5 pricing tips for service businesses

I’ve had a handful of pricing questions recently from new businesses wondering how best to price their services. Unfortunately there’s no easy answer.

Much of the answer can be tough to determine without some trial and error: What's a client willing to pay? Are your services unique or significantly different thanwhat others are providing?

That said, here are five things you’ll want to consider when creating your pricing list:

1. Consider your demographic

There are significant differences between Santa Monica, California and Brookville, Indiana. A trainer with a booked schedule charging $200/hour in Santa Monica will have a hard time finding two clients in all of Brookville to pay him that rate.

Research your market to find out what other professionals are charging for similar services. This will give you a great idea of the range of prices clients are willing to pay in your area. Spend an hour on Google and make a list—if you are a fitness professional, look at what other Pilates, Yoga, Personal Trainers, Martial Arts, and other similar businesses are charging. If you are a Massage therapist or Consultant, do the same—one hour of personal services tends to run in the same ballpark of sorts, depending on location.

2. Take care to not undervalue your services

Provided you are a professional and good at what you do, be careful to not undervalue what you are offering. I find new businesses tend to err on the side of undercharging—which impacts revenue and creates an expectation of low price from the customer. People have no qualms paying a fair price for an excellent service (if you set that expectation). And don’t forget, you can always give a discount if you feel so compelled.

A funny thing I’ve noticed: the more qualified practitioners are often afraid to charge what they’re worth while some who are newly minted, with far less experience, have no problem opening their doors at the higher price point. If charging what you’re worth and asking for money are difficult for you, you might find this post helpful.

3. It’s easier to discount honest prices than to raise rock bottom prices

If you are just opening, you have all sorts of great marketing tactics at your disposal. You can offer Grand Opening discounts and Founders' memberships, discounted for the first 50–100 members or so. This discount can stand for as long as these clients remain members, or you can limit the discounted rate to two years or some other time frame. The great thing about them is that they're temporary and in limited supply. And it can be a great incentive for someone to sign up with you when you’re just opening and in need of clients. Contrast this with opening at rock bottom prices where people expect those to be your ongoing rates.

4. Set your rates and be confident

So much of attracting clients and selling them on your services has to do with how you carry yourself—your confidence in your services and in your rates. If you feel bad about your prices, your prospective clients will sense it. They’ll feel uncomfortable and either question your prices or question their desire to engage your services altogether. If you are matter-of-fact about them and talk about your offerings as if there are a hundred people in line waiting behind the client you’re speaking with, you’ll find it much easier to gain new clients. It really is a “fake it till you make it” situation.

5. Know when to raise them

Regardless of where you decide to initially price yourself, at some point (as you become more established and demand for your services grows) you’ll need to raise your rates. You’ll know it’s time when your schedule is as busy as you want it to be, or close to it. You can decide whether to raise prices incrementally across the board or only for new clients.

Tell me about your experience pricing your services. If you could do it over, is there anything you would do differently?

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