Over the years many people have quit their jobs to launch a career as a consultant of some type. But like all new entrepreneurs, they are faced with the dilemma of what to charge their clients. Unsure of the worth of their services and unaware of their competitors' rates, many have settled with an initial fee that is too low.
Setting fees is a delicate task that stumps both startups and experienced home business owners alike. "Your new product will fail if you adopt the wrong price. Set it too high and no one buys. Set it too low and you won't make a profit -- and despite dotcom-mania, it's not OK to lose money forever. If you choose the right price, of course, you still have to do a lot of other stuff right." says Ken Evoy, author of Make Your Price Sell {MYPS!} which is an amazing e-book that provides an edge in determining the price of a new product.
Here are some ways to find whether you're pricing yourself out of the competition or selling yourself short:
Do the Math - With the patent-pending MYPS! survey questionnaire, you pull precise answers from your respondents. These answers are used to predict the price needed to bill your clients and to meet operating expenses (marketing, overhead, taxes, benefits).
Next, determine the number of days that you'll be doing billable work. Because much of your time will be spent on marketing and administration, two to three days per week will work. Now divide the price found in MYPS!, by the number of days you'll be doing billable work. This gives you the price to charge per day or the "daily rate."
Eye the Competition - Compare your daily rate with that of your competitors. To do this, you can pose as a customer and request a price quote or rate sheet, glean information from your rivals' web sites, or visit industry trade association sites. Also, you can subscribe to the Pricing Master's course, which is a FREE intensive 5-Day e-mail course on how to price your products and services. There is no other course like this on the Internet. To subscribe, send a blank email to yourtpms@sitesell.net
Bill by Example - Follow the fee structure -- hourly, daily, or project based -- customary in your field. Computer engineering consultants typically charge by the hour, for example, and management consultants charge by the project. Apply this fee structure to your MYPS! questionnaire. You can ask "What price is TOO much to charge per hour (or whatever fee structure you decide upon)?
Don't Waiver - Changing your fees out of the blue or when money gets tight doesn't give your business a good image. Don't give in when a client says there's not enough in the budget to pay your fee. -- That says you don't really believe you're worth your original price. Instead, encourage the client to handle simple tasks, or even subcontract to a less expensive organization.
Resist the Urge to Lowball - Touting the cheapest rates may bring you bargain hunters, but it's not the best way to land long-term, committed clients. Pinpoint any advantages you have over the competition, such as high level of experience or education. Then highlight these advantages in your press releases and marketing campaigns. Instead, price to penetrate.
Price to Penetrate - Your goal is to penetrate the market deep and fast, but there is no point in giving away the store. MYPS! will help you find the highest low price, or the prize that maximizes both profits and number of units sold. Re-read this section in MYPS! and you will easily establish a powerful position in the market quickly
Back Up Your Work - Offer a money back guarantee is a great way to attract clients and add value to your services. This says that you're confident and competent, and most clients will conclude that you're really good at what you do. And if not, they've got nothing to lose.
