For the most updated version of this article, click here.
Most authentic businesses have haphazard pricing.
Sometimes, you just pick a number based on how you “feel” about it. The problem is that your audience might not “feel” the way you do. No matter how intuitive you are, you are still a human being, with human biases. Pricing inside your own head (or even your heart or gut) is not wise business practice. It’s practicing like your offering is a hobby.
Or, you might blindly trust a business or marketing expert who says that you should “charge what you’re worth” and always do premium pricing.
Or, you might just go with whatever your niche mates are charging.
In this post I’ll offer you a more thoughtful process to come to a price that both “feels” right to you, and is grounded in reality. I call it authentic pricing.
The aim is to arrive at a price where your ideal client says “That’s truly a great deal!” and that you also genuinely feel in integrity about.
Your Cost (of Living)
One important factor to figure out your authentic pricing is to look at your cost of doing business.
First of all, are there any costs that are directly associated with the product, service, or program that you are offering? For example, if it’s an event, what are the event’s costs to you? If it’s a product what are its manufacturing costs? If it’s a service, is there software that automates some part of the delivery?
If it’s simply 1–1 coaching, there might be no other direct business cost.
Also take into account the indirect costs for your business, such as various software subscriptions that power your marketing, coaching/consulting that you’re receiving, advertising costs, etc.
The revenue from all your offerings should eventually more than pay for these indirect costs too.
Compared to all your offerings, how much time and energy does this product/service take up? Let’s say it’ll take up 50% of your working time. Then perhaps the revenue from this offering should pay for 50% of your indirect costs.
If you’re a solopreneur, another indirect cost to account for is your own cost of living: rent, healthcare, food, and a minimum amount of retirement savings.
You can, of course, charge a lower rate, if you can lower your costs.
If you don’t figure out what is truly enough for you, your natural, human appetites will keep rising and so will your costs.
Because I’ve figured out my “enough”, I’m able to charge a lower rate than others at a similar experience level, and my clients think “Wow, George Kao is a great deal for business coaching!”
I hope you’ll also give your clients that feeling of excellent value.
Of course, the perceived value of your offering also depends on what you’re offering as well as your branding/reputation. We’ll touch on that later.
How many units do you expect to sell once the marketing ramps up to an expected level?
For example if you are doing 1–1 coaching, you might want to find out how many sessions other coaches like you typically do in an average month.
If you’re starting a group program, what’s the number of people you reasonably expect to sign up? If you’re not sure, then what’s the minimum number of people you’d like, in order for the program to run?
The better you understand your audience’s wants and buying behavior, the more accurately you are able to determine the Expected Sales. This is why I talk about the importance of building an audience and getting to know them. (For more on that, see my framework on how to build an authentic business.)
Dividing Your Cost by the Expected Sales will give you a minimum per-unit price that you need to charge for this offering.
To watch a tutorial of this whole process, check out my video on calculating minimum sustainable hourly rate.
What does your audience expect the price of your offering to be, based on what they already know (or can quickly research)?
For example they might expect 1–1 coaching to be somewhere between $50 — $250/hour, depending on the reputation of the coach and what issues they’re coaching on.
This means the more specific your offering is, the more your audience has an expectation of what the price should be. The broader your offering, the more the audience has no idea what they should be paying, and are going to be uncomfortable buying something they’re not sure about.
Trust is another big factor, or what in marketing is called “branding”. The more they trust you (i.e. the more credibility you have with them), the more your audience doesn’t care about the market rate and will just go with what you charge.
How much your audience cares about the Market Rate (compared to your rate) is determined by Specificity of the offering, and the audience’s Trust in you.
Offer Different Levels
Chances are, you have potential clients who are at different levels of comfort with spending money on you type of business.
As a result, it’s a good idea to have different levels of offerings:
- DIY — an online course or automated program that allows the client to learn and practice at their own pace. Once you create it, it costs you very little time to manage it, so you can charge the least.
- Group support — for those who want more than DIY, but aren’t ready to buy your 1–1, this is a good option for them. At this level, you’re providing support to your clients in a group format such as a weekly group call, and perhaps also including a private Facebook group for additional suport. Priced in between the DIY and 1–1 support.
- 1–1 sessions —this of course takes you more time per client than the Group offering, so it would be priced higher.
- 1–1 with Emergency Support — this might be your highest level offering, where you provide not only scheduled 1–1 sessions (same as the offering above) but also you allow clients to request sudden/emergency “SOS” sessions, and/or they can text you for rapid support. You need to therefore take into account how much time and energy a typical client will cost you, and price this tier accordingly.
Focus on creating your offering for your ideal client/customer who will get the most out of that offering, and won’t be as concerned about the price.
If you get to know your ideal audience better, you’ll be able to better create an offering that is perfect for them.
Work with clients people who most value what you do. Otherwise, they (or sometimes, you) will feel bad about your price. It’s ok for non-ideal clients to go elsewhere. They’re only “non-ideal” for you… they may be the perfect match for someone else. You may in fact want to have a short list of alternative providers to give to such clients. Make yourself more available to those who love your work.
You can always change your prices, as you come to better understand (or change) your costs and your expected sales, and as your market changes its usual rate.
Keep aiming for a pricing that feels really congruent (not resentful nor greedy) to you, and that gets a reaction from your clients: “I’m so grateful for this offering!”
To receive the newest content once a week, or his best content once a month, Subscribe to George Kao’s Email Newsletter.