Are you struggling with your pricing strategy? Many startups fall into the trap of under-valuing what they do. They think they have to keep their prices low until they can prove they’re worth more.
- What is your product worth?- How much should you charge for your services?- How do you figure that out?
Answering these questions is tough when you’re just starting out. Many of us suffer from self-doubt, it’s a symptom of Impostor Syndrome, and it leads to charging clients less than we should.
In this post I’m going to share three steps you can take to overcome this and get paid what you’re worth.
1. Test the market
According to Forbes Magazine 90% of all start-ups fail. The main reason for this is they haven't tested the market to see if anyone would buy their product or service. Before you quit your job, or re-mortgage your house, find a way to get your product or service out there. Even if your product or service isn’t market ready - even if it’s just an idea - you can still test it. Look at how buffer did this.
A lower tech way of doing this is simple market research. Identify some people who are likely to be interested in what you do. Call them up, take them out for a coffee and ask them open questions to understand where their needs are. If your idea is a good fit then you can pitch it to them and get feedback on it. Don’t be afraid to ask them what they would be willing to pay. if they know you are just doing research they will usually be very honest with you. When people know you aren’t going to sell to them they can be very candid.
If you have an email list already of potential customers, you can target them with a simple questionnaire using Google Forms or Survey Monkey. Keep it short and keep the questions relevant.
2. Know the competition
Who else is out there doing what you do?How are they doing it?How successful are they?
Remember all that glitters isn't gold! Some people are like swans. On the surface they look like they are cruising along effortlessly, but underneath they are paddling like mad.
Do quantifiable research on others in your field. Look at their services, rates, testimonials, web and social media presence. If they are a limited company, you could even look up their HMRC returns. Although these are not always an accurate measure, it gives you a good idea if your competitors are really making money. If they are it’s a good indicator that you could too.
Use your competitors as inspiration, if they can do it, so can you. But don’t try to copy them, find your own way. Chances are they’ve been going much longer than you so their approaches to marketing and business development probably won’t work for you. Avoid comparing yourself to them too. If you compare your start-up business to an established competitor, it will only feed into your Impostor Syndrome. They will have a better website than you, they will be more active on social media and they will be advertising in places you can’t afford. That can knock your confidence and make you feel inferior.
We’ll be looking at this in more detail on our November 1st Webinar.
Competition keeps you on your toes. It stops you being complacent and usually it helps you focus on sales.
When you research you competitors you’ll quickly discover the differentiators between you and your competitors. This is key to know so you can stand out. Focus on what makes you different and celebrate it. I’m not the only sales coach or trainer in the world. I have lots of competition, but I am the only Entrepreneur's Godmother. I found a niche in the market that I’m truly passionate about and that helped me set a clear vision for the work I wanted to do...
I work with start-ups, micros and entrepreneurs to teach them how to sell their fantastic products and services, all for £99 & VAT per day.
What's your niche, why are you different to your competitors? Dig deep, and think creatively to find it. Steer away from the usual lines like “I give great service” or “I’ve got great experience”. So do your competitors. You aren’t going to sell to everyone, its ok to take a risk with your message.
3. The price is right: cost vs price
I know from experience this one is very tricky to master for startup businesses. For me when I started, my struggle with price setting came from a lack of understanding of the business, margins and cost of sale. Now when I work with clients who struggle with price, I ask them "How much does it cost you to open the doors?"
This is where you calculate the monthly overheads you have before you "open the doors”. This includes networking, advertising, office cost, travel, phone bills, insurance, wage cost, out sourced virtual assistants, social media management, material costs, room hire costs, website hosting, business cards and printing, CRM monthly charge, subsistence and other related overhead.
It is IMPERATIVE you know this figure because without it you will fail to set the correct price for your product or service and fail to make money and survive. I use the rule of thirds, here is an example.
If your monthly costs are £3,000, your sales target should be £9,000 turnover. This gives a third for you and a third to stay in the company. If you’re a service provider and you bill 12 days per month, your day rate to hit target is going to be £750 per day. Of course this formula will vary based on the number of days paid work you can get each month. You can also vary the amount you choose to pay yourself, leave in the company, or re-invest.
When you know these figures you can set yourself activity targets.
- How many networking events do you need to attend to meet the right number of prospects?- How many follow up phone calls, emails and face to face meetings do you need to make to convert prospects to clients?
It all comes down to ratios. As you get more experience you can gather more data and get more efficient and more accurate.
This is the formula I followed to take my company from almost zero to six figures in my first year of incorporation, using proactive sales strategies.
Getting your pricing right isn’t easy. It’s a combination of good thorough market research and confidence in what you do and your ability to deliver a quality service or product.
That probably sounds like a lot of hard work (and it is). Apparently there are easier methods out there. Only yesterday I was in a conversation in a Facebook group around the topic of self-value and knowing your worth. Members of the group were struggling with pricing and positioning and one of the members recommended techniques from an Australian woman called manifestation and abundance. Apparently all you have to do is ask the universe to intervene.
If you believe in universal intervention, you’re probably in the wrong place. If you want to take more practical action, try working through the advice above.
A heartfelt thank you for reading my blog and forgiving my dyslexic ways.