So you’ve chosen to go out on your own and you’re wondering how on earth do I find the right pricing strategy to charge for my services, right? A very typical question every new start-up wrestles with. Shall we have a look at it together?
Selling your services on a daily rate?
I’m going to assume that you are a business professional and that probably after many years or decades of business experience, and probably in a varied and successful career, that you have chosen to “go out on your own”. Some of you may have been working towards this for a while. Some may have had your hand “forced” by a separation, as has become very “normally prevalent” in today’s marketplace for resources, and have now decided to “go it alone”.
Of course there are many different types of businesses you could be buying into or setting up and across a range of different business models. For the purposes of this blog post I’m going to further assume that you want to start by going out Contracting or Consulting “on your own” and that you are going to “sell your services” based on a daily rate, OK?
Pricing Strategy Upsides and Downsides
If you’re anything like me, you will have already engaged a number such contractors or consultants in your previous corporate roles, albeit probably as a buyer of such services. At least then you’ll already have had some exposure to that game and know some of the rules, written and unwritten. And for yourself now, you’ll be aware of the upsides, which include the freedom and flexibility of choice of where, and in what sort of client organizations you want to work, what you’ll prefer to be doing and if managed correctly at a significantly better income. You’ll also be aware of some (mainly) “feast and famine” type downsides.
But what is the right pricing strategy?
Everybody in this situation wrestles with this question initially. Everybody. We all want to make as much as we can get away with, and we are all worried whether at what given rate we might be pricing ourselves out of the market, right?
Another very typical reality is that most people will err on the conservative so as to “get into the market first and then see” and will often under price themselves. There are not that many I have become aware of where the opposite has been true.
I remember one of my first contracts so well. It was in my CIO peer space where I was at lunch with an ex peer to decide on a reasonably lengthy and significant engagement he wanted me to lead for him. I had done my homework and knew that the market would pay around $1,200 a day for such an “independent” consultant. When it came to “the rate question” I don’t know what came over me but I just said $1,500, at which he coughed and spluttered but I just “zipped the lip”, and he agreed to take that away with him and come back to me. At first I thought that I’d blown it, but our relationship was such that I expected if he couldn’t get that approved in his organization, he would come back to me and tell me what he could. Well, the rate was agreed and the rest is history.
I’m suggesting to you that it’s probably too low
Since then, I have leveraged that example in almost every coaching or mentoring program where we have had to assist my client in finding their price-point. And in almost every case after I had asked them to do their homework in preparation for this coaching session, I felt that their rate expectation was too low and that they would be “leaving money on the table”.
In most cases we dwelt on the topic for a while and in most cases, the client actually ended up getting a higher rate than their initial view of their value. This is where the coach or mentor will intelligently challenge you so that you cover a much broader spectrum of positions, beliefs and options. And where that’s been the case, we often end up that an initial $1,000 or $1,200 rate belief might command $1,500 or $1,750, even $2,000 a day. Worth exploring, don’t you think?
The key point here in those scenarios is that this initial price-point can be allowed to end up being the “set point” for that clients belief, which they may never try to properly increase in the short term. One of the scenarios we play through can be the calculation of different rates across different contract periods and show the impact of these rates on revenue (and of course income) over time. Why lose 12 or 18 months of better rates, just because you weren’t “game enough” to up the ante at the start?
Interested in a pricing strategy technique?
By the way, I have an NLP (Neuro Linguistic Programming) based technique that I usually use with my clients at some point in this price finding process, where I will be able to help you find exactly that price-point where your true inner belief will cross over into where you no longer believe you are worth that daily rate.
It’s not just the rate
In a recent case, we were looking at hourly rates for training services. My client had some limiting beliefs in terms of their perception of their value and hence their ability to be able to “ask” for certain hourly rates for the services. That necessitated some “life coaching” in order to ascertain what kind of personal obstacle beliefs might have been lurking “under the covers” that they might not have been aware of.
This is where the life coach is often able to help with a range of techniques and questions that enable the incumbent to see themselves in a mirror they had never been in front of before. And in many cases, they are able to recognize certain meanings they had given certain events, often long ago, without realizing that these meanings had led to deeply held beliefs they were still allowing to play out often decades later which were still holding them back today.
As I say in my book “Life learnings of a Life Coach”, most people recognize at that point that most of these unsupportive beliefs were “made in the head” and that with the help of the right questions, they can be “replaced or remade in the head”, and off we go on a brand new trajectory they would not have believed possible before.
It’s about price and service level differentiation
Once that was “out of the way”, it was a matter of looking at the different services being provided by the business and establishing how we might be able to differentiate between:
- Premium level consulting and training services
- Standard level training services
- “One on one” and “one on many” level services.
They understood that looking at everything purely from an hourly rate point, they were in fact summarily comparing themselves to the lowest common denominator of their competitors and to a market of consumers that was also only buying on price. It is very difficult to compete if that’s the only basis we are offering our services on.
So with the above services differentiation we could very quickly see how these could attract different prices and how they would need to be structured to suit different client categories and different markets and different expectations. That also gave rise to the analysis of their ideal clients and what the expectations of each of these client categories were.
Once this was done, the rest was easy. We never needed to talk about belief again. The sales conversations were also very different. Without being arrogant, if a client is now purely focused on the lowest price, they now even direct that client to their competitors. There is confidence in the price conversation around premium level services pricing, based on the understanding that at the premium level market, there is also not as much competition and a clientele willing to (and able to) pay for the right level of services they seek.
This also enabled differentiating which services they owners had to perform themselves and which they could outsource or engage other resources to deliver.
It was all logically and sensibly and believably defined, differentiated and designed and with the right marketing targets and the right messages in synch, so now its confident business growth time.
It’s homework that leads to the right price
Of course your job is to do your homework. Analyzing the above dimensions for your intended services, your market and the client bases you will be addressing is paramount to finding the right entry level. Perhaps the above kind of differentiation will help as well.
I found in those initial stages that the amount of networking coffees I drank with so many different people helped me immensely in understanding those market forces and finding suitable benchmarks, experiences and price-point approaches. Hence I am able to teach that so well.
I also urge my clients to leverage Linked-In very specifically and my clients learn how to apply this tool as a fantastic filter as well as “door opener” to help facilitate what can otherwise be a very difficult process for people to find enough relevant information to base good pricing approaches on.
May I strongly suggest also at this point, that with a coach as your running mate, sounding board and confidante, this homework will be a whole lot more productive, more quickly achieved and to the point?
So what next?
So if you are in any of the positions outlined above and this post is resonating with you, why not avail yourself of a coach and mentor that has been there himself and helped heaps of others to find the right questions, find the right answers, find the right strategies and most importantly find the right confidence to tackle what many consider to be such a big impediment to successfully starting a worthwhile business?
What if you could?