Price your services

Wasserman, E. (2009, November 1). How to Price Business Services | Inc.com. Inc. https://www.inc.com/guides/price-your-services.html

Pricing
  • there is no formula on how to calculate it 
  • need to calculate
  • your operating expenses 
    • monthly rent
    • insurance
    • utilities 
    • admin costs
    • overhead 
    • mileage
    • advertizing 
    • depreciation 
    • taxes
  • your target profit 
  • difference between your operating expenses and selling price 
factors to consider 
  • competitor's pricing 
    • businesses doing same / similar type of service 
      • check their website
      • call them 
    • note how you set yourself apart from them (differentiation) 
      • needed to convince the customer of enhanced value 
  • perceived value to customer 
    • not time but value given to the customer 
      • they seek your expertise in realizing X (peace of mind, quality, efficiency, better than what they could realize) 
      • need to factor for 
        • materials to deliver service 
        • labour 
          • your work efforts to deliver what they expect 
          • your subcontractors efforts 
        • overhead 
          • expenses (see above) 
    • need to calculate / determine your fair profit margin
      • costs vs profit - very sensitive
price models 
  • hourly (desired by entrepreneur) - risk of cost over rides born by the customer 
  • if you're giving your service (not dependent on others) .. this is what you want
  • expertise / experience / seniority 
  • flat (desired by customer) - risk of cost over rides born by the entrepreneur 
  • if you are a customer, you protect yourself from cost overruns 
  • as an entrepreneur, you may want to put a cap on the number of hours (negotiate if you run out of hours) 
  • variable - making adjustments per customer 
  • avoid; others find out and you get into trouble 
  • exception? high volume purchasing; long term commitment 
monitoring
  • should be done monthly (no longer) 
  • be sure to know if you're making a profit in the last month; adapt accordingly 
test market for new services 
  • new prices, new benefits, new combos, more variety = more choice = better customer service 
be careful about raising prices 
  • raise prices 
    • if competitor do 
    • if customers say you are a bargain 
    • never all at once (jolt to customer) 
    • be discreet 


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