TET #007: How to Price Your Services for Maximum RevenueSep 17, 2022
One of the challenges for every new business owner is pricing their services.
Unfortunately, many people sell their services like a marketer:
- They do not normalize bigger thinking.
- They argue based on costs.
- They discount their services.
- They keep selling their time.
Today I'm going to show you how to leave less money on the table.
Let's dive in.
Normalize Bigger Thinking
One of the bottlenecks to higher revenue is your mindset.
When I went into business, I wasn't familiar with the budgets and pricing for our services.
When I drafted offers, the numbers always seemed so big.
I got intimidated and assumed that clients would reject us immediately.
So I adjusted the numbers until I felt good about them.
Looking back now, this was an expensive mindset that had cost us hundreds of thousands in revenue during the first years.
Normalize more significant numbers, or you will constantly undersell your services.
Cost vs. Value
When negotiating prices with potential clients, never base your arguments on the cost required to deliver your services.
Always argue based on the value you are bringing your client.
If it takes you an hour to build a landing page that makes your client an additional $30k in revenue, don't charge for what that hour has cost you.
Argue that paying $10k in exchange for $20k in profit is well worth it.
Would I pay you one dollar to make two? Heck yes!
However, this requires two things:
- You must understand your client's problem deeply, and
- You must be good at what you are doing
It's Premium, or It's Free
You never want to discount your prices, here's why:
- It leaves much money on the table.
- Clients will always ask for more discounts.
- You are signaling to yourself that your work is less valuable.
The last point is arguably the one with the worst long-term consequences.
And think about your existing clients.
When they learn about another client's discounts, they will feel like they got a bad deal.
If a client cannot afford your services, but you still want to help them, do it for free.
Reduce Your Time
Here is another approach that has helped me work with clients on a budget: reduce your time.
I suggested reducing my time when asked if I could reduce my rate to match the budget.
This way, I didn't discount my rate and freed up more of my time.
This approach also helps long-term once budgets are less tight.
Of course, sometimes the decrease in time is too much for you to deliver your services.
You won't be able to work with everyone, and it's better to build a client base that can afford your services.
Increase Revenue Per Time Spent
Selling your time 1:1 has limits.
You can increase your hourly rate, but only so much.
To unlock the next level of revenue, you should offer your services for a fixed price.
Clients pay you a fixed amount of money to deliver an agreed-upon output.
The budget then gives you room to optimize your processes.
If you are writing code, build a library of pre-built components and widgets you need to customize.
Even better, you don't need to do the work yourself.
Hire someone else to do it and keep the surplus.
There is immense leverage here.
That's it for this week!