One of the most common questions I get asked is, “how do you know how much to charge in your business?”, this tells me that many business owners out there struggle to value their offerings, whether it be a product or service and quite rightly, its not an easy task to put a price on something if you are new to the industry/new to business in general or even more challenging; if the concept is new altogether. You basically have nothing to compare it to, as let’s face it most of us Google to see what/who else is out there doing something similar.
This is something I encountered over ten years ago when launching my business network to the East Midlands- yes business networking of course existed, but there wasn’t a lot of it around and those that were, offered an entirely different solution to what I was proposing. Now I’m not saying I ‘invented’ the concept of relaxed, social, face to face networking through informative events, but the only place I could find remotely similar to what I was wanting to achieve was in London and even then, it was limited and not packaged together in the format I have been offering since. Therefore, I really had to dig deep to put a price /a value on my offerings- my membership packages.
So, what did I do? Well firstly I researched the market- was there anyone out there doing anything like what I was looking to launch- not really. Those I did find, I looked at what features and benefits were being offered and for what price- price comparison you might say. I compared value for value and then stopped myself… Why do I care who/what else is out there and how much they are charging, yes, I should be aware of my competition, however my main focus should be on what ‘I’ can offer and how much do ‘I’ want to charge? How much do I want to earn? What value can I offer taking into consideration my time, contacts and connections and overall potential value to the client? How much time will I be spending building this business, working on it daily, and what could the end result be for the customer? So many questions, but until you ask yourself these important ones, you may be in danger of pricing yourself too low, therefore devaluing what you offer, and this can be a big business turn-off to many.
Often people don’t opt for the ‘cheapest’, because they think it will be lower quality or not as good and would rather pay more, assuming the product/service is going to be better just because it costs more- this is often not the case at all- just clever marketing and confidence from the business owner, that what they are selling is worthy of that price. Price also reflects the demographic you are wanting to attract, so something to be aware of when setting your pricing structure.
My thoughts were back then, that if I filled the room of one of my events with one hundred decision makers from a wide range of industries and some of those, land a contract/sale off the back of an initial introduction, the value they have gained from that in a short space of time is priceless. It didn’t stop there. I wanted my clients to enjoy the process of networking, unlike past experiences I had, had in the magazine/advertising industry, when attending stuffy, boring networking events, so the social element was super important to me- and seemingly became very important to my clients as time went on, so much so that the concept of social networking sky rocketed in my city of Nottingham and people eventually just ‘got it’. Word soon spread as my database grew from a few hundred to a few thousand and business professionals travelled from not just Nottinghamshire to the Nottingham based events, but from across the East Midlands and further afield- we even welcomed members from as far as Manchester each month because they stated there was nothing like what we do in their city! I was being inundated with LinkedIn connections and messages from people from all over the country saying they had heard of my business network and what we were doing in Nottingham, wanting to know when are were launching to their city and so taking all of this into consideration, this is where I found the confidence to then increase my prices.
Committing to my prices was a daunting task admittedly and in the end I decided I didn’t want to be the ‘cheapest’, but I also didn’t want to out price my services and end up being too expensive in particular for the small business owners who may like to attend my events, so I went for a mid—range pricing structure- this worked for me and made it affordable for business start-ups and SME’s, but the package structure also meant that I could offer various different bundles, adding value along the way and pricing them accordingly, therefore hitting various markets and opening my network up to a whole range of demographics and budgets. I could also increase my prices later if I felt the need and no one would probably bat an eyelid once I was established – I later did exactly that and quite rightly no one noticed or cared.
The numbers- My advice,break it down, do some simple calculations and work out how much you want to earn that year, work backwards and figure out how much you need to charge to get to that figure, how much time are you willing to spend achieving that goal? Your pricing structure will evolve from this and as scary as it may be, be confident in your price, after all if someone says you are too expensive, then they are not the customer for you, move on and know your worth.