How I price my service offerings

I've been in many Facebook groups where the all too familiar question pops up,

"How do I price my offers?"

The entrepreneur is looking for advice on what the market might dictate for their service, but in my opinion, this isn't the best way to price your offers.

An important first step is to think about how much money you want to make in a year.

Did you know that 92 per cent of women in business make less than $100K a year in revenue? A large part of this is simply due to not knowing how to price their service offers properly.?

I want to see more women making more money—not just for the sake of it, but because it leads to more choice and freedom in your business and life.?

First things first, I want us to stop charging an hourly rate. Charging by the hour can cap your earnings and make it difficult to scale your business.

Let’s say you want to make $100K a year, work 40 weeks out of the year, and work for 30 hours each week. Your initial calculation might lead you to believe you need to charge $84 an hour. But remember, you won't be billing all 30 hours. Between marketing, social media, bookkeeping, and other tasks, you'll likely only be billing 20 hours each week. So let's revise that to an hourly rate of $125.

Even though we don't want to charge by the hour, understanding this helps us see the value we need to attach to our time and services.

Introducing Tiered Pricing Models

Now, let’s talk about a tiered pricing model. This involves offering multiple levels of your service, each at a different price point. Money psychology teaches us that if a pearson is presented with three options, most people will pick the middle option. Your tiers could look something like this:

- Basic: $100 per month

- Standard: $200 per month

- Premium: $400 per month

You can offer different sets of features or benefits for each tier. For example, your basic tier could offer essential services, the standard tier offers more comprehensive services, and the premium tier provides the complete package for those willing to pay extra.

This way, you attract a broader range of clients and maximise your revenue without significantly increasing your workload.

Calculating Your Income

Let’s break it down further. If you aim to make $100K a year from your basic model, at $100 a month per client, you need 84 clients. For the standard model at $200 a month, you need 42 clients, and for the premium model at $400 a month, you need just 21 clients.?

When you break it down, onboarding seven clients a month for the basic model seems manageable, but you have to remember that it’s potentially a lot of work to be onboarding new people so frequently.

Once you know how many clients or customers you can manage, you can start to build your offers out to match that need. You can also mix and match your client base across different tiers to meet your financial goals.

So, instead of charging by the hour, we move towards a tiered pricing model. This strategy allows your business to scale more efficiently.

By offering higher-priced tiers with added value, you can increase your overall revenue. Plus, you get rid of the revenue peaks and troughs that can come from project-based work.?

Consider implementing a tiered pricing strategy in your business to give yourself more stability and focus on trying to achieve the MRR (monthly recurring revenue) number that will get you to the 100K per year goal. It can take some time to figure out the perfect tiers for your service, but the effort is well worth it.?

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