Setting Your Prices

23 August 2021

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Short on time? Here's 3 Key Points:

  1. If you want your business to be a real business, then get your pricing right.
  2. Pricing is more than chucking everything up 5% or copying what other people are doing.
  3. For each customer you deal with, ask what they’re making you do for them, what they’re making you feel, and (lastly) what they’re paying you.

Want to talk to someone about your pricing? Reach out – we’ve seen what works, what people think will work, and (importantly) what doesn’t work.

Surely people won’t pay that, will they?

You’re putting together a quote for a new customer. You’ve looked at what the competition will charge. You’ve got a feeling about what the customer will pay. You’ve written down what you’re going to do. You pull the numbers back slightly to make sure you get the job.

You click send on the quote. A feeling of relief creeps in because you’ve ticked it off the list, mixed with trepidation on the response.

How you price is the difference between your side-hustle becoming self-employment, your self-employment becoming a business, and your business becoming genuinely saleable.

Get it right and you can stop doing everything yourself.

Many think it’s easy. The truth is though, pricing is more art than science. It’s more complicated than copying your competition or putting everything up 5%. It’s a very tight dance between what they pay, what they get, and how they feel.

It’s really petrol for your car. If you’re running low on gas you can drive conservatively. You can coast or turn your engine off at the traffic lights. You can get out and push. Do what you like, but you’ll only get so far without it. Pricing is the same – get it slightly wrong and you’ll be pushing before you know it.

So, pricing is a careful dance between:

It’s obviously what the customer pays, and what they get. I’ll go into each of those areas in separate blogs (sorry – we don’t have all the answers today…).

Most business owners tinker with those two circles. They’ll make pricing slightly bigger, or what the customers pay slightly smaller. And then they’ll click send on the quote…

If you really want to shift the pricing equation it really comes down to what the customer feels.

I hate using quotes (and telling jokes). I can usually remember the beginning and half of the middle. Then I run out of steam. There’s one floating around which I can’t quite remember but it does along the lines of:

People don’t remember what you did for them. They remember how you made them feel.

This entirely applies to pricing. They won’t remember if the cup of coffee was exceptional. They’ll remember how the staff made them feel. Virtual chocolate fish for anyone who can send me the proper quote…

What we all know

We know that 68% of customers compare prices online.

We all know that customers can get a discount from many suppliers. Heck, there’s whole websites giving people discounts…sidebar – if you’re thinking of putting products on GrabOne. Please. Don’t. It’s the death knell of many businesses.

We all struggle against online retailers, people going out less, or competitors with very low-cost structures.

But, just knowing that doesn’t mean we should copy their model. Copy and pasting what someone else does is crap.

Let’s be honest. You can work out how to do most of your accounting online. People think Xero does their accounts for them (tip…it doesn’t!). So, on that basis accountants should be very cheap. People pay thousands for something they could do themselves by googling.

Instead, customers come to us because (hopefully) we make them feel safe with the IRD. Because we make them feel like they’re not in business alone. Because we can share insights from what we know works with other customers. It’s not what we do, it’s how we make them feel.

So, here’s how we deal with it

Firstly, make sure you’re properly articulating what you give your customers.

Secondly, make sure you understand your costs. And then more importantly how much money you need to make from each sale to create a sustainable business.

Finally, work out how you make people feel. This is the secret to stepping up your prices, and shifting your business to something which is genuinely saleable.

More on each of these areas later.

BUT, there’s another side of this.

What are you paying, as a business owner to look after a customer? The more customers you have the more fires you need to fight.

What are you getting from the customer? I bet it’s less profit than you think you’re getting.

What are you feeling after dealing with them? Some people are just yuck right?

We all pay something. We all get something. We all feel something. So, bake that into your pricing.

Get it wrong and…

Getting it wrong sucks. It’ll also mean your self-employment stay as self-employment.

Some of the earliest customers we took on at Convex pay close to nothing. They I was desperate for customers and frankly bored (I was driving my wife Katherine crazy…) so needed something to do. Picking up any work was a good thing.

So you price cheap. Tell me we’ve all done it…

But then you hire staff. Then the staff do the work, and I check the work. They’re not as quick as me (and I wasn’t as quick as I thought I was). Then, the work of the needed to be checked to make sure it’s all correct.

The cost structure has jumped up, with pricing staying the same. I was going backwards quicker than I cared to admit.

But you’ve got to suck it up. You’ve promised a price so get on with it.

It means though starting again with your customer base. You’ve got to rebuild around customers who you’ve sold your pricing to and who you’ve clearly explained your value to.

In Summary

Here’s the takeaways:

  • Pricing is the difference between your side-hustle becoming self-employment, your self-employment becoming a business, and your business becoming genuinely saleable.
  • Get it right and you can stop doing everything yourself.
  • People don’t remember what you did for them. They remember how you made them feel.
  • What are you paying yourself as a business owner in dealing with any customer?

Want to talk to someone about your pricing? Reach out – we’ve seen what works, what people think will work, and (importantly) what doesn’t work.

HM v2

for more help feel free to reach out. Get in touch with Hamish Mexted