How “No-Brainer” Pricing Ruins Your Business (And What to Do Instead)

How “No-Brainer” Pricing Ruins Your Business (And What to Do Instead)

Much of the marketing advice out there encourages you to set prices that are a “no brainer.”

That is, a price that is so low, compared to the value you are offering, it would be silly for customers not to buy from you.

Sounds like a smart strategy, doesn’t it? But if you’re a coach, consultant, or freelancer, there are two big problems with this approach:

1) It works: you get a ton of clients, but your prices aren’t high enough to create the revenue you want. The result is you look successful but feel like an overwhelmed failure.

2) It doesn’t work: few people buy because your low price positions you as a beginner or someone who isn’t very good. The result is you both look and feel like a failure.

I know how much these two outcomes suck because I’ve experienced both of them. And yes, they nearly ruined my business because I either believed I wasn’t good enough to make it or I couldn’t keep up the pace necessary to make it.

Both conclusions turned out to be completely untrue.

By learning how to catapult my own income as well as a wide variety of clients over the last 3 years, I’ve found a smarter strategy that works in nearly every kind of business or niche.

STEP 1: WORK OUT HOW MUCH YOU NEED TO BE CHARGING

 

Set a reasonable capacity for your services and then make sure your price per client adds up to the revenue you want for your business.

To make the math easy, let’s say you want to earn $100,000 in revenue and you can comfortably handle 10 clients per year. This means, on average, you’d need to price your services at $10,000 per client.

STEP 2: RAISE YOUR PRICES TO THAT LEVEL

 

It’s not the math that holds people back. The REAL problem is that you don’t think you can charge that much. You don’t see a path from the “no brainer” price model to the premium price model.

I get it. To go from say $1,000 to $10,000 for the same service feels, well, uncomfortable.

How in the world do you justify such a radical change? Won’t everyone be shocked and angry at your arrogance? The voice in your head almost invariably starts yelling, “Who the hell do you think you are, anyway?

But here’s what you probably haven’t considered.

WHY YOUR CLIENTS FEEL LIKE YOU’RE TRYING TO SQUEEZE MORE OUT OF THEM

 

Making a big leap in prices is often easier than small, incremental changes.

I know it doesn’t feel intuitively right, but I’ve done this so many times now, I can assure you it’s true.

Small, incremental prices are hard to justify. It says nothing has really changed about your business, you just want more. And, in fact, this is often how entrepreneurs try to explain such price changes. They argue they haven’t raised prices in years. Or that it’s in line with what their competitors charge.

But your customers don’t care about any of that. Incremental price changes often feel like you’re trying to squeeze more out of your customers. And they don’t like it.

Big jumps in pricing, on the other hand, require quite a bit more boldness and creativity. You can’t keep to the status quo. You (and your customers) will require a perspective shift to wrap your mind around this new number.

HOW TO RAISE YOUR PRICES EXPONENTIALLY (WITHOUT ALL YOUR CLIENTS DESERTING YOU)

 

I use about a half a dozen strategies to help my clients earn previously unthinkable prices in their business, but here’s one you can use after just a couple hours worth of work.

Change the way you frame your business.

There’s no doubt that how you describe your services establishes a point of comparison and sets the ceiling for what you think you can charge. If you’re already at the high end of your industry, here are two ways around that issue:

1) Give yourself a new title. There are two main reasons to change what you call yourself: you either want to put yourself in a profession with a higher perceived value or you want to get out of an oversaturated market. For example, the term “virtual assistant” suffers from a relatively low perceived value whereas a website developer, marketing consultant, or online business manager can easily command much higher prices. A life coach suffers from low perceived value and is also a saturated market. Better descriptions might be an executive or career coach.

2) Increase your specialization. Specialization is an easy way to essentially double the expertise you get paid for. For example, I worked with a client who called herself a freelance editor. But much of her experience was helping professors edit technical research grants and papers. Emphasizing this specialization helped her to increase her prices 20% overnight within that sub-community of clients.

The obvious caveat is that your new title or specialization has to be accurate. You shouldn’t call yourself an executive coach if you’ve never worked with executives before.

And of course, beyond your title and specialization, how you describe what you do and the value it produces matters tremendously as well.

Unfortunately, most people get this wrong, even if they’re whizzes at marketing, because they’re just too close to their own story. I’ve seen brilliant entrepreneurs vastly undersell themselves because they simply can’t see the true value of their work.

