The practice of lowering fees on products and services happens so often that we become comfortable doing it. Lowering your fees can help you establish your business, get more clients in the door, and possibly pay off a couple of nagging bills.
Sometimes, it’s necessary to lower fees, especially if you’re pricing yourself out of the market or if research has confirmed that your price is the primary reason people will not buy your services (rare).
But the practice of continually lowering prices can and most likely will drive you mad if you don’t keep this habit in check. This month, we’re talking about overcoming overwhelm. So much of our lives are within our control. Pricing is one of them. Let’s look at how low fees affect us and can cause overwhelm.
1. Charging less may make you feel undervalued.
We talked about being undervalued not too long ago. Remember that? What happens when you start to feel undervalued? For me, it makes me feel a little bit of frustration at myself, and even some resentment toward those who I feel are getting more than they should be. There is nothing wrong with helping people out, and as women (many of us, anyway), we want to do that and may even feel compelled or driven to do that. But being in business means drawing some lines in the sand.
Think about: Whether or not your current pricing strategy is making you feel undervalued. Do you feel like you’re worth much more than you charge? Only you can answer that, but it’s such an important question to ask.
2. Charging less may not be profitable.
I’m learning now about profit margins, and believe me, it is quite the eye-opener when you realize that you are not actually running a profitable business. Revenue is not the same as profit. And there is a difference between paying yourself a (deserved) salary and your business being profitable. Many of us are consultants, and I am going to guess that many reading this are like myself and have never really thought about profit margin, because we don’t sell a “thing,” per se. But trust me, you need to start thinking about your business in terms of revenue, salary (yours), and profit margin. Ask yourself whether or not you actually make any money – beyond your own salary.
This is such an important concept to grasp, because when your business starts to make its own money, you can begin to think about hiring new employees, expanding into bigger office space, purchasing new equipment, etc. without taking a personal hit that may affect your family finances.
Think about: Whether or not, after you have achieved your desired salary, your pricing strategy is allowing room for a profit margin. Check ideal profit margins for your industry. Is your business even profitable? Also think about whether or not your salary is acceptable for someone with your expertise and experience. It might not be, and that’s okay right now. But you should have a plan to add additional revenue streams to get your business to the place where your salary is great and you are also a profitable business.
3. Charging less may not attract your ideal client.
Think about this: What does it look like when you are offering your coaching or consulting services free? Does it look like a kind gesture, or that you have a lot of free time, or that you need more clients? Do any of those things sound like someone who is in-demand and high-quality?
What about when you offer insanely cheap options? Was that decision out of lack or out of business savvy? What if the answer to your revenue needs lay not in pricing, but in networking, referrals, and smarter marketing?
Many experts suggest that very rarely is price the main factor in a purchase decision. Our job is to figure out what IS the main factor and play to it, rather than lowering prices just to entice.
Charging too much could become burdensome, too. It takes a lot of thought, research, and testing, to ultimately get the right pricing strategy down, and then you will still end up adjusting it year after year. Just give yourself some power to be in charge of your pricing so that the responsibility and success belong to you.