When it comes to the overall success of your business, one of the most important decisions you’ll face is how to price for the work you do. If you charge too much and you could scare away potential customers, charge too little and you could run yourself out of business or face liquidation or bankruptcy.
Figuring out how much to charge is stressful, but it’s worth it. If your business doesn’t bring in enough money to pay all the bills and compensate you, it isn’t going to last long.
So, how can you tell if you’re not pricing your services correct? Here are some items to check for:
1.The work isn’t worth the money
Many small business owners have periods where they don’t feel motivated to work. That’s normal. However, it is not beneficial to be repeatedly taking on projects (or clients) that consistently outweigh the work required, with what you charge. This can be de-motivating, damage your brand and create internal issues with keeping staff on board, who are being asked to do too much without fair compensation.
If the work doesn’t feel as though it’s worth the money you’re making, that’s a sign you need to re-think your pricing strategy. You don’t always have to feel keen to work, but you should feel as though you’re being fairly compensated for what you do.
2. You are finding it difficult to pay salaries
Small business owners have a tendency to make sure everyone else is taken care of first. There are bills to pay, marketing to take care of and, sometimes, employees who need to earn a living.
If your business doesn’t bring in enough to make sure you bring home a reasonable salary for you and your staff, this is a problem that needs to be addressed. You own a small business so you can be in control of the work you do—however you also need to ensure that, everyone in the business is paid a fair, consistent salary.
3. Your prices haven’t changed in years
If you can’t remember the last time you reviewed your prices—or you can but it was a long time ago, then now is a good time to take a look at your cost model. The cost of living is constantly on the rise and so is the cost of doing business. If your cost of doing business increases but your prices don’t, you’re earning far less from your small business than you used to, or than you should. Ideally, you should review your pricing strategy annually.
It can be daunting to think about the cost model in your business, but it is important to do. You work hard as a small business owner and you deserve compensation for the time you put into your business.. As a small business owner, you are also responsible for the salaries of your staff. Continually reviewing and keeping on top of your costs, prices and outgoings will ensure you are able to meet your expenses and that you can withstand the costs of doing business as they increase.
If you need some help with reviewing your business-pricing model, talk to our Commercial Concierge and stay on top of your business finances.