Chapter 5: Setting Prices
Part 2: Positioning Yourself in the Market through Price
If the Heilweil approach is all about the nuts and bolts of finances, the strategy championed by web development, design, and branding professional Liz Jackson of Agency Fusion is about how you want your business to fit into the bigger picture. Her advice harkens back to what Dr. Deborah Osgood mentioned about the early stages of launching a business: in order to set prices, you've got to decide what kind of business you want to have.
"Many entrepreneurs set their prices too low, thinking they will ‘just start somewhere’ and that people will be thrilled to get their quality services for such a low rate," Jackson warns. In reality, though? "Higher-end potential clients write them off, associating their price with how legitimate they are as an IT professional." WHAT? But this isn't your potential clients being foolish or too stupid to understand how good you are: research shows that when people pay more for something, they enjoy it more .
Still, that doesn't mean you should laugh maniacally and charge one million dollars for everything you do. Jackson suggests starting with some basic questions about how you like to work:
- Do you like to complete projects fast?
- Are you picky with which projects you take?
- Do consider yourself one of the best in your field (and do you have the skills to back up that estimation)?
- Are you still improving your skillset?
- Do you enjoy working with clients on a strict budget (or with simpler projects)?
Once you figure out what kind of a business you hope to be, Jackson says to start snooping. Look online to see what businesses with similar services and similar styles are charging for their work. This will give you a ballpark idea of where to set your prices. From there, you can adjust your rates to reflect the specifics of what you do and how you do it.
Next: Part 3: The Psychology of Pricing