How much of a difference does changing the way you frame your value make? The proof is in your bank account. One of my clients used these exact techniques and got mind-blowing results, such as:

  • A new offer that even her existing clients want to buy, earning her an additional $4400 in the first two weeks of pitching it
  • A better way to package and price her monthly services, so one new client paid her as much as all her previous clients combined
  • A monthly revenue increase from $1906 to $9766 (after working together just two months)

Most people think leaving a stable job to start a business is a huge risk.

But the biggest risk is that you’ll stand in the way of your own success.

Many people hold themselves and their businesses back because they think they have to stay competitive.

Today, I’m giving you permission to charge for your value, not someone else’s.

$174K in 6 Months: How One Mental Shift Made Me More Money Than Marketing Ever Did

$174K in 6 Months: How One Mental Shift Made Me More Money Than Marketing Ever Did

When I first started my business as a coach, I was incredibly optimistic.

After 16 years of service in the military, I was finally free to do things my way. No boss, no bureaucratic red tape to navigate. The only thing between me and serving my customers would be me.

I had no idea how true that statement would be. I’ll explain what I mean in a minute.

My first year I earned about $23K in revenue. Nothing special. Certainly Forbes wouldn’t be calling for an interview on how I did it.

But you know what? I was thrilled.

To create money, any money, out of nothing but my own hard work and ideas was amazing to me. If you’ve ever had any experience selling, even if just a lemonade stand or Girl Scout cookies as a kid, you might have an appreciation for how difficult it is to create that much money all by yourself.

The problem was that I’d also spent about $28K on various courses and programs, learning how to start a blog and an online business. Ouch.

“No problem!” I assured myself. I was confident I would make that money back over the years to come.

I did earn more, but not a lot more. In fact, over the next couple of years, I would fail to earn enough to pay myself regularly. I had high expenses due to education and outsourcing, and only meager profits. It hurt both my bank account and my ego.

What made it all the worse was that my clients kept telling me how great my coaching was, how I had made a real impact on their lives and careers. I had one glowing testimonial after another.

I kept asking myself: what’s wrong with me? Why can’t I make this work?

When good marketing produces bad results

 

I’m embarrassed to admit that I continued to pour yet more money down the drain on conferences, online marketing courses, and various contractors over those years, thinking the answer to my problems was my lack of knowledge or skill. Every time I made more, I spent more. My frustration grew.

It wasn’t until I hired a coach myself that it all became clear: my prices were too low to ever get my business to the place I wanted to reach. I didn’t have an information problem, I had a mindset problem.

To put it another way, you can be a master of marketing, but if you don’t master your “inner game,” you’ll continually struggle to achieve your business goals.

And that’s true at every level of business.

The simplest definition of money mindset is how you think about money. It’s how adept you are at pricing your products and services, your willingness to charge what they’re worth, and how capable you believe yourself to be when it comes to creating both revenue and value for your clients and customers.

Like many entrepreneurs, I’d assumed the hard part was finding people to pay me. I focused on blogging and marketing to make sure there were plenty of people coming in the door.

But if you haven’t figured out how to charge for your services appropriately, more people coming in the door just means exhaustion.

The classic solution to this overwork issue, if you follow the online marketing gurus, is to turn to passive income streams. You have this idea that you’ll coach during the day and magically make money while you sleep.

But marketing, good marketing, takes time. A lot of time.

I knew things had taken a seriously wrong turn when I began to resent the coaching calls on my calendar, because they kept me from all the work I needed to do to create online sales funnels. That’s right, my core business felt like a distraction from my marketing, rather than the other way around.

How screwed up is that?

Overworked

The secret to my (mind-blowing) success

 

Several years ago I was taking a long walk with a friend, and he challenged me to generate six figures in revenue that year. I said I wasn’t interested.

“I don’t need that much money,” I told him.

“But wouldn’t it be nice to have it,” he asked incredulously.

“I guess. But I don’t need it,” I protested.

This was the first sign that my money mindset issues ran deep. You see, a part of me thought it was wrong to make more money than you needed. So perhaps it was no real surprise that as long as I didn’t need money, I didn’t make money.

Admittedly, there was also a part of me that thought a goal like that wasn’t within my reach. I was scared to try because I was scared to fail.

