Putting it all together: Narrow your margins and test with potential customers
Putting it all together: Narrow your margins and test with potential customers
You can’t be certain you’ve landed in the right price bracket until you test it on the market. A potential customer’s reaction can reveal a lot if you know how to read it. Do they balk? The price is high. Do they jump at the opportunity, no hesitance? Could have charged more.
After you’ve given a price on a call, you’re not in a great position to change it. Dropping signals to customers that they can play hardball and continue to whittle you down, while trying to charge more after the fact is just tacky, and not going to leave a great impression.
What’s an enterprising entrepreneur to do?
Narrow your margin of error to make experimentation easier.
Use the previous steps to determine an upper and lower bound that are as close as possible. If you’re working with hundreds, think of a $200 - $450 range. If you’re working in the tens of thousands (damn, congrats), same goes but with extra zeroes: $12,000 - $14,500.
Ensure you’re testing against the right prospects.
We all know the difference between someone who’s going to pay a hundred bucks and someone who’s ready to shell out a few thousand.
Make a judgment call on every call: Are you going to test the lower or upper bound with this person? Is it the right opportunity to push your luck and throw out something even higher? As much as pricing is systemic, it’s far from a science. Stay light on your feet.
And remember: pricing is an iterative process. When you’re starting out, you’re going to lose some deals to a few too many zeros and take on some larger-than-life projects for too few.
Explore your pricing, keeping track of both results and evolution
What did you expect you could charge when you first set out?
What did you find were the lowball and highball prices for your field?
How realistic was that original number? Way too high or way too low is something to stay cognizant of — that’s probably your natural inclination. Keep an eye on this impulse!
From the range you researched, what dollar amount would make you uncomfortable to charge? Know this number but don’t fear it. Get comfortable with it, actually. Try working toward it.
OK, don’t go overboard! For you, what does a reasonable price range look like, that you could start charging today?
Which number feels best within that? Start there. Use it as your go-to pitch price.
Depending on the pricing model you’re using, repeat this process for different packages or use cases. Don’t get overwhelmed; those won’t all end up as a job. But if that number raises concerns, consider doing most of these experiments with quicker, small-scope services.
A note from Carmen:It’s gonna be rough when you set out. Calculate the costs you’ll need to get up and running (or transition away from company benefits, etc) and make sure you have at least six times that.
You’re going to do better than break even, so set your sights high and hang in there.
(It’s also OK if, after a time, you find this venture wasn’t right for you. No shame. We can’t walk you through that in this book! But we see you and support you.)
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