Robin recently featured on Entrepreneurs On Fire, an award-winning podcast run by John Lee Dumas, a fellow entrepreneur inspiring others along your entrepreneurial journey. Robin chats with John about the importance of not underselling yourself and how to price yourself correctly.
The conversation started with Robin sharing some thoughts on becoming successful that most people would disagree with. Robin believes in going against the flow. When you are starting out in business, you are typically told to follow the competition and do what they do because that is where the success lies. You don’t always have to follow the crowd though.
One of the reasons underselling is such a big issue is because people charge the same as everyone else. Why is this such a big mistake? There’s not necessarily anything wrong in seeing what your competitors are charging, but what you shouldn’t do is assume that other businesses are doing things right.
Robin instead recommends a goal-focused approach. Consider what your ideal turnover is in your business and how many products you would need to sell to meet that goal. Use this as initial guidance for how much you are charging. You then also need to look at what price point you are going to enter into: low-range, mid-range, or high end. Lower or middle range prices feel safer because they are not too expensive and you feel like you will still have clients. However, there is always someone, perhaps with more experience, charging high price options who are still successful and getting clients.
Another common mistake in business is charging by the hour. Charging by the hour suggests that it is only your time that people are paying for, but it is so much more than that. Your clients are paying for your experience and skills, and the results, leads and transformation they get after working with you. If you are confident in your skills and know that you can guarantee your clients the results they want, you have the right to charge in a way that represents that. Through knowing your worth and providing services and pricing which match that, referrals will follow because you are the best solution to your clients’ problems.
Robin recommends productising your services into packages rather hourly rates. To do this, you need to look at the average time it takes for you to get the desired outcome with your clients. For example, this could be a session a week for 12 weeks, and then multiply that timeframe with your hourly rate. This is the first step and you need to get used to selling in that way.
The next step is to start pitching other offerings in this package format. Through having this fixed fee based on transformation and results, you can then easily increase the price as your confidence and leads grow.
When you start feeling confident about your packages, have a process in place and know that you can get results for your clients, this is when you can incrementally start to increase your prices. How much do you increase your prices though at a time?
Robin recommends looking at how you feel as the price increases and when you hit the point where you start to feel it’s too expensive, that’s the price you start to pitch at. You have to go out of your comfort zone to find success. More often than not, there will still be people wanting to buy from you.
Through underselling yourself, it is as if you are offering discounted prices without realising it. Even conscious discounting though, which seems beneficial to increase demand for product, negatively impacts your business. A 5% discount might not seem like anything, but to make a profit, you have to sell 14% more of your product or service. This keeps increasing as the discount increases. Increasing your prices, on the other hand, you can afford to sell less products for the same profit. Robin’s philosophy is to have half the clients and double the profits.
Money mindset is a big reason why people might struggle to increase their prices. Research shows that we have a financial blueprint installed within us from a young age and as you grow, you rely on this blueprint to handle money in your business. You understand the concept of making money and spending money and cash flow.
The key is making money and keeping it.
If you are selling your products cheaply because it brings in a sale, this will be damaging to your business because you are not making enough money to cover all the expenses and overheads, but still have a profit.
By selling products at a higher price, you may wait a bit longer to create sales. There is a sense of immediacy in the world we live in and we are used to having everything at our fingertips. With patience though and waiting for the right prospects at the right price, this will bring you more success and profit.
John and Robin finished the podcast with two key pieces of advice.
People who read this article, also enjoyed reading:
Client Success - Case Study