Once I gave myself permission to earn more, I had to tackle my scarcity mindset. This meant intentionally taking fewer clients, so I could serve those I did sign more deeply and powerfully. I set a capacity of never taking more than 6 clients at a time.

This set me up for the scariest proposition of all, because to earn more with fewer clients, there was really only one option: I had to raise my prices. Significantly.

That forced me to re-evaluate the true value of what I was already doing and how I could raise the bar. I listened more carefully to the dreams and fears of my potential clients, and then got creative with what I felt was the perfect, VIP solution to help them.

The results were beyond my wildest expectation.

I went from paying myself pitiful wages to billing over $174K so far this year. In full transparency, I offer the majority of my clients payment plans, so not all of that revenue has been deposited into my bank account yet. I’ve never had a client fail to pay what they agreed to, so I feel comfortable reporting that as revenue, but as per this article, I also believe it’s important to be as transparent as possible about what these numbers actually represent.

Even better, I was able to accomplish those results by taking clients who inspire and amaze me, while also making time for the important things in life like family, friends, and my health. These rather simple changes have made an enormous impact.

For one thing, I’ve become a lot more confident in my ability to find and sign clients whenever I need to. The scarcity mindset is gone. That means I am detached from the outcome of any one potential client–I never pressure anyone to sign with me and there’s never any desperation to my pitches.

As my prices have gone up, the number of people wanting to work with me has gone up too. This was completely counter intuitive, until I realized that low prices unconsciously signaled to my clients that my services must not be worthwhile. Let’s face it, if you’re really offering to transform someone’s life or business, who expects to get that at a bargain?

Moreover, those low prices encourage people to sign up for work they aren’t totally committed to and thus never fully get the benefit from. You don’t want to sell to someone who’s still kicking the tires, so to speak. It results in a “poor” experience for everyone.

What I discovered is that changing your mindset about money changes your mindset about everything: about what you do, your capacity to deeply serve your clients, the lifestyle your business can enable, and the amount of satisfaction you enjoy in your business.

A successful business requires courage

 

No one sets out to create an unsustainable business.

People know they’ll have to work hard to get a new business off the ground, but they tell themselves that eventually they’ll hit a tipping point and everything will get easier.

But that’s not what happens when your prices are too low. At some point you realize you can’t keep taking on new clients without sacrificing the quality of your work (and your lifestyle). While I see the benefit of selling information products to increase your reach and revenue, calling their creation and marketing “passive” is a cruel joke.

That’s not to say online marketing isn’t something you should invest in. Just don’t kid yourself.

Effective online marketing is incredibly time intensive. But in my experience, so is mediocre online marketing, which is all you can expect if you’re trying to squeeze your efforts around your client based business.

So if you’re a coach, consultant, or freelancer, hear this: the fastest way to grow your business is to raise your prices.

There is a right way and a wrong way to go about it of course.

There’s a limit to what you can charge for certain products and services for specific clientele. The question you should be asking yourself: how do you know when you’ve hit the price ceiling for your services and what could you tweak to raise that ceiling once you hit it?  

There are 3 reasons you probably have trouble answering that question:

  1. you don’t fully understand the needs and desires of your clients
  2. you don’t understand the full breadth and value of services you can provide
  3. you have assumptions about what customers will and won’t pay, assumptions you’ve probably never tested

These stories we make up about how much people are willing to pay for our services are the #1 reason so many entrepreneurs are overworked and underpaid.

Does it take courage to override those voices in your head that say you can’t charge more? Sure.

But you know what, hiring you probably requires some courage on the part of your client too. If you want your potential clients to overcome their skepticism and potential disappointment, you need to be willing to do the same.

Make hiring you the scariest and most committed thing either of you have ever done.

Then make it worth it.

Feeling Stuck in Life? Try an Ideas Adventure

Feeling Stuck in Life? Try an Ideas Adventure

“I learned that it was in hard times that people usually changed the course of their life; in good times, they frequently only talked about change. Hard times forced them to overcome the doubts that normally gave them pause. It surprised me how often we hold ourselves back until we have no choice.”—Po Bronson, from his book What Should I Do With My Life?

I made the decision to change careers just hours after suffering my second miscarriage in a year.

I’d talked about my career frustrations for years, but it wasn’t until I literally had death staring me in the face that I found the courage to make a decision.

