How to Price Business Services

In addition to her experience as a small business strategist, she’s also a bestselling author and nationally syndicated columnist. Moreover, within those marketing tools, HubSpot provides limited access to specific features. This type of pricing strategy allows customers to acquaint themselves with HubSpot and for HubSpot to establish trust with customers before asking them to pay for additional access. Specific costs to consider in an education How to Price Business Services pricing strategy are tuition, scholarships, additional fees (labs, books, housing, meals, etc.). Other important factors to note are competition among similar schools, demand , number and costs of professors/ teachers, and attendance rates. You want to make a strategy that is optimal for your unique business. This is the approximate product or service pricing your business can potentially achieve in regard to cost, demand, and more.

Or, you might charge hourly if you don’t know how much time it takes you to perform the service. This is the cost of direct labor you hire to provide a service. This would be the hourly wages of your cleaning crew and/or a portion of your mechanic’s salary and benefits while they were providing the service for your customer. The SBA recommends using a time card and clock to keep tabs on the number of hours of labor involved in providing each service for a customer. Companies like internet and smartphone providers use this strategy to gain market share. Talking pricing is an awkward conversation that no one wants to have. When you have transparent package prices, you’re only talking to those who want to work with you and know the costs involved.

You’ll also use the information you gather to determine your hourly rate, and that’s the starting point for the entire process. Even when we’re certain that we provide an exceptional service and charge what we’re worth, we still worry that clients will view our prices as unreasonable.

Know Your Worth And Your Numbers, Then Price For Profit

But, be aware of what other companies charge so your prices aren’t completely off base. In service industries, finding a target profit margin is not as simple. Instead, your pricing formula for services should account for the intangible aspects of running your business, such as time and value. One of the few sources of benchmarking data from the financial statements of small and mid-sized businesses that are customers of RMA. Broken down by industry, this data can be used to help you set prices for your services. SurvivalWare is a software tool that shines the light on your cash flow and profitability. Everything you do in setting prices must be measured by the degree to which it helps you make money and create cash flow.

You need a clear understanding of your total cost of doing business. Price skimmingis setting a higher price because you have some sort of competitive advantage. You’re able to highlight different packages like Gold, Silver, and Bronze and empower clients to select the option that works best for their needs and budget. Having a firm enough understanding of your business numbers to know how much you can adjust your pricing for each job will help you fully understand your pricing formula inside and out.

You Can Overcome Your Pricing Fears And Get Comfortable With Service Pricing Strategies

You might also factor in your online campaigns to promote these products as well as how easy it is for your customers to find similar products to yours on the ecommerce sites of your competitors. Value pricing is a way of setting your prices based on your customer’s perceived value of what you’re offering. This occurs when external factors, like a sharp increase in competition or a recession, encourage the small business to further provide additional value to its customers to maintain sales. Researching your competitors’ pricing can be a great place to build on your pricing strategy after you’ve conducted a cost analysis.

  • Agency pricing models impact your profitability, retention rates, customer happiness, and how you market and sell your agency.
  • The following section details 3 packaging strategies and provides guidelines to help you build your packages.
  • After determining your pricing structure and your menu of costs, you want to make sure they work for your audience.
  • These are the costs of goods you use in providing the service.
  • If you want us to create a list for you, just submit a request here.

Before you’ve had these reference accounts, to get them on board, you may offer them a discount, but don’t be afraid when you’re no longer looking for reference accounts of charging full dollar. Learn several different pricing options including offering discounts to “reference” accounts to get your business rolling. Jen Crompton writes about small businesses and marketing for The Ascent and The Motley Fool. Your at-home fitness kit should be priced no lower than $26 so you can cover the cost of goods and your overhead contribution, plus contribute to your profit.

More From Starting A Business

Each package includes different deliverables and provides incrementally more value. With this strategy, you bundle together several services to create a more robust and convenient offer for your clients. Review your past sales to determine what services to keep and what services to cut. Chances are, you’ll probably find that some services bring in more revenue and profits compared to others. But, when you create tiered pricing packages, you set clear structures and processes for all projects that are easily replicated from one project to the next. Luckily, tiered pricing service packages give prospects something more tangible to justify their purchase decision. Packages “productize” your service and remove psychological barriers that prevent buying.

