The Perfect Pricing Mindset For Your Micro Business or Side Hustle
In my last blog post, I covered the importance of setting a product and pricing strategy that creates profit in your micro business or side hustle.
Note: Randomly pricing your products or services doesn’t count as a strategy!
A pricing strategy involves taking a much closer look at:
- what you’re selling
- who you’re selling to
- whether your customers want what you’re selling, and
- how much they’re prepared to pay for it
The “how much they’re prepared to pay for it” question is worth spending some extra time on
That’s because setting the right price for your products or services can make or break your micro business or side hustle.
If your prices are too low, your business won’t make enough money for you to live on. Is that a fair exchange for all the work you’re putting in?
Not only that, your customers might be suspicious about the potential quality and value of what you’re offering.
If you buy a T-shirt from Primark, for example, you won’t expect it to last, and you won’t expect it to be crafted from a luxurious fabric. If you buy a T-shirt from Chanel, you’ll expect the opposite.
There’s a famous quote from Warren Buffett that illustrates this point perfectly:
Price is what you pay. Value is what you get.
When Pricing, Knowledge is Power
When it comes to price-setting, one of the first things I advise my clients is: do your research.
Why? Because all too often their pricing is based simply on what they think people might pay, instead of what the products or services – and more importantly, THEY – are actually worth.
It’s a mindset thing.
You’ll get a much better idea about the potential worth of your offer if you know what’s already available and acknowledge your own value.
Take the time to find out what customers are paying for products or services that are similar to yours, then do some analysis of:
- The factors that separate the highest-priced options from the lowest
- What extra value could you offer that the others aren’t?
- Your specific product knowledge or the years of industry experience you have
- Which personalised service touches do you provide?
Your WORTH – Your Pricing Has to Reflect That!
Clearly, it’s much easier to price a product than a service.
A physical product costs money to make, and those costs have to be factored into the price you charge your customers. So if you charge less than your product costs to create, it’s easy to calculate that your business will end up making a loss.
You could also choose to price physical products at a higher rate, depending on additional factors that customers might be willing to pay extra for
- Personalised customer service
- Using higher-quality materials to make a premium product
- Offering specific knowledge that helps your customers maximise the experience they’ll get from using the product
- Etc, etc
But if you’re pricing a service, it can get tricky. Your customers aren’t getting a tangible product, which means that in most cases, what they’re really buying is YOU.
Does that sound scary? It doesn’t have to be!
When it comes to pricing your own value, you could start by thinking not just about what you earned as an employee, but everything you’ve learned throughout your career. Your formal qualifications, informal training, previous career, reputation, and skills should all factor into your service offering.
Developing the perfect pricing mindset begins when you value yourself properly. After all, when somebody chooses to work with you, they will be getting that unique combination of everything you are, and everything you’ve done.
If you are finding it difficult to price YOU as the product, we should talk
The Five Words Exercise
I often use this (very effective!) exercise to help the micro business owners and side hustlers I work with to help them understand how others really see them.
This exercise can add some helpful insight to your pricing strategy
Start by thinking of five words that you feel best describe you and your values. Then, ask at least ten other people to come up with five words they would use to describe you.
(Don’t ask for explanations of why they’ve chosen those words – just the words themselves).
Once you’ve collected everybody’s responses, create a grid for your words and those others have provided, and look for the similarities. This will help to ensure that what you think about yourself is consistent with the impression you’re actually making on others.
If you want to know more about this exercise, and many others, get a copy of my e-book, Five and a Half Steps to a Brilliant Brand