I’ve interviewed dozens of career changers, and found similar circumstances. Brian Clark waited until he almost died from a head wound. My friend Larry Warrenfelz made his leap after six rounds of cancer, two amputations, and a brain-stem stroke.

I want to spare you the agony of feeling you can’t change until life gets that bad.

It was this idea that led me to start the No Regrets Career Academy. If I could prevent just one person from having to go through a major trauma en route to their career shift, that was well worth the effort for me.

What I discovered once I started coaching clients surprised me. (more…)

The Simple Secret to Getting Ahead

The Simple Secret to Getting Ahead

I ‘ve been trying to decide who to give $7.5 million to.

The money is for a new synthetic biology project I’m managing as part of my Air Force reserve work. There are a lot of things that drive me crazy about continuing to work in the government, but I still love awarding big sums of money to innovative scientists trying to push the edge of our knowledge.

Programs like this attract the very best scientists in the country. Most grants are on the order of $1 million. Getting $7.5 million completely transforms your career and reputation.

As you might imagine, it’s not an easy decision. The chances of ultimately getting selected for funding are roughly 2.5%. In an extremely competitive field like this, the difference between success and failure often comes down to something small.

Leading this effort gave me a big picture view of competition and an objectivity I don’t always enjoy. All of a sudden I realized my own approach to getting help and getting ahead was less than stellar. I bet yours is too.

These lessons learned will be useful for anyone who thinks they have to tackle every big challenge alone (ummm, overachievers, I mean you).

But if you’ve ever toyed with the idea of starting your own business, either on the side or as a full-time replacement for a job you’re eager to escape, for goodness sake, don’t skip this post (or the webinar announcement at the end of it). (more…)

3 Lessons for Would-Be Entrepreneurs from Successful Quitters

3 Lessons for Would-Be Entrepreneurs from Successful Quitters

Editor’s Note: This is a guest post by Sumitha Bhandarkar.

A dmit it — every time you have a conversation with friends about successful entrepreneurs, you secretly daydream that someday they will be talking about you.

Sure, you’re currently in a regular job just like them, but you know you are destined for more.

You feel it in your guts that someday you will break out of the shackles and strike out on your own. You will find a way to turn your dreams and brilliant ideas into a spectacular success that people can’t stop talking about.

Is it time, though? How do you know when to give up the comfort of your regular job and take the plunge?

I wrestled with that very question for two years. And then, last month, I gave up my promising career with a six figure salary to start something on my own. It was without a doubt the hardest decision I’ve ever made.

And I haven’t looked back.

The thing is, you can never be 100% sure it’s going to work out. There’s never going to be a perfect time to quit.

What you can do however, is take a long, hard, look at those who have tried this before you. And notice the subtle differences in how those who are successful at striking out on their own approach this decision compared to those who fail. These differences raise some important questions. If you answer them honestly you’ll have a clear idea of whether it’s time for you to strike out on your own, and if not, what you need to do to get there.

Ready to give it a try? (more…)

How to Pay Down Big Debt Without Resorting to Ramen

Editor’s note: Guest post by Joan Otto

If you simplify the advice of most financial advisors, it goes something like this: Pare your budget down to the very essentials. Use the rest of the money to pay off your debt. Then you can do all sorts of things.

It’s pretty good advice, to a point.

Lots of pretty famous people share versions of the same philosophy. You know what it looks like, too. In its extreme, it’s eating ramen and driving a car that’s held together with duct tape, prayers and plenty of dirt. It’s no vacations; it’s not even driving 30 miles to a relative’s house for Christmas so you can save on gas.

Done in moderation, this philosophy is great. But when you’re trying to pay off what I call BIG Debt – like I am – moderation is key, and extremism is unlivable. My husband and I do share a pretty awful car (our only vehicle). We don’t take extravagant vacations, and we try to be reasonable with our travel.

But we’re two years into what looks like a six-year battle to pay off almost $90,000 in credit-card and loan debt. And that means that, yes, I prefer to eat something other than cheap noodles occasionally in that time.

So we compromise. We’re not lobster, but we’re not ramen, either. What we’re not willing to compromise on, though, is our debt-payoff schedule. We have a dollar amount above the minimums that we aim to hit every month. Sometimes, there are hurdles that prevent that, but we definitely try.

But what about when money is tight? (more…)