Pricing Model

I recently had a conversation with a student who was incorrectly pricing her services in her business. In her case, she was low balling herself. I wish I could tell you this was rare, by incorrectly pricing your services as a business owner is actually an epidemic. I have at least five to six conversations about it per week.

(Note: Technically, you could incorrectly price your services by overpricing. However, I’ve never seen this happen. In my experience, it’s always about undervaluing themselves.)

What Happens When You Incorrectly Price Your Services

Incorrectly pricing your services leads to a slew of problems for business owners – most of them having to do with cash flow.

In my experience speaking with small business owners, there are a few key signs that are a good indication that their pricing is way too low. In this article, I’m going to lay them out one by one.

Cash flow problems.

The first sign that you may be incorrectly pricing your services is when you are experiencing cash flow problems.

In the case of this consultation call, this business owner had been in business five years and never made a profit. Because of this, she could not save for herself, start an emergency fund for her business or make new investments that could help her earn more money.

Too much work, not enough time.

Another sign that you may be incorrectly pricing your services is when you constantly working but feel like you have no money to show for it. You also don’t really have any time for other things that matter to you.

I know this symptom well because I used to live it. I kept wondering why I never seemed to make enough money. I also wondered why I didn’t even have time to enjoy myself. Upon further investigation, I realized my business model was causing me to underprice my services.

Clients that are a pain.

I like to teach my students that pricing is a boundary. This boundary ensures that you only get high-quality clients coming into your business. Otherwise, you attract clients who will be more trouble than they are worth (and therefore devalue what you’re actually earning).

If you find yourself attracting clients that are causing problems, look to see if you are incorrectly pricing your services.

Final Thoughts

As you can see, incorrectly pricing your services leads to more headaches than it’s worth. In all of these scenarios it comes down to one simple concept: The numbers don’t add up. If this is the case for you, then consider increasing your pricing.