I've always been a little bit awkward when it comes to talking about money. But perhaps nothing has made me stress sweat more than talking about how much money to charge people for a service I created. When I launched Bridesmaid for Hire in 2014, I struggled with figuring out a price tag for a business that never existed before.
Because my business started in an unusual way — I posted an ad Craigslist that went viral — I had customers arriving in my inbox before I had much of a business plan. Their first question, after proclaiming that they wanted to hire me as their professional bridesmaid, was: How much this would cost them?
I struggled with figuring out an answer. Did one flat fee do my business justice? Would an hourly rate work better for the value I was providing? Am I charging what I feel I can get people to pay — or what I feel I deserve?
The truth is, there's no one-size-fits-all answer to the question of how much to charge for your product or service. But there are steps you can take to make sure that you are truly charging what you are worth.
The first place to start is always with competitors. Who else is out there doing or selling something similar? What's their pricing structure like? How many options do they offer? Do they upsell? It's important to not only note what other companies are charging, but also what value and offerings they provide to make their price pop or stand out.
Ben Walker, the founder and CEO of Transcription Outsourcing, recommends doing a competitor analysis of 10 different companies when you're first starting out.
"Analyze each company to understand why they were charging their clients the way they were," says Walker. In his case, "after a few days of checking them out, we took the average of all the legit companies we were studying and undercut them by 5%. Two years later we raised our rates once we were established in the marketplace."
My business was unique — being hired as a bridesmaid by strangers — so I wasn't necessarily dealing with direct competitors. But there was still a lot I could learn about pricing from the wedding industry as a whole. With my competitor analysis, I looked to people who did something as similar as possible to my role, like wedding planners and day-of coordinators.
While we offered a different service, it was structured the same in terms of hourly commitments, so investigating their fee and payment structures was very useful in creating my own.
Video by Stephen Parkhurst
You can't work toward profitability without understanding your company's break-even cost. Lay out things like your overhead, standard business expenses, product costs, and any additional factors that will come out of your pocket every month. Consider this the cost of doing business. It's important to know your overall cost so you can factor it into how much you charge.
Sara Oblak Speicher, a business and life coach who supports business leaders and CEOs, recommends putting together a break-even equation.
"You need to get clear on your vision, business and monetization model, accompanying marketing and sales strategies," says Speicher. "What do you need to earn to cover your expenses? What is the absolute minimum you need to charge to make it worthwhile?"
This was one of the biggest mistakes I made in the early days of Bridesmaid for Hire. I set my prices based solely on the actual service, without taking into account any other expenses that I would incur as a business owner. That quickly proved to be a mistake, and three months in, I adjusted my pricing model with those additional costs in mind.
Businesses are started to solve problems. Ask yourself this: What problem are you solving and how are you solving it differently than anyone else? You can increase the price based on that value.
Vasyl Dzesa, the COO of Lemon.io, a marketplace that connects entrepreneurs with freelance developers, says that if you are solving a problem in a completely different way than your chief competitor, you're well within your right to set what you believe is the highest fair price.
Start selling your product and then monitor the customer response. "You either lower your cost if you get negative feedback, or vice versa, increase the price if there is a high demand for your services or goods," says Dzesa.
I found that as long as I was able to effectively communicate in my marketing how distinct my service was, and my track record for solving my client's problems, my pricing would resonate and make more sense to potential customers.
Pricing matters to you as the business owner, but it also matters to your customer. Why not engage with them to see what they'd pay and why? Having audience feedback on not only the quality of what you're selling, but also the price point, can help you make changes before you officially launch.
Ryan Pitylak, the co-founder and the CMO of ZenBusiness.com, recommends finding people you think would benefit from your service or product and ask what they'd be willing to pay. Head to local meetups or conferences where your audience might be, or join Facebook and LinkedIn groups to interact with your audience on social media.
"This kind of impromptu focus-group approach is much better than learning the hard way your pricing is off," says Pitylak.
When I first started my business, I went to wedding showcases, where engaged couples would walk around and meet the vendors exhibiting their offerings. But instead of paying for a booth, I attended as a guest, and talked with my fellow attendees about my business in a more informal way. They became my unofficial focus group.
These conversations helped me figure out what problems I could help potential clients solve, how people were spending money and where I could fit into their wedding budget.
Video by David Fang
You might have an instinct to lead with discounts and sales, especially as a means to make your product or service appealing while you're trying to grow your customer base. But overdo it, and you run the risk of making your customers weary with constantly changing prices.
Michael Lucy, owner of a financial services company, is against the discount model when a company is just starting out. "When new prospects are interested in you and your business, if price becomes an obstacle I recommend adding value and not discounting price," he says.
If you start off by offering discounts, you run the risk that customers may never want to pay full price. I get people all the time asking me for discounts. Rather than saying 'no,' I tell them the one time a year that I offer discounts. That way, my customers know when to expect it and that if they want a service before that time, they will be paying full price.
While investigating what the pricing trends are for your industry and what your customers are comfortable with paying is a great way to start, sometimes it can help to think outside of the box and tap into what other entrepreneurs are doing in terms of payment structures.
Steve Morgan, the author of "Anti-Sell," advises people to go where other entrepreneurs are and ask them for advice. This could be as simple as connecting on social media, starting or joining industry groups of Facebook or LinkedIn, or creating Twitter and Instagram polls.
"Find groups and people who are new to running their own business and not sure what they should charge. People are often friendly and quite forthcoming with their advice and suggestions," says Morgan.
I found this to be the most helpful. Before I was happy with my pricing model, I spent months meeting with other entrepreneurs, getting their feedback on my business model, and hearing about their experiences. That helped me learn how to set pricing and also think about how I could scale my business.
Jen Glantz is the founder of the viral business Bridesmaid for Hire, the creator of the project Finally the Bride, the voice of the podcast "You're Not Getting Any Younger," and the author of the Amazon-bestselling books, All My Friends Are Engaged and Always a Bridesmaid for Hire.
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