Pricing your professional offerings doesn’t have to be hard. Using a few key success factors for common pricing approaches can help you get paid more, and paid more consistently. You’ll spend less time having pricing discussions with your clients, so you can spend that extra time growing your business and building the team you need to reach your revenue goals.
Key success factors take into account how you want to manage your clients, time, how you want to work and even best options for building your team.
What you should charge for your services is a separate and super important topic, too. Even using multiple prices for the same product has its place. Be sure you understand both your pricing approach and what you should charge, because they go together like peanut butter and jelly (or wine and chocolate).
The three most common pricing approaches are:
3. Project Based
Consider the key success factors for each, and how they fit your services and your business.
Hourly pricing is the easiest to use, but clients don’t always love it. Hourly pricing means you’re simply getting paid for each hour you work. If you spend fewer hours on a project, it means less money. This is one of the most challenging ways to plan your revenue unless you have a good client pipeline and can estimate the type and timing of projects. This is an easy way to pay additional team members for short periods of time, but it’s not a great long term solution. If projects take too long, clients get nervous they are paying for hours that aren’t necessary.
Key Success Factors:
- Estimate your hours well the first time. Clients generally won’t pay for additional hours when there’s been no change to the work.
- A detailed description of what’s included in the project scope. The project scope is the holy grail since you’ll be held accountable to deliver it. It’s also what you’ll use to hold the client accountable for work changes.
- A process for making changes the work and any change in cost.
- A system to track your hours and what you did for those hours. Clients expect to get the details before they pay.
Retainer pricing fees are fixed and reserve a set number of hours during a given period, usually weekly or monthly. Retainer pricing is great for consistency of cash flow and hours. It can also make revenue planning easier and timing for building a team.
Key Success Factors:
- Set clear guidelines on work hours. This avoids clients who expect you to be ‘on call’ anytime day or night, for hours they’ve purchased.
- Have a plan when multiple clients all want to use their hours at the same time. This is a great opportunity to consider how you’d bring on contractors or employees to your team.
- How you’ll handle clients that require more hours than included in their retainer.
- Whether the retainer hours will be ‘use or lose’. Will the client be able to roll over the unused hours, or a portion, to the next month?
- Specify the types of projects included in the retainer. Since you don’t know what type of work you’ll get, or when, this helps set expectations with work not in your zone of genius.
3. PROJECT BASED
Project based pricing is also a fixed fee, but it’s for a specific product or package with a set of components. It’s like ordering from a menu without substitutions. It avoids time-consuming ‘Harry Met Sally’ kind of clients with a laundry list of ‘special’ instructions. Project based pricing delivers an agreed upon product, regardless of the hours it takes to do the work. It gives you the consistency of cash, just not timing. Project based pricing can also be a great way to pay contractors on your team, with a percentage of each project.
Key Success Factors:
- Be diligent in defining what’s included and not included.
- Know beforehand how you’ll handle requests asking for items not included.
- Understand the most common items to include to increase sales.
- Complete similar projects to estimate hours so you can price profitably.
- Understand the maximum product packages you can deliver in a period of time to avoid overcommitting and missing deadlines. Once you understand your limit, you can consider how to build your team in order to grow your revenue.
You’ll want to consider which pricing approach makes the most sense for your business today based on the services you sell. Your pricing approach is not set in stone. If you need to change it in the future, you can.
You also don’t have to pick only one pricing approach. You can use a combination approach to match your services. Have a routine set of activities you offer, but can also do custom work? Consider project based or retainer pricing, with hourly pricing for additional custom requests.
When you consider pricing, think about your ideal clients, how you want to work and what type of services you provide. Know yourself and your ability to estimate time. The more aligned your pricing approach is for your ideal clients, the easier it will be for them to say yes. When more clients say yes (which is a great problem to have), consider raising your prices or building a team to grow your revenue.
What pricing tips have worked for you? Tell us in the comments.
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