Pricing is one of the trickiest things about starting a business. Why? Because we all get scared about setting prices. If you charge too much, you’ll lose clients. If you charge too little, you’re leaving money on the table. If you’re charging the same rates as your competitors, you’re just being a copycat (and you’re not placing enough value on the unique services you provide).
With something so important as pricing, you can’t afford to be scared or unsure. Your agency’s success and growth depend on the money you’re bringing in. Period. You could provide the best content creation services in the whole city, but if your pricing is off, you just won’t be making enough to sustain a business.
From lack of planning to overcharging, a lot can go wrong when setting prices. And, it’s not just big mistakes that can cost you — little mistakes also have the potential to leave thousands of dollars on the table.
So, to help you with pricing your agency’s services, here are three of the biggest pricing mistakes to avoid and what to do instead:
Mistake #1: Waiting Too Long to Set Prices
A common mistake that small businesses make is thinking about their pricing strategy last, when it should really be the first thing you consider. Let’s be honest — nailing your pricing strategy is not the sexiest part of starting an agency. You really want to be thinking about the services you’ll provide, how you can promote them, which clients you want to work with, or where you’ll work. But, these sexy, fun parts of your agency all depend on pricing. The money coming in to your agency will dictate how your whole business functions.
What to do: Go back to marketing 101 and think about the “four Ps:” price, product, promotion, and place. Price is the only step that involves money flowing into your agency; the rest involve money going out. So, it makes sense that pricing should be the first thing you consider. Here’s another way of thinking about pricing — instead of making it about the money you’re charging people for your services, think about pricing as the money that will be coming into your agency to make it run as smoothly and successfully as possible, and allow you to ultimately provide more value to customers in the long-run.
Mistake #2: Charging the Same Price for All Customers
When you’re first starting out, you have no idea what to charge. So, when one client is happy with a price you throw out there, it is easy to just keep repeating that same price point to other clients. But, here’s the mistake: not all clients are the same, so your pricing needs to change depending on who you’re talking to. Clients will have different perceptions of the value of your services, and as such, will be willing to pay different prices. For example, a CEO of a 200-person, well-funded company is more likely to pay a higher price for your marketing services. On the other hand, a CEO of a three-person startup simply cannot afford that same cost.
What to do: Create a buyer persona cheat sheet. Segment your clients into different buckets based on things like company size, marketing budget, reputation, funding, etc., and set a price point for each client segment. You’ll be able to track how your pricing changes depending on each client, and you’ll be more informed on how each client persona thinks and functions.
Mistake #3: Not Having a Plan
You need to have an action plan for when you’ll increase your rates and by how much. This is especially important for the first couple years of your agency. We tend to undervalue the worth of new goods and services, meaning that we’re not charging enough in the early years of our agencies. That doesn’t mean you should increase your rates with the next new client you land. If you are a young agency, it makes sense to build credibility before you increase your pricing. But, make sure you have developed a plan for how your pricing model will change.
What to do: Every business needs a growth strategy. You need to identify goals, challenges, and priorities for all areas of your business, and pricing is no exception. This plan does not need to be super detailed, but you do need to have a sense of how your pricing changes over time with clients. Maybe you charge new clients $X for content creation, but a year later, you increase your rate by 20%. Or, maybe you increase all rates every 18 months, regardless of how long you’ve been working with a client. The point is, you must revisit your pricing and have a plan for how you’ll do it.
Conclusion and Next Steps
It is an expensive mistake to set your prices and never look back. Pricing is not something you should forget about, although it is easy and convenient to stick with your standard rates for all clients and never increase pricing. But, however scary it can feel to tell your clients your rates will go up or to pitch a new client at a higher price than you’re comfortable with, this is the really scary part: the possibility of losing thousands of dollars a year because you didn’t have a pricing plan. Or, because you never had a three-minute conversation with a client about changing your pricing model. Now that’s scary.