What Should You Be Doing Now About Your Fees And Pricing?
- September 10, 2018
- Posted by: Rochelle
- Category: Fees + Revenue, Running Your Business
As we head into the last quarter of the year, it’s an excellent time to review your fees and program pricing.
Ask yourself two key questions:
Are you happy (i.e. more than just satisfied) with the gross amount you’re bringing in this year?
Are you at the right balance of being busy and financially successful without feeling like you’re on a never-ending hamster wheel?
If the answer to either question is no, there’s still some runway left this year to reposition your offerings and their price tags in time for a fresh start in January.
For the sake of argument, let’s assume your ladder of products and services is where you want it (and if it isn’t, give this episode of The Business Of Authority a listen. Jonathan and I make the case for creating diverse streams of revenue and show you how to build yours.)
But if you answered no to either of those two questions, you’re either working too hard—which isn’t sustainable long-term—or you’re not pulling in enough revenue to justify your efforts.
Either one sucks.
So let’s look at how you’re pricing yourself and where there’s room to increase your top-line revenue.
You’re pricing by time. While this is certainly a time-honored tradition (no pun intended), it puts you in a challenging spot. Billing for your time doesn’t necessarily equate to the value the client receives.
Worse still, you’re inviting your client to scrutinize your bills by line item. “What do you mean you spent two hours researching competitive practices” or “Surely we didn’t spend 45 minutes on that call.”
It puts your client relationship out of alignment—you’re incented to spend more time/do more yourself vs. finding efficiencies in how you work.
And it makes it deadly difficult to raise your rates—other than a token for inflation—for ongoing clients. You can quickly find yourself in freelancer jail with limited opportunities to make more money.
Your opportunity to grow your revenue is either to leverage more (hire employees/contractors and bill them out at more than you pay them) or start charging differently for your work.
One relatively painless way to get there is to review your best client relationships—the ones you’d like to replicate many times over. Ask yourself:
What outcomes did my work produce for this client?
How do you believe the client values those outcomes? (This requires getting inside their heads and understanding what about your work they value most.)
How do I value those outcomes—both for the relationship with this client and the opportunities to produce the same results for others?
What billing/pricing alternatives might better serve both parties?
Keep reading for two more ideas to change up your pricing structure.
You’re pricing by the project. Billing by the project—where you define a beginning, middle and end—gets you past the exchange of hours for money.
And—side note—gets you out of the freelancer category that can feel like you’ve given your power away.
But it can be a trap if you aren’t constantly looking for ways to make your projects irresistible because they solve a burning need for your clients.
It’s that link to outcomes that will allow you to keep boosting your prices.
So go back to the projects you’ve completed this year and ask yourself:
What outcomes did my work produce—and which did the client value most?
What about this project made me want to do 100 more or never touch one like it again?
Was there anything unique—or conversely, a trend—in the client, the project itself or the results?
There are two benefits from this exercise. Obviously, you’ll get tremendous insights into how to align your pricing with your value. But you’ll also get clearer on your brand—your niche, your best-fit clients and what they value most from their work with you.
You’re pricing by value. I’ve said it before and I’ll say it again—this is the holy grail of pricing for consultants and advisors.
Pricing by value means you are laser-focused on your client’s outcome and have aligned your pricing with what they value most.
Value pricing won’t work for every situation, but when you’re doing transformative work for your client, you owe it to both parties to explore pricing by value.
Perhaps you’re a strategy consultant and you’re advising a client in your vertical about a bet-the-business change. When you can show that a successful strategy can net them $10 million, a $250,000 fee seems quite a reasonable investment.
Proposing a fee related to the value they receive when you’re successful changes the nature of your discussion.
You become partners in achieving the outcome and singularly focused on making it happen.
While value pricing is not the magic bullet that will solve all of your revenue challenges, it does light the way to the highest, best use of your time.
Which also means you’ll be paid exceptionally well for spectacular results.
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