There’s alway a time when you look at your business and think you’re not happy with the current state of things and want to take your business to the next level. Most of the times, “doing more” can be easily translated with cashing more money in and increasing your income.
The problem is, as soon as you think about that, you’re scared that if you raise your prices, you’ll lose half of your current customers, make the other half angry, and end up broke eventually. You greedy business owner.
Fortunately, this is the less likely situation you’d experience, both as a web agency or freelancer/consultant, if you do it the right way.
Before jumping in at how you can sell your services at a higher price stack, you should consider some key areas that are intimately connected to your desired business goal. I’ll come clean: there’s no secret formula here, it’s just numbers but if you wish to earn more from your services, you’ll have to focus your efforts on 2 important aspects:
- you need to lower your business expenses
- you need to increase the amount paid by each client
On lowering business expenses
Taking expenses continuously under control and check them regularly is a great way to understand where your business is bleeding money (if any) and get to know where most of your cash is spent. So, start today by looking through all your expenses, even those you almost forgot about. The more you get close to these numbers, the more you’ll find flows that aren’t perfectly optimized, or aspects that aren’t required for each of your clients but you’ve been paying ever since.
Also, think about improving the effectiveness of your workflows: is there any activity that you’re currently taking care of but brings no money into your business? Teach someone else to do it or outsource it. Think this is a waste of your time? You couldn’t be more wrong.
Bottom line: if lowering expenses is what you need, try to streamline all your processes as much as you can. Find out how to automate all aspects that have to do, for example, with invoicing, scheduling, estimates, confirmation, and let others take care of what makes you lose time instead, and get back to work onto something that would bring more money into your business.
On increasing the price of your services
If your goal is to make more money, starting today you’ll need to increase the price of your products and services. I know it sounds counter-intuitive (you think clients will be scared away) but is something great agencies and experienced professionals have been doing for years. Let’s see how you can do the same with your business and start pricing your services at a higher stack.
Ready? Let’s jump in!
1. Perform an in-depth analysis of your business
To better understand how your business is doing, you should start with a SWOT analysis which is a great way to evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business venture.
Specifically, you should be able to:
- Enlight your core propositions
- Find your weaknesses
- List what can be improved in-house and what you should outsource
With these crucial information around your business, you’re empowered with everything you need to analyze how your business can differentiate towards competitors.
2. Compare your business to competitors and look for opportunities
With a SWOT analysis, you should now have clear in mind all business insights relevant to your business. Now let’s start by comparing your business to that of your main competitors to gather a deeper knowledge of it and look for opportunities. With this in mind, start by looking at:
- Their offer
- Their pricing structure
- Their clients and testimonials
Try to think both as an entrepreneur and a prospect client when you’re doing this analysis. Would you buy what they’re selling? Is it a clear and compelling offer? Are there some cool features they talk about that you never mentioned on your website or selling materials? How is their tone of voice: serious, friendly, technical? Do they offer premium services or products?
By answering these questions, you’ll understand the what, why and how of their offering and, most importantly, you’ll be able to find where your propositions overtake theirs or where your business falls behind.
3. Ditch the hourly-based pricing strategy and use the value-based strategy
With a better picture of your business and how it stacks against the competition, it’s now time to take a step further and talk about pricing. If you charge clients on hourly-based fees, you’re doing it wrong because competing only on prices is always a bloodbath for your business. At first, because offering services at low costs will let clients and prospects perceive them as low quality. Secondly, if no further value is added to your services, you’ll always be in the run against smaller agencies or freelancers that cost way less than you.
The turning point here is to switch from an hourly-based pricing model to a value-based pricing strategy. In “Brake the time barrier”, an amazing ebook from Mike McDerment and Donald Cowper from FreshBook, the constraints of a per hour pricing strategy are explained like this:
“Selling hours actually creates a conflict of interest. It puts you and the client on opposite sides of the table. If you’re selling hours, it’s in your best interest to take longer, to bill more hours. But your client is interested in getting solutions that work as promptly as possible”.
