Lessons on pricing from my cleaner vs how we do pricing for my consulting business
Lessons on pricing from my cleaner vs how we do pricing for my consulting business
“And one more thing, Mr Aranki”, said my cleaner at the end of what was now one of her customary monologues that she gave at the end of her bi-weekly clean, “The price will be going up by £1/hour starting immediately. Bye! ”
And then she left… 😳
As it turned out the price rise was 8%, which in some ways is not that bad considering the recent pressures of inflation and the fact that I hadn’t experienced a cleaning price rise for at least 18 months 💷 .
Still, the way she dropped the news did make me laugh 😂.
When I raised the prices for Shiageto Consulting earlier in the year, I rang round each of our clients to share the news personally 📱, addressed any questions and then followed it up with an email confirming the discussions 📧 and making it clear that the price rises would only come into effect from July 1st 🗓.
Everyone seems to be talking about pricing at the moment
The last few weeks it seems everyone wants to talk about pricing 💲💰💸.
In the last few weeks alone I’ve been on a podcast where I had to share pricing nightmare stories 😱, I’ve been on a discussion panel all about how small businesses can respond to current economic uncertainties 🤔, I’ve filled in pricing surveys 📋, I’ve been asked to contribute to pricing articles for LinkedIn Top Voices ⌨️ and most importantly I’ve coached several other small businesses and solopreneurs on how to do pricing 🧑🏫.
Now, I don’t profess to being an expert in this [I mean, I’ve gotten it right probably as many times as I’ve gotten it wrong 🎰] but I have had 4 years as a small business owner who has had to work out how to price correctly so as to grow at a nice rate 📈.
As such, allow me to share with you how we do pricing at Shiageto Consulting, which may in turn help you and your business.
Always start with value
When you are offering services, most customers and clients want to base how much they pay on what is known as “Time and Materials”.
This is where they say: “You worked for 2 days so I want to pay you for 2 days of your time.”
This may sound reasonable but as a consultancy whose main offerings are making strategy and leadership more effective, 2 days of our work can have a highly impactful outcome [for example: one recent client saw a 6% increase in trading profits after working with us for 3 months, in clock time that was probably 8 days of sessions and 8 days of prep but the outcome was certainly way more than 16 days of value].
With that in mind we always try to estimate the value of our work and charge accordingly — now, whilst I wish the client in the example above would have split this trading uplift, getting a small proportion was good enough for us.
Many clients struggle with a pricing approach that is based on value as they are risk averse or not accustomed to this.
Certainly, it is hard to put such a fee structure in place if they are a new client or if there are low levels of trust.
It is also difficult to put in place if it is hard to tangibly measure the outcomes of your work or it’s hard to directly attribute the improvement in those outcomes to your work.
With that in mind we come to part 2 of our pricing approach.
Price on exposure
Our alternative to pricing on value is taking the stance that: our work is impacting X number of people who have this much influence on your business so we will charge this much because having them aligned or their performance improved will lead to positive outcomes.
Again, an approach like this relies on an element of trust and confidence in your work so it may be hard to enact with a client that has little exposure to you.
A good way to overcome this is to show them references and testimonials or let them experience the power of a small piece of your work for free [often my initial support in helping a client identify and articulate their problem in a simple way is powerful enough of a display of this].
If all else fails, go Time and Materials
Whilst I may have been disparaging of this earlier in the article, it is a good fall back approach if needed (or early-on in a relationship).
The important things to remember here are:
1) not to set your price too low (anyone can sell a Ferrari for a Fiver) and
2) to properly estimate how long a task will take you (even if you can charge retrospectively) as clients always like to know approximately how much something will cost in advance.
My golden rule that I seed with all clients early on, is that 1 hour of original delivery equates to 1.5 days of work (this covers ideation, planning, preparation, facilitation, write up, follow up and more). This means that if you have the pleasure of one of my team facilitating you for 2 hours on bespoke material then expect to be charged for 3 days of their time.
Pricing is still just as much an art 🎨 as it is a science 🔬
Here are some other top tips I’ve learnt the hard way:
- Just remember, it’s hard to change pricing once it’s live (so haggle hard from the outset, a low initial price has a bad habit of never shifting and there’s nothing worse than continuing to deliver work at a price you know is too low).
- Regularly reassess your pricing; as you gain more experience and your performance improves you may want to raise your fees. This also might happen as you become more in demand or your costs go up; don’t be afraid to price out smaller or more cumbersome pieces of work.
- Whilst many people take the attitude not to rock the boat with existing clients, the clients you have the most trusted relationships with are the ones you can have the most honest conversations with when it comes to price. Do not underestimate the value of their flexibility sometimes.
- Think creatively ; can you trade fees for services or similar — in the past I’ve taken lower fees in exchange for client products, office space or trading their services for ours.
- Sound out others in a similar industry as you to give you an idea on how others are pricing.
- There is always a way to lower your pricing to fit in a client’s budget without dropping your rate card; maybe you can offer a discount for volume or reduce the scope/level of detail of the work or be able to deliver it on your schedule or combine clients for economies of scale. Again you are only bounded by your creativity.
Ultimately, enjoy the challenge of constantly trying to optimise your pricing
As I said before, it is more an art than a science and there is no way you will always get it right so enjoy the pricing journey and constantly learn and adapt from each engagement.
As ever, I’ll keep you updated on how I get on as I evolve my business but I’d love to hear how you do pricing and if you want any further tips, drop me a line.
Faris
Faris is the CEO and Founder of Shiageto Consulting, an innovative consultancy that helps firms and individuals sharpen their effectiveness. Connect with him here
Success = IQ x EQ x FQ
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Originally Published on https://farisaranki.medium.com/
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