The Secret to Pricing Like an Expert
The challenge of pricing strategy
What should I charge for my services? asked every entrepreneur ever.
We all want some magical formula to calculate the perfect rate that will instantly close the deal with our ideal clients and earn us what we’re worth. That would be nice, right?
Unfortunately, there’s no magical formula. Or is it fortunately…
If there was a magical formula, everyone would be priced the same and we’d all be commodities.
I don’t know about you, but I don’t want to be a commodity. I want to be an expert, an authority, a thought-leader. I want people to recognize my value and to attract the people who are willing to pay for it.
Sounds more appealing, doesn’t it?
So, how do we get to that place?
The secret to not being a commodity
The number one thing you can do to not be a commodity is to stop charging hourly.
Let me say that again.
Do NOT charge by the hour.
As soon as you charge by the hour you become a service provider or a freelancer, not an expert. What’s the difference and why does it matter?
Service providers & freelancers
A service provider is hired to perform a service, meaning that the hirer knows exactly what service they need and just needs someone to provide it. The same goes for freelancers. They are essentially executers that free up capacity and time for you or your business (or do what you don’t have time for).
People hire service providers all the time - someone to clean their home or office, someone to babysit or dog-sit, someone to mow the lawn. You might also hire a service provider for your business to delegate work to that you don’t like to do or don’t have time for - like virtual assistant or intern kind of work. People hire freelancers for similar reasons. Maybe they are short-staffed or have chosen not to take on employees and need someone to help them execute their work load.
People who hire service providers and freelancers know what needs to be done and know what they’re willing to pay for it.
Service provider/Freelancer $ = $ you’re willing to pay to not have to do it yourself
Be an expert
Conversely, you hire an expert when you need expertise - that is, when you don’t know how to do something or want something done better than what you can do.
Expert $ = How valuable it is to you to up your game
If you want to improve, grow, solve, or invest in something, you hire an expert. For example, you might hire an expert to help you invest your money wisely so you don’t lose it all and have a nest-egg to retire. You hire an expert to help you develop a marketing strategy to grow your business. You hire an expert to tell you why you’re not feeling well and what to do about it. The only time you don’t hire an expert for these things is if you are an expert in these things.
You are an expert in something (or could be). You just have to figure out what your time, money, and efforts spent over time (possibly along with your natural gifts) have uniquely positioned you to do well and how to articulate this value to those that need it to up their game.
Price like an expert
This is why most experts shouldn’t charge hourly. The value that people get from experts is more than just a simple calculation of time spent. It includes the time, money, and efforts spent over time (along with possibly natural gifts) to develop the expertise.
value received from time spent > Time spent doing the work
Therefore, if your clients are getting more value than just the calculated time you spend, they should pay for the value, not the time.
If someone offers you their expertise priced by the hour, your brain will immediately need to do a calculation.
How many hours will it take so I know the total cost and can determine if it’s worth it to me or not?
Answer: NO idea because I don’t have the expertise to fully grasp what they are doing and what it takes (hence why I’m hiring someone). All I know is what I want to happen because I hire them.
Next Thought: If this person truly is an expert, they should know how long it will take and should just charge me that amount so I know what to expect, can control costs, and can evaluate if the value is worth the price.
Next Thought: Is this person even an expert? Maybe I should keep looking. I can’t determine the value they will bring to me from this information.
Lesson: Don’t make your client leads have this inner dialogue. This inner dialogue will cost you sales.
Productize your services
We don’t sign up to buy physical products at an hourly rate and then wait to see how long it takes to manufacture the product to know how much money we owe. That would be ridiculous because we have no idea how long it will take to manufacture so we wouldn’t be able to evaluate if the final price is worth it. We wouldn’t buy it.
So why is it any less ridiculous that you would ask your potential clients to make a purchase decision for your expert services in the same way? It could be (and likely is) costing you sales.
Instead, companies sell physical products at a set price. If it’s a commodity, the price is pretty much equal to what it costs to produce (including it’s fair-share of the overall company expenses) plus some profit margin to make the business endeavor worthwhile.
However, if we purchase a luxury branded product, like a Gucci purse, the price includes so much more. The company knows that the purchaser will get more value out of it than just the functional benefits of a bag. They will get value in feeling special carrying around a bag that not everyone has or can afford, along with any recognition from the social status portrayed by carrying a Gucci purse. This is value that could not be gotten from carrying items in a purely functional plastic grocery bag, for example, so people are willing to pay more for it.
When I say productize your services, I mean that you should package your services as if they are products with a set value and a set price. There’s truly no better way to price if you want to be seen as an expert and get paid like one.
One of my favorite experts in this space is Pia Silva. She is my go-to expert for all things branding and has a lot of awesome suggestions when it comes to how to package and price your services. She is a huge proponent for pricing like an expert. If you need some help in this area, I highly recommend her free webinar, a Crash Course to Badass Your Brand. So much good stuff!
The secret to pricing like an expert is to stop charging hourly
Expert $ = How valuable it is to clients
Value received > Time spent by expert doing the work
Package your services as if they are products with a set value and a set price.
Are you still charging hourly?
What challenges do you have pricing like an expert instead of like a service provider or freelancer?
Stuck on how to price?
In order to package and price your services, you must know who your ideal client is and what their needs are. Only when you are clear on this can you get clear on what you have to offer that solves for those needs and the most useful way to describe and package those offerings.
Need help figuring out who your ideal client is? Download my free workbook you walk you through the process to identify your ideal client.
You might also be interested in these articles
I’m Stacy, an entrepreneur, strategist, and adventurer dedicated to helping you build a kick-ass business out of your skills & passions. Why? Because I think you should love your life and that’s kind of hard to do if you don’t love your work.
Want More Strategy Tips?
Sign up to get these strategy articles delivered to your inbox every week.