We’ve talked before about ‘Imposter Syndrome’, and how this can be a huge barrier for many small business owners. Whether or not you suffer from feeling like an imposter every now and then, though, knowing your worth can pose a problem all on its own.
Deciding how much you want to charge for your products or services is a big step, and one that many businesses wrestle with for a very long time.
There are so many considerations here, and whilst we couldn’t possibly cram them all in to this post, let’s at least try and tackle a few of the biggest issues in this area.
We’re going to address these topics under three headings, you might not have thought about your worth in this way before, but putting a new spin on things can always be helpful.
Selfishly. Realistically. Practically.
That’s the order we’re going in. It’s different, but it will hopefully make sense to you soon.
Firstly, you need to think selfishly. You might not be very good at that, but it’s important.
How much money do you want to make? Sorry, not make, how much money do you want to earn?
Because in business, you earn every penny, no matter how much you charge.
When you know how much you want to earn, you’re teetering into a little bit of ‘blue sky’ thinking, and there’s nothing wrong with that, but also ask yourself the question of how much you need to earn, as that’s important too.
This is still thinking selfishly, but lose the negative connotations that come with the word selfish, because they’re not helpful.
How much do you need to pay the mortgage? To put something away for the kids? To treat yourself and enjoy life?
You may see a disparity between the two figures, of how much you need and how much you want, you may not.
We often find that how much people need outweighs what they say they want, and this creates an obvious problem, they aim too low.
Humility and humbleness are fine attributes, unless they actually prevent you from ever being able to earn the money you need to earn, because you set your prices too low in the first place. Be selfish!
OK, so you’ve got those figures in your head about how much you want to earn, how much you need to earn, and have maybe settled on a figure that sits somewhere between the two.
This all comes into Business Planning, which we go into detail on elsewhere within 2080e, but for now, let’s make the jump from being selfish (remember, that’s not a dirty word) to being realistic.
All that blue sky thinking isn’t necessarily unrealistic, but keep your feet on the ground for now, and take a look around.
How much does the competition charge for your services?
Remember, there may be geographical disparities with certain services, and this has to be taken into account, but your research into the competition should stretch as widely as time allows.
In all likelihood, you’ll find a huge range of prices for the same things, and that’s across all industries and niches as well.
You’ll find web developers with eye watering prices, and those who look like they’re doing it ‘on the cheap’.
Similarly, you’ll find people in the building game engaged in a race to the bottom, whilst other firms tell you that if you ‘buy cheap, you buy twice’ and that if you’re looking at the price first, you’re looking in the wrong place.
It can be confusing and you may have conflicting views and voices, but it’s all good, it’s all about learning, and that’s what 2080e is here for, to help you learn.
Realistic pricing is important, as it makes your goals achievable, and any goal that a business owner sets, needs to be just that, achievable.
You’ve probably encountered SMART targets before, and we won’t go into that right now, but the sentiment is the same.
We’re not saying that being realistic means that you need to err on the side of caution though, as some businesses actually find that undervaluing their services can be off putting to potential customers.
“Why is that so cheap?” is a question many potential customers may ask themselves.
Imagine that, turning people away with low prices.
It happens, and if you’re unrealistically underpriced, this can be just as big a barrier as being unrealistically overpriced.
So, what does your competition charge? What is a realistic price? 2080e can help with all of this, so don’t worry, we’ll get there.
Speaking of ‘getting there’, it has a lot to do with practicalities, which is the third string to our bow, if you like, when it comes to knowing your worth.
You’ve been selfish, you’ve been realistic, and now it’s time to be practical.
Let’s break it down for you.
Overheads come into the equation here. How much are you spending on premises, stock, materials etc., and are you passing enough of this on to the customer?
We often find that business owners take home far less than they’d planned, by underestimating their overheads, and subsequently undercharging for their services.
The customer avatar is vital to consider here, too, especially if your sales and marketing are limited to a specific location and/ or demographic.
If all the work you do is aimed at people on lower incomes, you might want to take that into consideration, just as you would if you were pricing up work for people with huge amounts of disposable income.
And don’t assume that high prices and ‘richer’ customers will automatically improve your bottom line.
There’s an awful lot to be said for building a consistent, loyal customer base, and one way to establish that is through fair and affordable pricing.
Many tradesmen and other business owners know this, many don’t, but this understanding (or a lack of it) can mean the difference between a successful business earning a sustainable income, and an unsuccessful business flitting from one job to another, even if those jobs happen to be high paying jobs.
What are the key thing to remember here, then?
Well, it’s that the three areas we’ve looked at today, namely, ‘being selfish’, ‘being realistic’ and ‘being practical’ all need to be taken into consideration collectively, before you’re able to truly know your worth.
It’ll take some doing, and you’ll change your mind along the way, but 2080e can at least point you in the right direction.
Look at your prices right now, and instead of thinking ‘are they too high?’ or ‘are they too low?’ try and apply the ‘selfish’, ‘realistic’ and ‘practical’ filters to them, and then see how you feel about where you’re at with your pricing.