The Red Flags of Inadequate Pricing
February 17, 2020
Recently I was on a discovery call with a videographer. This man has been in business for five years, and he felt like he needed to make some major changes to his business if he was going to achieve goals he’d set for himself.
About 15 or 20 minutes into the conversation, I told him, “I can tell your pricing is too low.”
“How do you know that?,” he asked. “I haven’t told you my prices yet.”
“In no particular order,” I responded, “there are several reasons.”
“First, you price by the hour. By definition, a professional services provider like you who prices by the hour is underpricing their services.
“Second, you tell me that all clients are paying the same price. Not all clients have the same values. Different clients value your services differently. You’re probably going the extra mile for clients who don’t value that added care you’re giving them, and you’re not charging for it.
“Third, you’re not offering options. Options are a powerful way to tailor your services to your best fit clients who love what you accomplish for them, and they’re willing to pay you a good price for that.
”Fourth, you complain that you feel like you’re working too hard for too little money. For professional services providers like you, that’s always a sign of a pricing problem.”
“Fifth, you seem to be taking on most projects which come your way. More prospects should be turning you down because of price.”
“Finally,” I said, “you’re talking a lot about what and how you do what you do, instead of the challenges clients have that you solve. What that tells me is you’re not having solid value conversations with clients at all. A value conversation is the dialogue you must with a prospective client to understand the difficulties you’ll be helping them overcome. If you understand how your solution to their problems moves the needle for their business, then you’ll be able to set better prices.”
“You’re exactly right,” he said. “I need to work on my pricing.”
In about 15 minutes, this videographer ran through just about every red flag I look for when assessing the pricing of professional services provider.
If any of these red flags are flying over your practice, you have a pricing problem: your pricing is too low.
Photo by Zachary Keimig on Unsplash
©Ray Business Advisors, LLC and John Ray
About me: I’m enthusiastic about how changes in pricing strategy can significantly change profitability for a business and enhance life choices for business owners. I live this passion through Ray Business Advisors, my outside CFO and business advisory practice, in which my pricing is exclusively value-based, not hourly. I work with business owners on how they can change their pricing not just to increase their profits, but better serve the wants of their customers. Click here to learn more or call me at 404-287-2627.
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