What Should I?Charge?

Nail your?pricing?with my simple formula

My name is Krista Mollion. I am a business mentor and owner of the e-platform?From Zero 2 Six Academy, where I teach entrepreneurs a proven 6-step framework to success, consisting of courses, coaching, and community. Please check out my podcast,?Take Back Mondays, and my?YouTube channel, where I post weekly episodes to help people love Mondays again. Free Tips: I invite you to join nearly 27,000 smart business-oriented people who are subscribed to receive my weekly newsletter absolutely for free?here.

I see you, my entrepreneurial friend.

You’ve got big plans and great services to offer.?

But there is one nagging question in the back of your mind:?

What should I charge?

Ugghh….everyone from rookies to top experts face this question.

Stop stressing about your rates, friend.

If you are a small business or agency owner, creative, coach, freelancer, consultant, or subject-matter expert, I have a simple formula to get super confident and nail your pricing.?

Let me share it with you. But first:

Disclaimer

Pricing is one of those touchy topics. People argue. People get upset. Everyone has their opinion, including me. Obviously, everything you read here is my own opinion and based on my own experiences. Situations are not always black or white so please use this advice carefully to take into account your unique situation and don’t troll me for my viewpoints, deal? Ok, let’s dive in!

Know Your Clients to Know Your?Prices

Defining your one ideal client avatar is mandatory for good pricing, since everything depends on whom you serve!

So before reading further, make sure you aren’t telling me ‘coaches’. Instead, you are saying a professional who runs a successful business to coach others around one specific pain point (Sales, Weight Loss, Mindset, Business, etc) who has no employees, no office, no school-aged children, and makes between $8,000–$12,000 USD per month. Then you tell me about their pain points and how what you do is exactly what this type of coach desperately needs.

Toggling back and forth, and never being clear on whom you serve, will always result in poor pricing. Worse though, it will lead to bad business decisions overall. If you are torn on this subject, two resources that may help you are my Ideal Client Quiz and Define Your Client video.

Pro Tip: If someone you think is your ideal customer doesn’t buy, it is usually not the price. Either you pitched the wrong person or there is another reason (timing, trust, personality preference, personal hardship, etc)

Price < Earnings Logic?Rule?

This article is based on how much your ideal customer earns. Gasp!?

Yes, I know this is different from what the gurus have told you.

You’ve likely been told to “10 x your prices” and “crush it” by the bro authorities on social media.

Well, in real life, things work based on logic, not hype.

The reality is that I can’t charge more than you earn.

Duh.

So my rule begins by understanding what your ideal customer is making.?

The average full-time wage in the USA is currently $70,000, according to my sources here.?

Do your research and adjust based on your country, state, and city to account for fluctuations.?Do your research and adjust based on your country, state, and city to account for fluctuations. You can use websites like this or search the job title on LinkedIn as often the rates are listed. Did you know California just passed a law that employers must include salary range in their job listings??

Take into account that these numbers change, so your rates should adjust periodically too.

The 4 Pricing Categories (Plus a 5th I Will Briefly?Mention)

Let me show you the breakdown in a very simplified way:

1. Juniors (makes 50k)?
2. Seniors (makes 100k)
3. CEOs (makes 200k)
4. Multi-millionaires (makes 1 Mil)
5. Companies (corporate budgets for your services)

My Magic Pricing Formula is?12%

For 1. -4. above, I take 12% of their monthly gross income to base my prices on. Why 12%? I assume for the majority of people, their income is at least 75% allocated to a budget they spend monthly (monthly spending is closer to 80% of one’s income, according to this source).?

If your product price falls into that 12% range, they will be more likely to buy it because it fits into their budget of what they know they can spend monthly on discretionary items (entertainment, eating out, consumer purchases, and services).

Note: This doesn’t mean you can’t charge less or more but I find that 12% is the sweet spot for most customers.

