Pricing | How to Reach Your Full Revenue Potential

Today is an extremely important episode because we're talking about pricing and this is clearly a decision you want to think a lot about because of the obvious financial implications. Not to worry though, because I'm going to remove all the guesswork and confusion for you. This is the Launch your business podcast because we know starting a business is challenging, but it doesn't have to be confusing. Each week we'll give you the tactical advice and the necessary tools to scale your business without feeling burnt out. I'm Terry Rice, business development consultant and staff writer here at Entrepreneur Magazine. Let's dive in on today's episode. I'm answering your questions and the first one comes from Mark Johnson. He wrote in I've recently started a consulting business and have no clue how much I should charge. It feels weird asking for hundreds of dollars per hour to Since I was making around $50 per hour at my previous job. What advice would you give? I'm glad you asked that, because this question does come up a lot and I know the response will benefit a lot of you as well. But we're not just going to talk about pricing, we're also going to discuss your money mindset and how to make sure self limiting beliefs are not lowering your revenue. You'll also learn how to create your profit multiplier so you can reach your full revenue potential. So let's go ahead and get started. When I first started my business, I helped companies grow by running Facebook ads for them. I had just left Facebook and felt like it would be a good way to use my talent and background to make money on my own terms. And I made a lot of mistakes, but the biggest mistake I made was how much I charged. And it's actually embarrassing to admit this, but I was only charging $40 per hour for my work. And I'm not saying it's a bad amount in some situations, but but I live in New York City so everything is more expensive. And beyond that, I worked at Facebook and at the time only 10,000 people in the world could say that they worked there. So I was clearly an expert. So the question is, why did I not charge more? Look, honestly, I just want to get a yes out of people and I hate haggling over pricing. But when I took a step back and looked at how much I was charging, I realized I'd have to work around the clock in order to make enough money to support my family. So finally I did some research to determine how much people at my level should be charging and I stumbled across someone who was far less experienced than I was, but was charging much more. I was annoyed, but I was more annoyed at myself for not charging enough in the first place. So here's what eventually worked for me. And here's the process I recommend you all consider as well. First, do some research. How much are similar professional service providers charging? And by similar, I mean they serve the same audience or the same industry. Fortunately, many people have their pricing on their website, so this information shouldn't be too hard to find. Next, just Google it. You might find an article that shows a range for how much people in your industry charge for their services. And I'm not saying you should automatically go with either of these prices, but it will give you a clear idea of what competitors are charging and the amount your prospects expect to pay. So let's say you notice the Average compensation is $100 per hour. Start there, but then adjust up or down based on your experience. So that's your hourly rate. But you also want to think about how much you would charge for a project. And I actually prefer to charge on a project basis because you can focus more on the outcomes you deliver as opposed to how long it took you to do it. So let's say you have a service that would take you about 10 hours to deliver, and you're charging $100 an hour. The service will cost $1,000. 10 times 100 is 1,000. Now listen, initially it will be very challenging for you to estimate how many hours a product will take, but you'll get better in time. But here's something else to keep in mind. How much money do you want to make during the year? $50,000? $100,000? Well, if you want to make $100,000 and you're charging $1,000 per project, you would have to close 100 deals in order to make that happen. And to close those 100 deals, you probably need to have around 2 to 300 sales calls. That is a lot. So you're probably better off charging more and having fewer clients. So if you charge $5,000 per project, you only need 20 clients to hit your goal. That's what I want you to think about. How many yeses would you need to hit your revenue goal? And the next question you might have is, well, great. Well, how do I charge more? There's actually two ways to do it. The first is to offer a premium service. For example, instead of just doing a project for a company, you can also train their employees on how they can do the same thing going forward. Or make yourself available for ad hoc questions for a certain amount of time after the project is done. And here's another way. Create a profit multiplier for your business. Now you might be thinking, what is that? Good question. A profit multiplier is when you offer the same service but change the context to make it more valuable. And I'll give you a good example here. A friend of mine is a sleep health educator. As you may have guessed, she helps people get a better night's rest. And one group that she focuses on is teachers. But there are a few ways she does it. The first is one on one consulting with individual teachers. She charges a few hundred dollars and walks them through her signature process for getting more sleep. Next, she also trains entire schools using the exact same process, and she might charge around $20,000 for that. But here's the problem. Many service providers would stop there, but she doesn't, and neither should you. Her profit multiplier is selling the same training program to school districts. That way, one yes from a school district is worth well over $100,000 to because she's training hundreds of teachers and administrators. I want you to take the same approach. How can you change the context to make your service more valuable? In my friend's case, she's doing it by increasing the volume of people she trains. And you can do the same. You can also provide services to organizations that have more to gain from your help. For example, a business pulling in $1 million per year would most likely have more to gain from your help than a business that makes $100,000 per year. So you can make more money by solving more expensive problems. And remember this the value of your knowledge is contextual, and your profit multiplier is the key to finding the right context to help you achieve your revenue goals. Just get started. If you've ever looked for tips on launching a business, just get started seems to come up a lot. And while that's vaguely motivational, it does not provide any real direction. Because the next logical question for anyone would be, well, how do I get started? What specifically should I do? Well, if you're looking to quickly start a business without the confusion, risk and pressure of doing something entirely new, I've got a solution for you. It's called the Solopreneur's Fast Track, a step by step process on how to start a business using the skills you already have and actually enjoy using. So let's say your favorite part of a previous job was email marketing. You'll learn how to start a business offering other companies advice on how they can improve their email marketing. Or maybe you are really good at integrating complicated tech tools. You can help other organizations do the same thing without the need to bring on a full time hire. So the main point here is that everything you need to start a business is already within you. You don't need a cool website or fancy tools and by completing the course you'll also discover a simpler approach for attracting clients without using complicated funnels or cheesy sales tactics. You can finish it over a weekend and start making money in as little as 30 days. You'll gain the clarity and confidence you need to start your business and receive a one page business plan so you can immediately apply what you've learned. Get started today and receive a 20% discount by heading to Terryrice Co Fast. That's TerryRice Co backslash fast. So now we've established your pricing for hourly and project based work and we also determined your profit multiplier. Here's the last step. You want to offer three different tiers of service. Good, Better, best and the main difference will be additional services or access your clients get. For example, let's say for the best option you'll meet them in person and offer access to you via Slack and provide a few more services, but the other options are delivered remotely and you mainly communicate with them via email. The main point here is to give people something to say no to besides everything and your most expensive package will make the other ones appear less costly. So to recap here, first start by removing those self limiting beliefs. You provide a valuable service and you should be compensated well for it. Then do competitive research to see how much similar people are charging. After that, have your good, better and best offers set up and do not forget to implement your profit multiplier. That's the key to achieving your revenue potential. So thanks for joining me and if you have any questions that you would like answered, you can contact me at Terryrice Co or on Instagram Terryrice. Thanks again and I'll see you next time. Apply what you've learned on today's show. You'll find the show notes and more resources at Terryrice Co Podcast. Again, that's Terryrice Co Podcast and the best way to support this podcast is by subscribing, telling a friend and leaving a review. Also, you can get more tips by following me on Instagram at Terryrice or follow me on LinkedIn. This episode was produced by Josh Wilcox of Brooklyn Podcasting Studio and edited by Dan Lardy. Special thanks to my wife Dominique for keeping our kids relatively quiet as I recorded thanks again for listening. I'll see you next time.