The value of an hour may be priceless but we still need to know our numbers.
The best way to learn to appreciate the value of your time is to calculate the financial worth of a single billable hour. It’s part number crunching, part experience, and part guesswork. Knowing this number helps you avoid making the three most common pricing mistakes that can cripple your business.
MISTAKE #1: Too many business owners cheat themselves by choosing billing rates and pricing projects and products based only on guesswork i.e., what they think they can (or should) charge for whatever it is they are selling.
One of the most challenging decisions you will make in your business is deciding what to charge customers for your products and services. If you get this wrong, you risk paying for your mistake for a very long time. You could even cause your business to fail.
MISTAKE #2: It is just as much of a mistake to price yourself too high as it is to price too low.
Pricing, whether you are selling products or services, or charging a fixed rate for projects, requires setting an appropriate hourly rate for your time and effort and being able to value what you bring to the table. It’s more than just doing quick and dirty number crunching; it’s a process of “becoming” that involves:
(1) considering a number of personal, business and ethical factors
(2) completing a few critical calculations after choosing a billing model
(3) coming to a conclusion based on your professional judgement, and then
(4) validating the truth of that conclusion with your authentic self.
Right pricing is a matter of value and authenticity. Now many coaches will tell you setting your hourly rate should be based on three things:
(1) what you need,
(2) what your competition charges, and
(3) what the market will bear.
But we don’t agree with that. Never have. Never will.
Comparison is the root of all unhappiness. It will only leave you feeling hurt and confused. Don’t go there.
MISTAKE #3: Following bad advice blindly is another common mistake business owners make in our experience.
We do think you should have an awareness of your competition and market, but believe the most important factors in setting your rates are the value you bring to the client and what rings true for you. In future posts, we’ll show you how to evaluate those. If you’re in a hurry to get the details, you can download a copy of SMARTSTART Pricing now (and use the coupon code to set the price to $0 for you).