  • Once you have this information, you’ll be able to find a solid starting point to base your service price.
  • Contrary to popular belief, pricing strategies aren’t always about profit margins.
  • Knowing and understanding where every dollar is going is critical to the success of your business.
  • Here are business success tips to teach you how to charge more for your products and services.

A business plan is a written document outlining a company’s core business practices – from products and services offered to marketing, financial planning and budget, but also pricing strategy. This business plan can be very lengthy, outlining every aspect of the business in detail. Or it can be very short and lean for start ups that want to be as agile as possible.

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A combination of the words “free” and “premium,” freemium pricing is when companies offer a basic version of their product hoping that users will eventually pay to upgrade or access more features. Unlike cost-plus, freemium is a pricing strategy commonly used by SaaS and other software companies. They choose this strategy because free trials and limited memberships offer a peek into a software’s full functionality — and also build trust with a potential customer before purchase. For example, if you want your business to expand into a new market, then you may want to charge lower prices to attract new customers. Is when your prices either match or beat those of similar products that are sold by competitors.

  • Upsell optional add-ons and packages can increase your quote totals by 35% on average.
  • With competitive research, you have the opportunity to size up the competition, benefit from their work, and use your knowledge to get a leg up or find an underserved and valuable niche.
  • But, be aware of what other companies charge so your prices aren’t completely off base.
  • If your product or service is reliable but you aren’t turning a profit, you have to make adjustments.
  • You can, and should, charge more for your services based on the value they now provide.
  • We need to know approximately how long projects are going to take us to complete, even if we never share that number with the client.

For many businesses, pricing services on an hourly rate is preferred. This ensures that you are achieving a rate of return on the actual time and labor you invest in servicing each customer. Hourly rates are often used when you are pricing your own consulting services, instead of pricing a service that uses labor and materials from others. Your rate should be determined by your amount of expertise and seniority; a more senior consultant will generally be paid a higher hourly rate than a less experienced or junior consultant. The SBA recommends that one’s travel time be included as an extra charge. Sometimes even consultants are asked to price a service on a project or contract basis.

Pricing Strategy Examples

Those are work hours and you need to include them in your price. A pricing curve is a graph that shows you the number of people who are willing to pay a certain price for a service or product. Freemium pricing is a strategy in which a service or product is given to a customer free of charge unless they want to access premium features or services within that product. Is a strategy of marking up the cost of services and goods to arrive at your selling price. Average just $44,000 a year in annual revenue with two-thirds of these companies earning less than $25,000 per year. While various factors can affect a business’s revenue potential, one of the most important factors is its pricing strategy.

How to Price Business Services

However, if your price is too low people may think that your product is cheap. A legal document showing the operating name of a company, as opposed to the legal name of the company. In the case of a corporation, a fictitious business name is any name other than the corporate name stated in its articles of incorporation.

Scope Out The Competition And Marketplace

Freelancers and contractors, in particular, must adhere to a services pricing strategy. Digital products, like software, online courses, and digital books, require a different approach to pricing because there’s no tangible offering or unit economics involved. Instead, prices should reflect your brand, industry, and overall value of your product.

How to Price Business Services

Be sure to consider shipping and any marketing expenses needed to sell merchandise. Pricing your products and services isn’t always easy — but the right prices are key to profitability and success. There are multiple factors to consider, including cost, value, and the type of industry you’re in. Learn how each of these impacts your business so you can make smarter choices about price.

It’s highly unlikely that you’ll set the right prices right away — it might take a couple of tries , and that’s OK. Simply sit down, calculate some numbers , and figure out what’s most important for your business. Start with what you need, and this will help you pinpoint the right kind of pricing strategy to use.

Discounts, clearance sections, and year-end sales are examples of high-low pricing in action — hence the reason why this strategy may also be called a discount pricing strategy. Hotels, airlines, event venues, and utility companies use dynamic pricing by applying algorithms that consider competitor pricing, demand, and other factors. These algorithms allow companies to shift prices to match when and what the customer is willing to pay at the exact moment they’re ready to make a purchase. Discover how much your business can earn using different pricing strategies with HubSpot’s free sales pricing calculator so you can choose the best pricing model for your business. A perfect example of a captive pricing strategy is seen with a company like Dollar Shave Club.


This plan can be used for external investors and relations or for internal purposes. A business plan can be useful for internal purposes because it can make sure that all the decision makers are on the same page about the most important aspects of the business. This website is using a security service to protect itself from online attacks. The action you just performed triggered the security solution. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data.