When it comes to the overall success of your business, one of the most important decisions you’ll face is how to price for the work you do. Charge too much and you could scare away potential customers. Charge too little and you could run yourself out of business. In this article we’ll focus on the signs you’re underpricing in your small business.
Figuring out how much to charge is stressful, but it’s worth it. If your business doesn’t bring in enough money to pay all the bills and compensate you, it isn’t going to last long.
So, how can you tell if you’re underpricing in your small business? Here are some signs you need to consider charging more, and soon.
1. The work isn’t worth the money
Many small business owners have periods where they don’t feel motivated to work. That’s normal. But what’s not normal is repeatedly taking on projects (or clients) that you don’t feel are worth the money they bring in. You may feel obligated to do the work, but there might also be a sense of resentment about it. Working may feel like a chore.
If the work doesn’t feel as though it’s worth the money you’re making, that’s a sign you are underpricing in your small business and need to charge more. You don’t always have to feel keen to work, but you should feel as though you’re being fairly compensated for what you do.
Which brings us to the second sign…
2. You’re not taking home a salary
Small business owners have a tendency to make sure everyone else is taken care of first. There are bills to pay, marketing to take care of and, sometimes, employees who need to earn a living. You can’t forget about yourself, however.
If your business doesn’t bring in enough to make sure you bring home a reasonable salary then you aren’t charging enough for your services. You own a small business so you can be in control of the work you do—you should also be in control of your salary. If you don’t make a salary, you need to charge more and you need to do so quickly.
3. Your prices haven’t changed in years
If you can’t remember the last time you raised your prices—or you can but it was a long time ago, then you need to increase your rates. The cost of living is constantly on the rise and so is the cost of doing business. If your cost of doing business increases but your prices don’t, you’re earning far less from your small business than you used to, or than you should. Don’t go longer than two years without reviewing and increasing your prices. Ideally, you should review your pricing strategy quarterly and likely increase prices annually.
It can be daunting to think about raising your prices, but it’s important to do. You work hard as a small business owner and you deserve compensation for the time you put into your business. You also need to charge enough to ensure all your business expenses are paid for and that you can withstand a cost of doing business increase.
If changing your prices for current customers seems overwhelming, start small. Set higher prices for your services and charge new customers those rates. If you’re concerned about losing existing clients by raising prices too high too quickly, increase their rates incrementally. You can also give your clients plenty of notice about the increased rates, so they have time to become used to the idea.
The really good customers and clients will understand that you need to raise the rates and will support you for doing so. Those who don’t probably weren’t great clients to begin with.
So are you underpricing in your small business? Do you have any questions about your pricing? Book a Biz Fit call today and ask to talk about all things pricing to get a plan in place.