The advice no one tells you when you are running a startup: pricing will make or break your market position. Many small startups and solopreneurs have no idea how to price effectively. They think everyone is going to pay inflated rates. Who can blame them, when no one is educating them on how to price? It is not a problem of greed, but a lack of education.
When I was in startup mode, I made the classic ego mistake of pricing as high as possible, with little previous reputation for good client work and no testimonies of prior work. This meant I got a ton of unanswered emails once I released my price for a project.
This backed me into a corner. We were not turning prospects into paying clients. We had not made a proper assessment of our needs versus our asking price.
The advice I wish I knew earlier:
Never, ever, tell a client your price by email. Get them on the phone instead.
Never send an email to tell a client your price for anything more than $1,000. Get him or her on a call. It is harder for them to say no to a human voice than a static email.
To combat the emails not being returned, I took an honest look at my pricing. I worked out an honest rate for what my time and my team’s time was worth. I tracked my assets and staff time, and I started asking for that price. Clients responded.
Clients started returning my emails, and they were happy about the new prices. I was off to a good start. I had to take my own advice that I now give to freelancers and entrepreneurs.
Pricing low is a good starting point, especially as a startup. Showing that you are working at a reduced rate is good when you have a working relationship with a client who can refer you to others in their industry.
Clients don’t pay for your hours in their mind, they pay for a finished product or a process. They don’t count your hours, they count results.
Once you start to see cash flow, you will get more confident asking for money. You may find that you get clients quicker and that everything flows a bit more smoothly. Don’t hinder your own cash flow by overpricing your market worth.
Over time, the prices you ask will increase, if your skill increases with it. Keep your work consistent and measurable. Don’t lock yourself into a lower rate that can’t pay the bills. Keep consistently paying for the business expenses and raise your rates when you are getting faster and better at producing results.
Be honest with yourself that asking for money isn’t natural. However, that barrier is what separates you from happier clients who will pour the referrals in once they see the value of your price versus the work being performed.
If I could give my younger startup self advice about pricing, I would say three things: price honestly, as it equips you to sell without desperation. Price consistently, as it assures the clients who all talk to each other that you are honest. Lastly, know that prices will rise in time, with a proper upward flow of work, trust and client testimonies.
If you think you’re charging too little for your product or service, that is ok. Charge your new clients a higher price and keep current clients on the early bird discount. It is very easy to raise prices over time, but it’s difficult to initially get that first sale when you’re charging too much to start.