I’ve been getting a lot of queries lately about pricing, in particular what is best practice when it comes to the ideal model?
It’s a fascinating question that I have spent many years researching and observing as advisers pursue the ‘perfect’ pricing structure. The ‘one’ that holds the key to unlocking a dream business.
What I have noticed is the similarities between pricing and the health and fitness industry.
For example, one day a particular food can become ‘all the rage’. The next day it is the cause of societies increased health problems and food allergies.
Or, one day a fitness expert promotes why you should exercise in the morning. The following day, morning sessions are being ruled out in favor of evening workouts.
So, what is right?
The most compelling answer I have heard to this question is:
The best time of day to exercise is the time when you are actually going to do it.
In other words, it doesn’t matter whether you exercise morning, noon or night. What matters is that it’s a time you can commit to. And that time is different for everyone.
So you ask, how is this similar to pricing?
Like health and fitness, with pricing there is no one pricing model that fits every business. What works for one business does not mean it will work for another. Just like someone else’s diet and exercise plan may not work for you. There is danger in comparing someone else’s pricing success with yours.
If you listen to the commentary, there is a different story each day. Charge fees for advice, don’t charge fees, take commission, commission is evil, support asset based pricing, ignore asset values in your pricing etc. I bet you’ve heard it all.
The right pricing model is the one that works for you and is both profitable and sustainable for YOUR business.
Here are some things to consider:
Keeps you in business:
[tweet_box]You owe it to your clients to stay in business. That means making sure you’re profitable enough to do so.[/tweet_box]
Doing this involves understanding what it costs to deliver your promise (upfront and on an ongoing basis) and factoring in a margin for profit. You wouldn’t find a retailer selling a product without knowing their cost base and profit margin. Nor should you.
Clients understand it:
When it comes to pricing, avoid confusion at all cost.
Otherwise it can appear as though you are hiding something.
I have seen many pricing models that require a financial calculator to understand. Or the cost is clear, however the client has no idea what they are paying for.
Work on being able to confidently position any fees the client needs to pay and what they get in return. The clearer you are, the more confidence the client will have when engaging you.
Another little tip: Position your fees to clients as an ‘investment in their success’, rather than a cost of doing business.
It’s amazing what this small mindset shift can do.
Increases the perception of your value:
Price can influence people’s perception of value. Ensure your pricing works to increase yours.
There is a fine line between being cheap and people not valuing your advice; and being too expensive forcing people to look elsewhere.
Discounting your price, or negotiating the dollars with a client can impact how you are perceived. Work on promoting your value, rather than altering your price.
One of my mantra’s is:
[tweet_box]If you articulate your value sufficiently, you should not have to justify your price – as long as your price is reasonable.[/tweet_box]
Rewards you for your worth
Many advisers continue to undercharge purely through a lack of understanding what they’re worth.
Don’t underestimate the value of what you do and how you change peoples lives for the better.
What’s that worth?
[tweet_dis]Know what you are worth and charge for it. You, your clients and your bottom line deserve it.[/tweet_dis]
If you are stuck, reflect on the outcomes you have helped your clients achieve and how it made them feel. Review their testimonials or comments. Or ask them. Be aware of the incredible impact you make.
At the end of the day no matter what pricing model you choose make sure you believe in it, can explain it and that it’s both profitable and sustainable for your business.
That’s the right model for you.
Happy pricing! Kim