Let’s look at this more closely on a monthly basis what you can charge for your service:

These are prices most customers should have no objection to if it is something they want or need. In fact, these are the “perfect” prices by income level, give or take a bit higher or lower.

Keep in mind that 12% is the sweet spot where someone who wants the product or service will have no price objection. This doesn’t mean you can’t charge more or less. It is only a good guideline for you to work within. If you have a unique skill set or 10+ years of experience or have won awards, you can easily charge up to 15%, but keep in mind the customer must recognize your value first. A bonus of charging up to 15% is that it gives you more wiggle room to offer discounts (see below) without much damage to your bottom line.

If your service or product is much higher, then I would set up a payment plan and find the sweet spot to keep it even lower than 12%. For purchases that would require three or more months of payments, the fee should go down to around 7%-8% of the gross monthly revenue.

Positioning Yourself As Unaffordable on?Purpose

You define your brand.

You can totally decide to serve the luxury market.

Go for it.

Then….make sure all your public profiles scream “expensive”. This will attract the right customer and repel the customer looking for a deal. Less time wasted. Win-win.

Be transparent: talk about your rates openly and let people know working with you is a “big commitment” or “a significant investment”.

You may even consider is to list your pricing transparently on your website like “Consultations start at $50,000 per hour.” Your millionaire audience won’t bat an eye.

Just make sure behind the hype you can back this up on your About page why you are worth that price.

Having worked with a couple of well-known brands or having 10+ years of experience in your field is NOT justification.

Selling three 20-million-dollar companies and having dinner regularly with the top leaders in the country would be more of what I’d be looking for.

Don’t be a douchebag and quote crazy rates to poor people. No normal consultants do that and get away with it long-term, except lawyers. And that's because the lawyer does something only they can do that has such high stakes we don't have any choice but to pay them. Whereas your customer can probably live without the service (I know this may bruise some egos out there).

Positioning Yourself As Affordable on?Purpose

Maybe, on the contrary, you wish to build your reputation as an affordable option in your market. I highly discourage my clients to adopt this positioning because most often, it will backfire. The reason is simple: time after time, I have seen these well-meaning providers attracting clients who expect double for nothing. Unless you are running an e-commerce business with strategically very cheap products, you will find it very difficult to build a stable income. Plus, what is cheap really? Today we live in a global marketplace where there will always be a provider who is cheaper than you somewhere. There are exceptions but globally I would try to talk you out of it. After all, I assume you are trying to build a business, which is difficult if you are working with ‘cheap’ clients.

Working with Corporates?

If you serve category 5 (companies), I have a few suggestions.

?Do your research to find out the right budgets for the services they want from you. A couple of ways to do this:

• Join an industry association so you can get guidance on industry-standard pricing
• Reach out to a couple of successful firms doing similar work and find out their rates
• Go into industry forums and ask other experts about their rates
• Get yourself a mentor in your industry who can guide you on pricing
• Ask the company directly about their budget ranges for the project and be firm to try your best to get a clear answer. Do this before sending any proposals, doing any scoping work, or agreeing to anything, even orally.

You should rightfully assume corporate budgets for your services will be on average between five to ten times higher than your non-corporate rates. For example, if you charge an individual $2,000, you can ask for $20,000. But let the company make you an offer first since some brands expect to pay up to twenty times your individual rates.

Other Conditions That Drive Your?Pricing

Be careful when pricing your services that you are doing it in the most clever way as possible. Some aspects you won’t want to overlook are:?

1. Will you need special software? If the client requires you to use software you don’t own, you may need to budget that into the project.
2. Will you need to commute a long distance or do in-person meetings? Factor that in too, as well as if that commute will affect you in other indirect ways, like asking the babysitter to work an extra hour or an increased food budget or even a hotel.
3. Will you need to manage others? If this is an extra service, it should be added to your budget.?
4. Is this client ‘green’? This means you will have additional back-and-forths to educate, answer more questions than usual, and generally, they will take up to 15% more of your time than a more experienced client who is used to this service. Factor that into your budget.
5. What is the timeline? If the client is asking for rush delivery, you must add a rush fee to your normal fee.
6. What is the intensity? Is this a routine job or a ground-breaking new product? Those would require very different rates.

