Approaching an industry as a new business can feel like a daunting task. It’s a giant step into the unknown, which is why many of us ponder taking this big step for so long.
One of the trickiest decisions that you will have to face is how to price your services. Some people will opt for the lowball approach, pricing themselves as low as possible just to get those first few customers through the door. Others will opt for what they think they are worth, and suffice to say; neither approach is likely to result in much success.
In truth, it’s a complicated equation, but through today’s article, we’ll look at some ways you can approach it.
What costs do you have to cover?
Before you proceed to other steps, you need to understand the true costs of your business. After all, you are unlikely to take home all your income as profit. Instead, there will be costs, which need to be understood in the great pricing debate.
Even a tradesperson such as a tiler will have their own public liability insurance requirements, vehicle costs and, of course, the cost of materials. Make sure you understand all of these costs before even contemplating what you will be charging clients.
What does the market dictate?
When you are new to an industry, understanding the going rates can be incredibly difficult. This is why research is essential. If you want to know what to charge as a fair price, you need to see what others in your industry and region are charging.
This is the approach that many new businesses take, and it is a good one. It will help you to understand what the competition is like and, more importantly, what customers are used to paying.
Should you then proceed to undercut them? Absolutely not – this is not a sustainable strategy. Instead, you should be looking to charge a fair price that meets both your and your customers’ needs.
How much is your time truly worth?
If you are self-employed, then your time is your most valuable commodity. After all, it is the only resource that you have that is truly limited.
Many people make the mistake of undervaluing their time, which is a big mistake. If you do not value your time, then how can you expect your customers to?
This is where you need to assess your goals. If you moved from the comfortable employment world to make more money, it stands to reason that your pricing strategy needs to follow this same logic.
Now, you can’t simply create a “cost per hour” that works for you – you do need to keep referring to the second point we made about market rates. Instead, this part of the equation is more about fine-tuning your pricing and finding that final price point that works for all concerned.