The Profit Scale

The Top 3 Pricing Mistakes You Might Be Making (And How to Fix Them) - Ep. #1

Episode Summary

Salutations friend! 👋🏾 In today's conversation, we're going to discuss the 3 biggest and most common mistakes that most service-based entrepreneurs make when it comes to pricing. After listening to this podcast, you'll be able to re-think your pricing strategy and see if you're also making these mistakes. Don't worry, I won't leave you hanging! I'm also going to discuss some tips to help you start to correct these mistakes if you find yourself, currently making them!

Episode Notes

Don't worry, I won't leave you hanging! I'm also going to discuss some tips to help you start to correct these mistakes if you find yourself, currently making them!

Curious about what the three mistakes are? Check them out below, and listen to the full episode for more details and the tips on how to correct them!

Not Having A Pricing Strategy!
Pricing Based on your Peers!
Charging Your Worth

Worksheet: Top 3 Pricing Mistakes You Might Be Making And How To Fix Them

Website:https://rjcconsulting.com/

Episode Transcription

Salutations friend, and welcome to another episode of The Profit Scale! This is THE podcast for service-based coaches, consultants, and creatives looking to stop living paycheck to paycheck and who wants to pay themselves more and scale their business beyond the 6-figure plateau all while without being overwhelmed by working 60 + hour every week.

In our conversation today, we’re going to be talking about the 3 biggest and most common mistakes I see when it comes to pricing. This particular conversation is going to challenge the way you think about your pricing, and hopefully, encourage you to go back over your pricing strategy and see if you’re making these mistakes!

We’re not just gonna talk about what not to do though, I’m also going to give you some strategies that will prevent you from making these mistakes, or will help you correct them today!

Alright, make sure you have the notes app ready on your phone, or grab your pen and paper, because we’re about to dive in!

Mistake #1 - Not Having A Pricing Strategy!

Simply put, a pricing strategy is a consistent way of calculating your pricing, which takes into account the income needed not only to maintain your business, and pay yourself, but also to grow your business. It’s very common not to price your services using a pricing strategy when you first start, after all, it’s not one of the most common topics taught in the world of entrepreneurship, so that makes sense.

However, it’s also common that by the time you hit the 6-figure mark or more, you’re still using the same pricing strategy you were when you started your business (or lack thereof). Maybe you’ve raised your prices overtime, your charging more, and you’re paying yourself a consistent salary that you’re proud of! To be in that position is certainly an accomplishment worth celebrating!

Reaching the 6-figure milestone in your business is huge, BUT it’s not the end of your journey. If you’re listening to this, then I know you’re an entrepreneur with a HUGE vision for your business, and although earning 6-figures in revenue is amazing, it’s just the beginning for you, and we both know it!

There’s an old adage that says “what brought you here, isn’t going to take you there” and those words apply perfectly in this situation. I believe that if your business is going to grow past where you are now, you need to have a pricing strategy in place to support that. Having a pricing strategy allows you to understand why you charge the prices you do, beyond “because I’m worth it”, and that understanding leads to confidence, and that confidence leads to clarity in your communication, and that clarity in your communication leads to increased conversions, and those conversions, lead to coins!

In case you forgot, I’m all about my coins, and I’m all about yours too! So if the former is true, let’s reverse engineer it and look at what happens when you don’t have a strategy in place:

There’s a lack of understanding about why you charge the prices that you do.
It will then lead to lack of confidence and clarity in your communication, and this really shows up once someone challenges your pricing or gives you the infamous “I can’t afford you” and you find yourself questioning your own prices, or thinking to yourself “maybe I can give him a discount”, or “maybe I should offer her a new payment plan”.
This leads to a decrease in conversions, and eventually, you'll experience either a decrease in your coin flow, or having a ceiling in your coin flow, where you’re making money consistently, but it’s not growing.

If you’re currently thinking to yourself, “okay RJ, I feel you, we both know that’s me, but what do I do about it?”

Well, let me help you out my friend with a very simple quick fix to correct this mistake. There are 3 crucial things your pricing strategy should always account for:

The cost of running your business and providing your services (just to be clear, this also includes your salary).
The cost of your time - you can easily do this by setting an hourly rate for your time that you will include in your pricing
Profit margin - which is the space in revenue between what your business needs to maintain itself, versus what it needs to grow. And your profit margins are a percentage of your revenue. A quick way to find out what your current profit margins are is to ask your accountant, they’ll be able to let you know.

These three things form the foundation of a sustainable pricing strategy that will support your business as it scales.

Here's a quick recap of what every pricing strategy needs to include:

The cost of running your business
The cost of your time
Profit margins

Now let’s move unto Pricing mistake #2

Mistake # 2 - Pricing Based on your Peers!

Whether or not we want to admit it, this is a tactic we have all used at one point or another! You know how you charge $97 for your workbook or $1997 for your coaching package, yeah, you probably didn’t come up with that number yourself, and again, that’s normal. At the start of your business, it’s normal to look at what others in your industry are charging, find someone who’s around the same level as you and mirror their prices. It’s what most people do, but that doesn’t necessarily mean it’s a good strategy.

