Opinions expressed by Entrepreneur contributors are their own.
That startup life, right?
The one where you’re barely making ends meet.
In crippling debt.
Worrying why you left the security of your full-time job.
But *record scratch* Why is this our view of entrepreneurship?
Why do we constantly have to be hustling in the DM’s, working ourselves to the bone practically for free, just to make ends meet because that’s what the first months of entrepreneurship are meant to be like?
So how do you get it right from the beginning? Truth is, it may never exist. But in today’s article, I’m dropping my best tips for how to price your online service and sharing a free pricing guide to get you started.
How to nail your price for online services
Pricing is a fundamental aspect of your profitability, success and prosperity in business. Sure, you can’t expect to make five-figures in your first month, but you also can’t expect people to take you seriously if you’re charging less than a cup of coffee for value-packed services!
When I was first starting on my own I struggled with this, too. From what to charge to how the heck I was going to get out of debt while scraping to deliver value to clients with fewer hours in the day. Even writing that exhausts me, so I know the struggle.
But nailing my pricing was the best thing I ever did to put more time and money back in my biz, and I hope that by sharing my tips today, you can skip this stuff and start on the right foot today!
Related: 3 Marketing Pricing Strategies That Will Win You More Customers
Why pricing is so important in business, especially online
Time is your most valuable asset in business. Even more than money. But the thing is, time and money are inextricably linked. And nailing your pricing strategy is crucial to ensure abundance in time and money as you scale.
And oh my gosh, pricing has so much power, you guys. It can uplift your value, and it can degrade it. Let’s do a little exercise to show what I mean:
Let’s say you’re looking at a $7 bottle of wine vs a $70 bottle of wine. Which one, without reading the label, would you assume to taste better?
Chances are, you’ll automatically associate quality in taste with the more expensive one, right?
You can view your expertise and client’s subsequent trust in you the same way.
And at the same time, as consumers, we often need to touch and feel value before we invest heavily into it. And that’s made even harder as a provider of intangible services!
All in all, everything comes second to your service pricing. Optimal pricing has a direct impact on your profitability and scalability, your lead’s view of your service quality and your business objectives. And that also makes it extremely hard to nail.
Related: Mastering the Art of Pricing: What the Textbooks Don’t Teach You
Why determining a price for online services is so difficult
I just mentioned that as a service provider, you’re already at a disadvantage given your leads can’t touch and feel what you provide – they can only experience it. Of course, if you’re a Pinterest Manager, SMM or superstar VA, they see that in increased clicks, sales, leads and time. But communicating that from the outset is hard – but more on how to tackle that later.
There are so many factors that make it hard to price your services. Things like:
There’s science behind this, too.
Business pricing psychology
There’s more to pricing than pulling a number out of thin air and chucking a dollar sign at the front of it.
Integrating psychology into your pricing decisions is crucial to scalable business and appealing to your dream client. And you don’t need to have a degree to do it! Simply think of emotive language and visual cues. For example:
You look at $3.99 and it seems way cheaper than $4.00, even though it’s just 1 cent less. This is psychological pricing.
It’s things like:
-
Charm pricing – anything ending with a ‘9’.
-
Capitalizing on innumeracy – like the way “Buy One, Get One Free” sounds better than “50% off two”.
-
How “$9.00” looks more expensive than “$9”.
-
And the way we’re primed for loss aversion, rather than gain – always prioritizing what we stand to lose (like money or time) over what we stand to receive.
So how can you integrate these simple tricks into your pricing?
Related: 5 Strategies of ‘Psychological Pricing’
Strategies to price an online service
There are so many directions you can take when pricing your offerings! Everything from premium pricing to skimming strategies. But for the sake of you as the boss of an online service provider, let’s keep it simple with three:
1. Value-based pricing
This is pricing your online services based on their perceived worth, focusing on the value you deliver and the return on their investment, taking into account things like time saved, expertise and financial return. This takes a strong understanding of the intangible and tangible value of your services, and an ability to communicate that value to any leads that come your way.
2. Competitor-based pricing
This strategy requires pricing based on the market, and going sleuth-mode to determine what your competitors are charging. While this is great for getting a potentially easy sale if you’re the cheapest, it can lead prospects to make explicit comparisons between you and your competitors, viewing your unique expertise as an expense up for bargaining, rather than a solution.
3. Cost-plus pricing
This is probably the simplest way to price yourself as an online service provider. But it’s not always the most effective. Essentially, it’s taking the cost of your services and adding a markup. This could be pricing a service based on the number of hours it takes you to complete it, multiplying that by your hourly rate, and adding on.
So with all these options, what’s the best way to price YOUR services?
The best starting rate for a new online service provider
Before you jump into the numbers, remember to consider the things that contribute to your rates and pricing, especially when first starting. Things like your:
An ideal starting price for a new online service provider like a Pinterest Manager SMM or VA is around $30 per hour.
This takes into account the value you bring (while acknowledging you’ve got more to build on) and also your need to, ya know, make a living! All while providing an affordable entry point for your clients. This rate is the perfect starting point as it ensures you’ve got a minimum in terms of the money you’re making, a bottom line you’ll accept to keep your clients (and you) happy. It also factors in the effort and dedication it takes to have your head inside someone else’s business – because that takes up a lot of rent!
Free pricing guide for new online service providers
While every VA or SMM is different, I know how handy a good guide can be (because I would have loved one when I was starting!). So to get you started, here’s a guide for pricing.
Experience Level: 6 months, 1-2 years, 3+ years
Monthly Pinterest Management: $450/month, $650/month, $850+/month
General SMM: $600/month, $800/month, $1000+/month
Virtual Assisting: $25/hour, $35/hour, $50/hour
Pricing can be tricky, but with this guide, it can be a heck of a lot easier. If you need help, or want a hand, make sure we’re connected on Instagram, Tiktok and online.