The eternal question: What price should you charge?
The short answer is “Whatever gets you to the point where you lose half your enquiries on price”. We won’t go into the maths here, but trust me this is correct – experiment till you find that point, and then stick to it.
I know it’s scary, and when you lose ONE job you immediately think you’re going to lose every job from then on, so the temptation is to immediately crumble and start quoting cheaper prices again, but: hold the line!
…And when you lose a possible job on price, tell yourself the following (hey, you could even say it or write it to the customer you just lost, particularly if they ask why you can’t be cheaper)
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“Dear potential customer…
Sorry we couldn’t make it work on price.
Please don’t feel bad about turning me down, and I also won’t feel bad about charging a higher price than you can afford (or justify?) at the moment.
About 50% of my potential new customers feel that I’m too expensive and here is why that’s how it has to be – and why I don’t / can’t reduce my price when asked by those 50%:
For the customer:
“For you it’ll be fine, you’ll get someone cheaper, and maybe less good, but actually maybe just as good or even better! And even if they are less good, since they are cheaper they might still provide you with better value than I would have done.
If they cost £800 and are worth £3000, while I cost £1800 and am worth £4000, the cheaper option gives you the same benefit, so you should take it!
Or, if they end up being worth only £2000 you’ve still gained from having the work done, and perhaps you’ll come back to me at some point in the future and gain even more next time.
For the supplier (the trainer, me, in this case):
“For me, losing 50% of my enquiries on price is OK – essential in fact. An odd thing to say but here’s why…
The first reason is that I don’t have enough days in my year to do all the work that is enquired about; or at least, not enough days that I want to work – working every day would be exhausting and quality would suffer. So I have to charge a price at which my diary just fills, which is where it’s at now.
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But even if I DID have enough days my thoughts are like this:
I know you’d like me to quote you say £900 for the day rather than say £1800
Then the two choices are
- 50 days at £1800 (assuming I lose half the possible work) = 90k
- 100 days at £900 (assuming I get all of the possible work) = 90k
If we assume a cost of maybe £400 for travel time and cost, hotel, preparation. materials etc (and this assumes zero Opportunity Cost for loss of time with family or on the beach, or designing/marketing etc, so the £400 probably should be higher)
- Income (after cost) with the first (higher priced) option is 50 x £1400 = 70k
- Income (after cost) with the second (lower priced) option is 100 x £500 = 50k
So if I halve my price I’m making much less profit AND for working double the number of days – that would be madness!
So that’s the maths, which is inescapable.
But hopefully at some point the future you’ll get access to a bigger budget or decide that paying the extra does pay back for you, in which case I’d love to hear from you!”
CC
PS how about the middle ground: selling 75 days at £1350? After costs that’s 75 x 950 = 71k. Slightly more income, a 1.4% increase, but having to do 50% more work to get it! No, the higher price is the best place to be. Sorry but that’s how it HAS to be!
