Pricing services is hard. We know because it's conversations we're having on a monthly basis with our clients.
But as the best way to make sure your business is profitable, it's one of the most important decisions you'll make in your business.
In this blog, we will provide you with expert advice on how to establish the right price for your services to ensure profitability while remaining competitive. Whether you are just starting out or looking to re-evaluate your pricing strategy, we've got you covered.
Research the Market
In order to keep your business competitive, we recommend conducting market research to scope out your rival's prices. Pay attention to what they offer and how much for. This will help you to understand the range in which people are willing to pay.
It's important to remember that whilst your prices might be higher than these competitors and you may lose custom to them, you don't have to lower your prices. In fact, setting your prices too low could put off customers and clients who might read lower cost as inferior services. If you want to charge more, consider focusing on what value you offer than competitors don't.
Top tip: Look to review your pricing every 6 months to keep on top of market fluctuations and inflation.
Charging what you believe is proper value for what you do or produce isn’t just a fanciful desire but an essential if you want to succeed.
Calculate your costs
An early step in the process is to determine the cost of good sold required to operate your business. First up, take a look at your direct costs including material and labour costs. For service providers, this would typically be the cost of the labour to provide those services.
Next you need to look at your operating expenses, those overhead costs that are required for the day to day running of your business.
There are two key pricing models:
Cost-plus pricing. Adding a mark-up to your break-even costs.
Value-plus pricing. The price a customer is willing to pay. Businesses with loyal customers or high quality branding/marketing might be able to charge more, for example.
You might like: Are You Charging Enough Blog?
Know your Customers
Understanding how your customers perceive your business is important in deciding a price for your services. A survey is a great way to get the data and information you need to determine if you and your clients are aligned on price. We recommend sending this out immediately after working together, whilst your service will be fresh in their minds. This is an absolutely essential step in a Value-plus pricing method.
Top tip: Do the work now and you won't need to increase your prices at a later date which can be a little difficult for customers to understand without an increase in value.
If you are looking for more guidance on your prices or other aspects of your finances, don't hesitate to get in touch with Catherine on 01423 431 889 or email catherine@bctaccountants.co.uk for your FREE consultation call.
Please note: all stats are accurate for the 2023/24 tax year.
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