Should I Price My Services Lower When I’m First Starting Out?
I recently received this question from a professional services provider who was just starting out in their practice, and barely had dry ink on their business cards. The premise behind their question was that they are new in business and want to attract clients to “get going.” Here’s a high-level version of a more specific answer I gave them. (In a word, the answer is no.) The Price and Value Journey is presented by John Ray and produced by the North Fulton studio of Business RadioX®.
John Ray: [00:00:00] And hello, I’m John Ray on The Price and Value Journey. I recently received a question that was along the lines of, Should I price my services lower when I’m starting out? I get this question a lot from new professional services providers, ones that have just started their practice.
John Ray: [00:00:18] It’s an understandable question, but it comes from a faulty assumption. The premise is that lower prices attract customers, and that’s an understandable misconception. It’s one I labored with when I started out. That conception, that idea is wrong.
John Ray: [00:00:38] A couple things here. One is that prices are marketing signals. In the absence of any other indicator, a price is a marketing signal. For example, if I were to offer you a Lexus for $2,000, what would you think? It’s too good to be true, right? That’s part of the problem with pricing in a way that is supposed to be promotional, sometimes it actually drives clients away.
John Ray: [00:01:04] Now, let’s call something else out though. Part of the problem with professional services providers starting out is both fear and confidence. We are afraid and insecure in thinking a buyer will look at us and question our inexperience in the business. The answer to the problem is focusing on the client, discussing and understanding their problems in depth. What is the scope of the issues that their problems are causing? What will the client be able to do, whether it’s greater sales, lower expenses, less aggravation, a better vacation because the problem gets solved? What’s the cost of doing nothing?
John Ray: [00:01:48] You see, questions like this are a value conversation. And a value conversation is a dialogue with a customer which helps ferret out what the solution to their problem is worth to them. When you have value conversations with clients, you’re shifting everything. The comparison is less about price relative to, well, in this case, you’re supposed lack of experience or your newness in business.
John Ray: [00:02:17] Instead, the comparison becomes more in the minds of that client about price relative to the value of the solution. Once you’ve had a thorough value conversation, you may find that you’re not a great fit for this client. That what they really need is something you can’t provide. If so, you’ve done both them and you a favor.
John Ray: [00:02:42] But if you think you can solve the client’s problems, craft options for working together. Offer a good, better, best set of options. The good option should be your very basic – we’ll call it – compact car offering priced at more than what your gut tells you it should be. The best option should be your luxury solution to the problem when you know you can deliver with a price you think is crazy high.
John Ray: [00:03:12] Now, if you offer options after having a deep dive value conversation, the discussion with that client becomes more about the ways and terms to work with you as opposed to your time in business, your experience, what have you. Now, there’s a lot of detail underneath this answer, but that’s the way I answered this particular question on how should I price when I first start out. Have a value conversation, offer options.
John Ray: [00:03:46] I’m John Ray on The Price and Value Journey. If you’d like to give me a question that I can answer here on this podcast, I’m happy to receive it. Just email me, firstname.lastname@example.org. Thank you for joining me.
About The Price and Value Journey
The title of this show describes the journey all professional services providers are on: building a services practice by seeking to convince the world of the value we offer, helping clients achieve the outcomes they desire, and trying to do all that at pricing which reflects the value we deliver.
If you feel like you’re working too hard for too little money in your solo or small firm practice, this show is for you. Even if you’re reasonably happy with your practice, you’ll hear ways to improve both your bottom line as well as the mindset you bring to your business.
John Ray, Host of The Price and Value Journey
John Ray is the host of The Price and Value Journey.
John owns Ray Business Advisors, a business advisory practice. John’s services include advising solopreneur and small professional services firms on their pricing. John is passionate about the power of pricing for business owners, as changing pricing is the fastest way to change the profitability of a business. His clients are professionals who are selling their “grey matter,” such as attorneys, CPAs, accountants and bookkeepers, consultants, marketing professionals, and other professional services practitioners.
In his other business, John a Studio Owner, Producer, and Show Host with Business RadioX®, and works with business owners who want to do their own podcast. As a veteran B2B services provider, John’s special sauce is coaching B2B professionals to use a podcast to build relationships in a non-salesy way which translate into revenue.
John is the host of North Fulton Business Radio, Minneapolis-St. Paul Business Radio, Nashville Business Radio, Alpharetta Tech Talk, and Business Leaders Radio. house shows which feature a wide range of business leaders and companies. John has hosted and/or produced over 1,100 podcast episodes.