The most common issue I notice when I work with clients is that they look at what their peers are charging and use that as a marker to set their prices. The problem is you haven’t taken into account your position in the market, nor that of the business that you’re basing your pricing on. And if that business doesn’t hold the same position in the market as you, then modeling your pricing after theirs can do more harm for your business than good.

Don’t get me wrong, when you’re pricing it’s important to take your clients into account so you understand what they’re willing to spend, and your peers or competitors into account to understand where you want to position yourself in the market, but not for the purpose of copying what they’re doing.

Here’s an example, let’s say you’re a local branding consultant who works with local lawyers in your city. You provide branding services that help make their law firms more approachable. Now there are three other branding consultants in your local area that provide general branding services, they do all the things for all the people. The first thing you need to understand, is that they are not your competition, because they don’t have the same target audience as you. That means, their pricing, is not geared towards the same people that you want to reach.

If their target client is any and everyone who needs branding, then charging $500 for a basic branding package, makes sense for them. Whereas you’re targeting a specific client and offering a specialty service to them, so mirroring that $500 price point, likely doesn’t quite make sense for your business, when your position allows you to command more.

Inherently, taking clues from what’s working in your market is not a bad tactic, and it’s actually an effective strategy if you do it well. That being said, it’s effectiveness is based on understanding who your competition truly is, so to start correcting this mistake, ask yourself these three questions to help you better understand:

Do they target the same specific client as me?
Do they offer the same specialty service that I do?
Do they promise the same results as that I do?

If the answer to all three questions is yes, then that business is considered your direct competition. If you have a mixture of yes and no in your answers then it’s possible that they are a peer in your space, but not your direct competition.

And that leads us to the final mistake…

Mistake # 3 - Charging Your Worth (yes you read it right)

I left the best for last! So hear me out, here. We live in an Instagram world where the quote, “charge your worth” has become so popular so we as a collective, and especially women have begun to internalize this as truth.

So when clients ask me about pricing, this question always comes up, “how do I charge what I’m worth?” OR “I know I’m worth charging more, how can I increase my prices to reflect that”.

I believe that the premise of the quote is that you deserve to experience the benefits of charging higher prices, but the dollar value of the price itself does not reflect your worth. So friend lean in, and listen to me carefully! “You do not charge for the value you are worth, you charge for the value you ADD”.

Let me say it again for the people in the back, “You do not charge for the value you are worth, you charge for the value you ADD”

What exactly does that mean? It means, friend, it’s ain’t about your worth, you’re making what should be a professional matter, a personal matter, and that’s a problem.

It’s the reason why you begin to question yourself, your prices and whether you should be in business at all when clients tell you the infamous line we’ve all heard before “I can’t afford you” or “I wish I could work with you, but I don’t have the money”. You find yourself defending your prices, not only to your clients but to yourself. You find yourself frustrated as to why they don’t think you’re worth the investment. You may even find yourself feeling guilty for not lowering your prices, or offering a discount.

The more you attach your pricing to your worth as an individual, the harder it will be for you to communicate the value of your service. You see when you focus on “charging what you’re worth”, you focus less if not at all, on communicating the added value your service is bringing to your client’s business or life.

You become defensive of your pricing, because subconsciously, you’ve tied it to your worth, and when people reject your services, it feels like they’re rejecting you, as a person.

Friend, does any of this sound familiar? Am I speaking to you? Is this you right now? I need you to understand that you can never put a price tag on your worth, and no one besides, God could ever afford you even if you could. So let that notion go – it doesn’t serve you, or your business, or your clients.

Instead, correct this mistake by shifting your focus to charging for the value your service adds to your client’s lives or businesses. Get clear on the benefits your clients will walk away with by working with you, the elevated experience they’ll have, the load that’ll be lifted off their shoulders, their quality of life that will be increased, the more money they’ll make, the debt free-life they’ll live, the amount of time they will get back, or any and all of the benefits that come as a direct result of working with you. Let those benefits, be the justifiers of your pricing, not your worth.

Episode Recap

So let’s recap, we covered the top 3 mistakes you may be making when it comes to your pricing, and how you start to correct each one of them.

Mistake #1 is Not Having A Pricing Strategy!

You can start to correct this by making sure your pricing includes these three things:

1. The cost of running your business

2. The cost of your time and

3. Profit Margins

Mistake #2 is Pricing Based on your Peers!

You can correct this strategy by asking these three simple questions of the other entrepreneurs in your space:

1. Do they target the same specific client as me?

2. Do they offer the same specialty service that I do? AND

3. Do they promise the same results as that I do?

And lastly, Mistake #3, Charging Your Worth

You can begin to correct this mistake by shifting your focus off of your value, and unto the value, your services add to your client's lives or businesses. Highlighting the benefits of your service is a great way to do that.

If you haven’t done so already, download the worksheet that goes along with this episode, and take 10 minutes to fill it in. The worksheet expands on each of these points and has even more pricing information that we didn’t cover in today’s conversation. Head over to rjconnell.ca/1 to download the worksheet

As always friend, thank you for spending this time with me today! You know how important it is for me that this is a two-way conversation, to join the conversation on our IG page at RJ Connell consulting and comment on the post for episode 1 on the top right-hand side, and let me know which mistake resonated with you the most!

Friend, I will see you at the same time and same place next week, until then, I wish you coins, confidence, and all the bags!