If Your Business Isn’t Making Money, It’s Just an Expensive Hobby

Developing a Kick-Ass Pricing Strategy

If you come around here often, you know that I’m a big advocate of creating a side hustle.

The challenge for  any new side hustler, or any business owner for that matter, is finding people who will pay for their service or product. When I started my side hustle as a Resume Writer, my marketing budget was a whopping $0. So I focused on referrals.

The plan was to write job-winning resumes for a few clients for free and my services would do all the marketing for me. I hoped those clients would tell their network about this kick ass Resume Writer… and I’d live happily ever after.

It actually worked and I got a good stream of new clients.

But I didn’t live happily ever after

I was working my ass off writing resumes, cover letter, LinkedIn profiles every evening and weekend, but my side hustle was nowhere close to bring in this type of income. To make matter worse, my clients were haggling with me constantly.

I was frustrated by the fact that they didn’t see the value in my work. So frustrated that even wine wasn’t working to rid me of this frustration.

If you and I are connected on Twitter, you saw a lot of these tweets:

 

It wasn’t until one of my clients referred someone who was at his wits end with his current resume, a resume that had already been written by a resume another Resume Writer, that I got a wake up call.

To say that resume was an absolute mess is an understatement. The format was bad, it spanned over 4 pages (job search suicide) and it was peppered with errors. Including his own email address… no joke.

Sheer shockWhat shocked me most however, was that he paid TIPLE what I would have charged. Triple! I sat in front of my laptop in compete shock.

No wonder I wasn’t making the type of income I wanted, I was completely underpricing my services. I was almost working for FREE!

What I realized at that point pissed me off.

My pricing strategy sucked from the very beginning

I just didn’t know it at the time.

When my first few clients referred me to their network, I made the mistake most entrepreneurs make when they’re starting a side business – I made my services too cheap. All out of fear that they may run off if I they thought my services were too expensive. After all, making some money is better than no money right?

Unfortunately, I didn’t factor in my time. I also didn’t consider whether or not this was sustainable.

I don’t just re-write a resume. I actually have a one-hour consultation with my clients where I gather information, strategize a personal brand and only THEN do I start writing their resumes.

When I account for all these things, I realized not only was I working for free,  I was attracting the wrong types of clients with these low prices.

And yes, unlike leprechauns, the ‘wrong types of clients‘ do exist:

  • The ones who haggle over every single penny after they agree to your rates
  • The ones who don’t pay on time
  • The ones who remind you that their uncle’s friend’s next-door neighbor’s high school son is “really good with computers” and has offered to write their resume for FREE

I could go on, but I know you get the point.

People value and appreciate what they pay for

Let’s say you spill a glass of red wine on your beloved $4,000 Gucci handbag. You’d probably have a meltdown. If the same happened with the $35 handbag you bought last week however, you’d probably be annoyed at the wasted merlot… at least I’d be.

Bracing myself for my side business to come crashing down, I knew I had to increase my prices.

And…

The world didn’t end. I lost the interest of a few ‘wrong types’ and I started getting nervous. But a few weeks later, after the dust settled, I noticed that my client base was growing.

I was getting more high-quality clients who really wanted to invest in their career rather than the ones who wanted to haggle over every penny. And instead of focusing on quantity, I was able to offer my clients the type of high quality resumes I love and in-turn, they referred me to clients just like them – people who truly valued my services and were happy to pay for them.

I’ve now found the road to ‘happily ever after’. Imagine if I had just done that from the beginning?

The key is to have a pricing strategy that works for you from the get go. Otherwise, you’ll just be wasting your time and energy working for free. Working for free is doing someone a favor, volunteering… anything but running a business.

How to develop a kick-ass pricing strategy

If you don’t do anything else with your pricing strategy, at least try these:

1. Research the hell out of your competitors

As a startup, you want to see if you can charge slightly below your well established competitors and still make a profit. Figure out if they’re offering add-ons as well as the quality of their services or product. You should start off with an introductory price, but it’s important to make it clear that these are NOT your usual prices so that people understand  you will be increasing your prices shortly.

2. Determine how much your time is worth

If you’re offering services instead of a product, you need to sit down with a calculator and figure out the value of your time in numbers. This is a huge challenge when you’re offering a service. People price it as a service instead of their time, which is the product. I changed my pricing strategy based on how many hours it generally takes me to work with a client from start to finish. I now have an hourly rate that works for me and my clients.

3. The smaller your niche, the more you should charge

If you target your services or product to a very specific target market (meaning not everyone can be your customer), you’re likely to have less competition. Smaller target markets mean bigger sales. The key to focusing on a specific niche is doing enough research to understand them inside out. You have to know them like you know your family!

4. Don’t be afraid to increase your prices

The world will not end. Promise! If you’re like me, you will likely end up with clients who appreciate you and live happily ever after!

What is your pricing strategy?

Like what you read? Subscribe to get weekly updates directly in your inbox!


Related Posts Plugin for WordPress, Blogger...

{ 0 comments… add one now }

Leave a Comment

{ 1 trackback }

Previous post:

Next post: