Gimme anything!

This was the response from my friend Stacy (name changed) when I asked her how much money I owed her son for papering my daughters’ school textbooks - “Gimme anything”. I tried explaining to her that she should teach her son how to price his service because, whether he recognizes it or not, he is an entrepreneur. She laughed nervously. In her eyes, papering books is just “something he is good at and does in his free time” for anyone who needs the service.

But isn’t this how businesses are borne? You have a skill, talent, resources or time to perform some task or duty that someone else is willing to pay you for?

In other words, you create value by meeting a customer’s need and solving their problem. In my case, I neither have the skill, time nor desire to spend hours trying to cut those brown paper edges straight or tucking in those wretched corners neatly! Over the years, I am positive that my daughters’ teachers must have laughed at my pathetic attempts at covering their textbooks!

Now, I know that determining the value of your service is no easy task.

I have heard “Gimme anything” from painters, plumbers, seamstresses, hairdressers, the young and the not so young, the experienced and the amateur. It seems to be a challenge that many of us face. I am sure that there are many experts on this platform who can weigh in on the most effective pricing strategies, but these are the simple ones that I have used over time and what I recommended to my friend:

1.      Conduct a competitive analysis – What are other service providers charging for a similar service? Can you detect a trend or pattern? Is there an upper price or lower price? For example, some providers charge per book, others charge per book list. Research as many current examples in the marketplace and find an approach that best suits you.

2.      Conduct a basic break-even analysis – What are your potential expenses versus your revenue? Do you have to buy the brown paper and other supplies for the customer? How much time do you anticipate spending on the project? Can you put a dollar figure to that time? The simple principle is to ensure that your revenue at least covers your expenses.

3.      Determine your profit margin – How much profit would you like to make on each project? For example, using your break-even formula, you could decide that you want to make a 20%, 40% or 60% profit after covering all of your expenses. Or it could also be a $ amount such as $100, $200, etc.

4.      Determine added value – Can you provide any added value to the customer and therefore charge extra for your service? For example, can you provide the brown paper, tape, book labels, etc. so that the customer does not have the hassle and inconvenience of having to purchase these? Can you pick up the books from the customer and deliver them when completed? I would certainly be willing to pay more for these extra services.

5.      Match supply and demand – What are the peak and slow periods in the marketplace for the service you are offering? Are you the only service provider in your community/area? You may be able to offer your customers lower prices in the slow periods and higher prices in peak periods. You may also be able to charge higher prices if there are less competitors in your area.

6.      Offer discounts and specials – Maintain your base price but feel free to offer your customers discounts and specials. This strategy allows you to still communicate the true value of your service while encouraging repeat business and loyal customers. You can offer several types of discounts – eg. Family & Friends, Repeat customer, First time customer, Bring/Refer a friend. I can guarantee you that your customers will appreciate any cost savings.

7.      Ask another service provider for advice – While not everyone might be willing to share their strategy with you, hopefully you will find someone who is willing to walk you through the process and give you some ideas. For example, I was asked to conduct a training session for a corporate client recently and I called my friend and colleague Brendon (from BUZZconcepts Ltd.) for some advice and he freely shared some of his prices with me. Bless your heart Brendon!

8.      Review your pricing strategy regularly – for some providers, regularly may mean every month, for others it may be every quarter or year. It really depends on the service and the industry you are in. The point is to ensure that your pricing always remains competitive. Remember that customers’ expectations can change quickly depending on trends and choices available.

I personally know the uncertainty and fear that surrounds trying to determine a competitive price for my service.

Every time I am planning a Customer Service Workshop or event, I spend hours trying to ensure that my attendees feel that they are getting value for their money. I am learning to check in regularly with my potential customers in order to better understand their expectations. While I know that it is difficult to figure out the right price point,

“Gimme anything” is certainly not the answer!

Please feel free to share your approach to pricing your services as we can all learn from each other. What factors do you take into consideration when pricing your services? Thanks.

#pricing #pricingstrategy #service #smallbusinessowners #entrepreneur