1 coaching to be somewhere between $50 — $250/hour, depending on the reputation of the coach and what issues they’re coaching on.
How much your audience cares about the Market Rate (compared to your rate) is determined by Specificity of the offering, and the audience’s Trust in you.
This means the more specific your offering is, the more your audience has an expectation of what the price should be. The broader your offering, the more the audience has no idea what they should be paying, and are going to be uncomfortable buying something they’re not sure about.
Trust is another big factor, or what in marketing is called “branding”. The more they trust you (i.e. the more credibility you have with them), the more your audience doesn’t care about the market rate and will just go with what you charge.
4. Different Tiers of Offerings
Chances are, you have potential clients who are at different levels of comfort with spending money on your type of business.
As a result, it’s a good idea to have different levels of offerings:
If you get to know your ideal audience better, you’ll be able to better create an offering that is perfect for them.
Focus on creating your offering for your ideal client/customer, the ones who will get the most out of your offering, the ones who are so interested in solving the problem / reaching the goal, that they will be less concerned about the price.
In other words, work with clients who will most value what you do. Otherwise, they (and sometimes, you) will feel bad about the price.
It’s ok for non-ideal clients to go elsewhere. They’re only “non-ideal” for you… they might be perfect for someone else. You may in fact want to have a short list of alternative providers to offer to such clients, so that you can make yourself more available to those who love your work.
Lastly, remember this: You can always change your prices. As you come to better understand (or change) your costs and your expected sales, and as your market/niche adjusts its usual rate over time.
Keep aiming for a pricing that feels really congruent to you -- neither creating resentment nor greed -- and that gets a positive reaction from your clients: “I’m so grateful for this offering, at this price!”
George Kao is a Marketing Coach for small business owners, especially solopreneurs such as Coaches and Mentors. He focuses on ethical & effective ways to grow one's platform and build true livelihood.
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