The main urge while starting a business on your own and selling services to clients is to increase the revenue and run a profitable business. If you are pricing your services for not as much of the cost, or just balancing the books, then you are leading a project that may fail.
Of course, various factors influence your overall business strategy: whether your organization is lucrative or not, the industry you belong in, the positioning you wish to have, the market, your competitors, and more. But the most valuable thing to determine whether the business will be profitable or not is how you price the services you are offering. This is a critical decision because one wrong move in the pricing strategy can cause a whirlwind of problems that will be very hard to repress.
What is a Pricing Strategy?
While you consider marketing and selling your services, you must comprehend the meaning of pricing strategy, what is it? How does it work? How will it bring in more revenue? These are relevant deliberations that you should invest time in. We will guide you down this road.
A pricing strategy will offer you the methods that you will utilize to upsurge sales and increase profits by marketing your services at convenient rates. The best part is that there is exceptional accommodation in what manner you set your prices. Assessing services is more demanding than assessing products because you can determine the charges of manufacturing a physical product but when it comes to pricing your services, it is more specific and challenging to evaluate the value of your direction, your skills, and the worth of your time. You can set your pricing strategy based on your industry, the nature of service pricing that prevails in your domain, the offers of your competition, and how clients distinguish the worth of your services. We will show you various pricing models that you can evaluate before deciding what suits you the best.
Pricing your services at an hourly rate is quite reasonable and straightforward. This strategy certifies that you are attaining an above-the-line pay for the time and work you capitalize in servicing each client. You should consider hourly rates while pricing your consulting services, rather than charging a service that demands employment and resources from others. Your rate will be set by evaluating your knowledge, skills, experience, and precedence; a more skilled and experienced consultant has usually remunerated a more hourly rate than a less skilled consultant. Your travel time will also be encompassed as an additional charge in your hourly rate.
As the name implies, you will be charging for your services for a single day. Daily rates are applied in industries where employees are hired based on per-venture or seasonal work. A daily rate is generally fixed based on an eight-hour working day. You need to be precise while setting the daily rate of your services. If you work more than eight hours in a day you can charge additionally for your time, effort, and the skills that you will offer while accomplishing the task. And make sure that you negotiate your pricing strategy with your customers beforehand.
Various studies have revealed that minor variations in your pricing can either increase your profits or low your revenue by 20-50%. Just like hourly and daily pricing, you will be charging your customer for time, and it is expected that you will be offering your services round-the-clock for that week except quantified otherwise. Of course, there is always a possibility that customers may originate a price and compare that with your competition. You must understand if a task demands more time than anticipated, the customer will pay you for extra weeks rather than extra hours. Therefore, you may need to settle an hourly price for minor fluctuations or amendments that take less than a week.
A monthly retainer is convenient when your customer will be paying a fixed price to employ your accessibility, regardless of the need for your services. A retainer fee should be agreed on beforehand. What often occurs is that your customer will prefer to pay for your services when the needs call for it, this points to the fact that you are on-call. Preferably this requires you to have flexibility in your calendar for your customer even if they don’t demand your services for that month. Food for thought, if your customer pays you at the end rather than in advance, they are not monthly retaining your services. They are only paying you for your services at a fixed price.
Jerry Osteryoung, a business consultant affirms: “Customers want a fixed rate, entrepreneurs want an hourly rate. It’s a question of who is going to bear the risk. If I charge a flat rate, I am bearing the risk.” If a task gets more extended than anticipated, you are risking losing coinage to the customer. If your client insists on a fixed fee, you should make sure that they agree to pay extra charges if the task runs over a specified time.
You will not be charging your customers according to the hours you served instead you will be paid depending on how much your customers value and perceive your skills and services and how much value your skills will bring to the project. To conquer this approach, you need to efficiently understand your customer, their perception, and what they desire. This will lead you to acknowledge the kind of value you will offer to your customer.
A little word of advice, when it comes to pricing your services, no matter whether you are an experienced entrepreneur or a potential bootstrapper, you should be clever. Never underestimate your competitors because they may have a more vivid pricing strategy than you. To get ahead, you need to find the optimal action plan and this procedure begins by deciding on the most suitable pricing strategy for your services.