Pricing your services correctly in 2022

by | Jan 5, 2022 | Business, Cash Flow

As the new year arrives on everyone’s calendars and we all drag ourselves back to work, it’s time to think about refreshing and refocusing your business. Are you working with the right people, pricing your services correctly and offering the right services?

As you will know, it is great to be busy. But, there is good busy and bad busy. It can be common in many walks of life to attract the wrong type of clients, ones who haggle you down, or keep changing the spec, or bombard you with emails and tortuous phone calls.

Weeding out such clients and replacing them with ones who are a good fit for you can transform your business – and put a spring back in your step at the same time.

It is one thing recognising you have a problem, but quite another doing something about it. Here are a few tips to upgrade your client base and get your pricing right, ensuring that you are pricing your services correctly in 2022.

The scope triangle for pricing your services correctly

The scope triangle, or to use its more fun moniker the “business triangle of death”, is a useful tool to keep in mind and inform conversations with potential clients.

On the three points of the triangle you have cost, time and quality. Your clients can have any combination of two in the triangle, but at the expense of the third.

Pricing - Scope TriangleSo, you can be:

  • fast and cheap – but your clients must accept lower quality
  • high quality and fast – but, boy, will they have to pay for it
  • cheaper and good quality – but it will take time.

You must avoid the centre of the triangle (it’s the death bit) – e.g. if you are fast, cheap and high quality your business may well not be sustainable.

Profile what ideal clients look like

The scope triangle can act as a great guide in how you position and subsequently market yourself to clients. So, now you want to profile what ideal clients look like.

Are they large corporations or smaller businesses? Or do you work best with the general public? Do they buy ad-hoc or on subscription/retainer? Do you want clients giving lots of small jobs, a few big ones or a blend?

When you have clarity on what good clients look like, check your marketing to make sure you are attracting this audience.

You may need to be brave, turning down clients who don’t fill the bill, or having difficult conversations to educate them in how you work. Short-term pain for long-term gain.

Tailor your services to what ideal clients want

Of course, it’s all well and good knowing who you want to work with, but you’ll also need to ensure you offer what they need.

An honest review of your services may reveal you need to change tack and offer more value to the better clients, and be less attractive (with price or the way you work) to those clients you are no longer keen on working with.

There might be obvious changes you can make, like removing a particular service or raising prices to properly reflect the value you deliver.

Or it may be an in-depth piece of work you need to do, perhaps engaging the services of marketing specialists to develop a value proposition, for instance.

Five basic ways to price a service

The industry you operate in will likely determine how you are pricing your products or services. Some businesses may find charging by the hour or day is the best fit for the type of service provided, whereas other industries may find that charging per project or piece of work is better.

There are five basic ways to price a service, which you can use to price your services correctly:

  • By the hour or the day
  • A fixed cost plus your profit margin
  • A retainer package – for regular work
  • By commission
  • By value

Whilst in some instances it may be the best way to charge by the hour or day fits with their service, such as for cleaners and childcare providers, or perhaps when you’re unsure how long a project will take to complete, we find that charging by the hour often doesn’t encourage smarter working when pricing for a piece of work or a regular service. It also caps your earnings, and leaves you stuck working long hours to earn a living!

Work smarter, not harder!

You’ll see that our fees are charged on a monthly basis via a retainer for a mixture of services, or per piece of work if it’s ad-hoc. This encourages innovation and smarter working in our team, which provides a better service for our clients.

That being said, sometimes hourly or daily rates work well, especially if a customer changes the scope mid-project. Charging by the time taken will mean you’re not trapped into a fixed price, and are not eroding your profit margin.

Need advice on pricing your services correctly?

We work with many knowledge-based businesses and often see companies restructure to get themselves better clients and get their pricing right.

If you are thinking of refreshing your business in 2022, let’s talk!

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