Take your time pricing services. This also implies you have a perfect process for new inquiries where you ask them the right qualifying questions. If you met with a client to gather all information, it is fully acceptable to say you can get them a proposal by ‘end of the week.’ or ‘next Monday.’ But never walk out of such meeting without knowing their budget range or expectations. Otherwise, you are wasting your time.

Overcharging?

When someone says ‘No’, use the above formula to determine if it could be the price. Did you make the price so high that you know your target customer can’t afford it? Then that is on you, and it is no surprise they turned you down. I personally unfollow people who gave me outrageous estimates because it signifies to me that either 1.) this person has a massive ego problem or 2) this person does not want to work with me so they overquoted me on purpose, meaning I am not their ideal customer avatar after all. There is nothing cool about overcharging except giving yourself a terrible reputation. But be careful to know the difference when someone says “it’s too expensive” if you are confident in your rates, then it translates into “I don’t value this service enough to spend that on it specifically.”

Undercharging?

When someone accepts too eagerly your quote or looks at you in disbelief before asking if they heard the price correctly, you are probably undercharging. Use the formula above and make sure you know what your target customer earns. Undercharging is a sign of a lack of self-confidence and guilt feelings around money. You can’t build a business if you are undercharging. Setting higher rates means the client will respect you more and value the services you provide. People tend not to value cheap or free things.

Reasons You’ll Want to Price Your Services?Well

1. Clients won’t respect you if you undercharge
2. Clients will hate you if you overcharge.
3. Your services are valuable and value is reflected by the price.
4. You will feel bitter if you under charge and not do as good of a job.
5. You hurt innocent people when you overcharge. I’ve seen people go into debt for services that were overpriced
6. You will lose great potential clients because you didn’t design the price with them in mind. Price should always match the audience!

Conditions Around Your?Pricing

No pricing discussion would be complete without setting clear boundaries around your services. Make sure to invest in building a rock-solid contract template that lists off clearly what is in-scope and what is out-of-scope, the timeframe, the late fees, how out-of-scope requests, approvals, or disputes will be handled, as well as all disclaimers. Pay for a good contract template for your industry and modify it according to your needs. This small detail is crucial for your work and can save you big headaches and thousands of dollars.

Money Talks

Please don’t play the cat and mouse game where you spend hours working on a proposal only to send it to the client and hear nothing for weeks. There is a better way. Here are a few ideas to use depending on your type of business:

1. Ask in your initial inquiry form for their budget range
2. Post a fee list on your website
3. Set up a payment processor so they can book your service directly online (example: https://kristamollion.com/powersession)
4. Learn to close on the discovery call. Watch my video here how.?
5. Get some money confidence coaching here?
6. Join a professional association to learn about industry rates, contract templates, and pricing best practices.

Discounts

‘No’ is often not about price. The majority of the time, there are other reasons for the rejection. Therefore, I’m strongly against using discounts to land a new client. If someone asks you for a discount and you are sure you priced based on your avatar, it usually means this individual is not your right audience. Here are some situations where I give discounts:

a) Add-on sales

b) Preferred rate for my newsletter subscribers or Academy members

c) Annual, bi-annual, or flash sale

d) Bundle deals

e) Annual pay

f) VIP customers?

e) Scholarships?

g) Giveaways?

More Resources For?You

Watch the video version here.

Download the pricing worksheet here.

Listen to the podcast version here.

Watch the playlist for more great money videos here.?

Come to my money workshop to get help in nailing your pricing and more here.

More questions? Submit them here.

Join my Insiders email list of 27+k subscribers and get my free pricing worksheet, discounts, and more Insider only tips to make more money and grow your?business?