And more interesting:
“Our clients don’t care about our costs. They care about the value we create for them, so that’s what we should be asking them to pay for.”
Of course moving to a value-based pricing strategy isn’t something that happens immediately, and you have to earn and develop your way into it but this will enhance your business with better-paying clients.
4. Position your services as business investments
With a new pricing approach, based on the value your services are providing, you need to position your services differently. Let me explain.
Since everyone hates to spend money, when people buy a product or service they usually try to capitalize on that and see how this expense is worth in their future, how much would this give in return to their life. Yes, an ROI.
When Mike McDerment changed his pricing approach and started to position his agency services as something able to provide an ROI to clients, he tells: “I was no longer competing with other service providers on price. My clients stopped seeing me as a commodity, someone with an hourly rate that they could compare to somebody else’s. [...] Instead, I was competing based on distinction; on the unique, customized ways I could help my clients reach their goals.
As a business owner, you should leverage this way of thinking among clients when talking about your services and present them as valuable tools to achieve their goals, like business investments.
5. Communicate and show your value
With a new approach to pricing based on both perceived and provided value, you have now to consider investing some efforts in showing your prospects and your current clients what they should expect from your business services.
This means you have to be sure the following 5 elements will communicate your value at best:
- Portfolio: create breathtaking pictures and compelling copy of selected projects that align with your new pricing strategy
Case studies: it takes time, but case studies are great tools to share meticulously how your business addressed interesting requests and business issues from your clients
Blog: creating useful content like writing blog posts, guides and also tutorials about your market, or tools you’re using to provide some of your services, benefits your business in several way: strengthen your market position, add an authoritative layer to your business, it improves your SEO
Social proof: it’s no secret that social proof is an effective technique experienced businesses use. That's why you should do the same by showing testimonials, sharing comments from happy customers and anything that could help communicate how great your business is
Newsletter: email addresses are powerful tools that let you talk directly to prospects and clients. This is where you could promote your services, share exclusive discounts to increase conversions, upsell your services and many other things. If you don’t have any idea about how to grow your email list, create an ebook, a short guide or a cool infographic and give it for free to those who share their email address with you
6. Use leveraged growth tactics (like outsourcing)
In modern business, companies don’t need to own all the assets to create and deliver services. Specifically, smart entrepreneurs can tap into one growth strategy known as leveraged growth, where you would look for resources (assets) outside of your company to improve your business earnings.
In a way, outsourcing is a leveraged growth strategy you can implement within your business because independent freelancers and experts add value to your services in a cost-effective way. And when you opt for this growth strategy, your role will be to orchestrate all the involved parts and subjects.
7. Turn services into productized services
As you learned at the beginning, streamlining your processes can have a huge impact on your way to increasing the profits of your business. That’s way productized services are worth mentioning here. Entrepreneur Pat Flynn from Smart Passive Income quickly explains productized services as:
"A productized service takes a skill you already provide and allows it to run systematically, growing with or without your direct involvement. [...] Productizing your service can free you from the classic freelance model, where you bill by the hour. When you productize, you’re no longer limited by the number of hours you can feasibly work."
Given this, you should now evaluate which of your services can provide an added value to clients if bundled together, but still be something easy to manage or even completely automated to your end.
Wrapping things up
Increasing your business profits and margins ain’t easy and it could take some time because it’s a business shift that affects several aspects: pricing, market positioning, branding, value, just to name a few. With these proven tips and tactics, you’ll be able to change radically the type of clients you’re used to working with. Specifically, low-paying clients will likely leave their place in favor of those who need what you’re selling because it aligns with their business needs.
Even if all of this might sound a crazy move, don't be afraid and take your chance: start re-thinking all of your services by the value your clients can earn from them, and not by the mere price they're asked to pay.
How about your experience: how did you profitably change your pricing strategy? Which tips did you find more effective for your business? Share your thoughts in the comments!