Be brave with your pricing…

My biggest business lesson so far.

I started my business, Velocity Digital in August 2012, it was my first foray into running a business, and while there were many initial challenges to overcome, pricing was up there with the biggest of all.

What is my brain worth?

When I started the business, my full intention was to be a pure consultancy — I’d help businesses to make the most of digital marketing by applying my skills and experience to their particular needs. That means that I’m effectively selling the contents of my brain and the time it has taken to create said contents. Naturally I think my brain is valuable, but does the market? How do I put a price on the time that my brain will dedicate to the client’s needs?

I read various resources, most of which told me to take into account overheads etc, but that seemed obvious, and I was in a fortunate situation that my overheads were very low.

So I put my finger in the air…

and settled on a day-rate. I based it on a mixture of my experience of pricing from working in agencies and what value I felt I could add, but in all honesty, it was a bit of a shot-in-the-dark.

The initial reaction from prospects helped me refine it

As I started the process of finding clients and had conversations that led to pricing being discussed, the vast majority of feedback was along the lines of…

Wow, that’s far too much for us!

or…

You’ve just set up, how can you justify that day-rate?

The second point really hit home — perhaps my experience and reputation doesn’t count as much as I thought it would now I’m out on my own?

Then, one day, I had a long conversation with a business owner, we got on like a house on fire and while they didn’t need any help at that time, he did tell me that my rate was far too low and that many businesses may de-value me immediately based on that alone.

So, I went against the feedback from the majority and zeroed in on the advice from that one chap who told me I was pitching too low and actually upped my rate.

Brave or stupid?

It took a while to bring in clients, and then one day, after meetings, proposals and presentations, three signed up in the space of a few hours. All had one thing in common — they never once baulked at my pricing. I’d brought in three exciting clients, all of which had been willing to work with me at the level I felt was fair.

If I had dropped my rate, would I have brought in more business, quicker? Probably. However, would that business have led to the on-going partnerships I have with the original three clients? I’m not so sure, as sometimes I feel those who are willing to invest at a higher level will be those that are willing to give new things a try, be brave and learn, all things I believe are needed in order to breed marketing success in today’s world.

What about now?

Things are very different at Velocity now, I’ve got two wonderful people working alongside me, and we handle a lot of delivery alongside pure strategy and planning work. Due to that, we have various prices for a multitude of services (I need to refine those services, I’ll probably write about that soon).

Do I waver on those prices? Very, very rarely. I stick to my guns, and if businesses aren’t in the position to invest at the level I feel is required, then we won’t work with them.

Does that sound arrogant? It’s not about arrogance, it’s down to pure numbers — we need to bring in a certain level of fees in order to maintain quality of output. If we pick up too many jobs at a low fee level, then we can’t afford to expand the team and in-turn, too few people have to work on behalf of our clients, and a slip in standard is almost inevitable. Slipping standards lose business and stretched teams don’t work. Lowering fees in a quest for volume of clients could well be the beginning of the end.

So, be brave with pricing, it may be tempting to drop your price just to attract business, but in my experience (so far!), it will be of massive benefit in the long-run.