How much should I charge?
How much should I charge?
Money can be a very sensitive topic. It is more than the profit of your business. It acts as a measure of your success, validating your skills and experience. When setting a price for your product or service, you’re trying to price something you’ve poured blood, sweat and tears into and that is no easy feat.
Factually speaking, deciding what price to charge tends to be more difficult for female entrepreneurs, which often leads to women charging less than what they are really worth.
So what can you do about it? Here are some thoughts to consider.
Look hard at your business financials
If you want to charge what you are truly worth, know where your business stands financially.
o Understand the performance of your business – are you thriving, breaking-even or slumping into debt?
o Use accounting software to see real-time cashflow – do your financial reports show that your business finances are okay or could you be doing better?
o Critically evaluate your financial habits – do you regularly check your books and discuss information with your accountant? If not, is there something you are trying to avoid?
Examine your psychology and behavior
What is your attitude like towards your business and money, because the way your present your product or service to clients is vitally important. Ask yourself these questions:
o Do I have trouble demonstrating my value to others?
o Do I hesitate when asked for costs and then quickly offer a discount?
o Do I regularly ask myself if prices are too high?
If you said yes to any of these questions, you may have a problem. Your mind is a powerful tool and can play a significant role in setting your price. To charge what you’re really worth you must believe you deserve to be properly compensated for your time.
Research the market
The first step in deciding what to charge is to find out what other businesses charge. This is not always feasible as pricing can be commercially sensitive information, but here a few ways to source this information.
o Talk to your contacts and find out what competitors are charging for similar services.
o Search for prices and market rates on competitors websites and discussion forums.
o Use something like the Gabor Granger Elasticity Curve to get an idea of what customers might be willing to pay for your product.
o Peruse industry reports from analyst companies (which you may have to purchase) as this information can be incredibly valuable
So how much should I charge?
By now you should have a good idea about the price you should be setting. If you are already charging around that figure, that’s good news. If not, you may need to rethink your price and consider making changes to rectify the situation.
Four pricing strategy steps
1. Get your accounts in order
Hire an accountant or bookkeeper to ensure all your books and records are in order, which will provide a better assessment of the state of your business.
2. Find an accountability partner and meet weekly
This could be your accountant, bookkeeper or other professional. Whoever you choose, they must be able to help you focus on your value. Talk to your accountability partner weekly for at least 30 minutes.
3. Keep financial goals in mind
In your accountability meetings, review your financial goals and assess your progress towards improving business finances and cashflow.
4. Talk about your challenges
Do not ignore problems or financial issues in your business. Overdrawn bank accounts, maxed-out credit cards or overdue bills are significant indicators you need to seek professional advice and change your business strategy to overcome these challenges.
Xero is a wonderful accounting software product which can help you generate reports quickly and easily identify areas of concern. In addition, there are hundreds of different add-ons you can use to customize the software specifically for your business.
We are here to help you succeed! If you have identified areas in your business which need to be addressed or are in need of some advice, please don’t hesitate to give MB+M a call on 5821 9177 to book a free consultation.