Money Mindset: Does My Pricing Structure Line Up with the Value I Offer?

There is a pretty common occurrence in the small business and entrepreneurial spaces. Many often associate the size of their business with the size of their prices. They think to lure in clientele and customers the best offer they can make is to be affordable. 

This decision can come from so many places, but the core of all underpricing is scarcity.

The assumption is that we have to be cheap and that through time in business and number of clients we may someday earn the ability to charge more, but not today. 

But someday can be now. You can start earning 50% more. Double. Triple. Doing the same amount of work, but charging more in accordance with your value. Before you get there, though, you have to clear some mental hurdles.

What does the market look like?

If you haven’t taken the time to compare your prices to others, start there. Sometimes we operate in isolation and we don’t even know we’re underpricing ourselves. There’s what we think our product and service is worth and what it’s actually worth and often, businesses are surprised to see just how much their peers are charging.

Big box stores aren’t your peers. Corporate entities aren’t your peers. And being a small business does not mean you have to discount your offerings because you don’t have the presumed prestige of global brands. In fact, some people are willing to pay a premium for handcrafted, personalized and intimate attention. 

The thing you may be under qualifying yourself with could be your biggest asset. But you won’t know how far from the target you are until you look into the price model of those operating in the same space at your level.

Confidence

Yep. It matters. At every stage. It takes courageous, bold action to launch a business in the first place, but that’s not where the bravery ends. We’ve seen new businesses undercharging over and over again because they think “new” means less valuable. 

But are you really new to this?

Often when people launch a business, they are hardly amateurs. Many have spent years in corporate or have honed their skill over the course of hours of experience. 

Don’t determine your prices based on the age of your business. Determine your prices based on all you’ve invested into over the course of your lifetime. Your college education. Your work experience. Your personal development. All these things compound your value and make this about more than just the cost of materials or the average hourly fee.

What’s the message you’re sending?

Another area to focus on is not just the message you’re telling yourself about what your offerings are worth, but the message you’re telling your audience.

Do you really want to be the cheapest?

At what point in your life as a consumer has the cheapest also been the best? Don’t be the dollar bin of your industry. Not only is that tough to sustain, but we believe you’re better than that.

Abundance

It’s common for small business owners to believe that if they price too high, they’ll price themselves out of the market. And, we suppose, that all industries have a place where they top out, but that’s what your research is for. 

Instead of thinking of higher prices as a way of thinning out your potential client base, think of it as a way of attracting the perfect client or customer.

Your ideal client will meet you at your price point. The higher pricing could actually help you eliminate difficult or unwanted customers, who only ever show up for the bargain.

Most service-based businesses, and product-based businesses too, will notice that as their prices go up, the complaints tend to go down. Why is that? Do people just love spending more?

No. People who pay more are more invested in the process, have a keener eye for quality and tend to better understand what they are purchasing. 

It may indeed thin out the crowd a bit. But what if you can work with three clients a month and earn more than when you were serving eight? The service you give those three will likely be your best yet. Or you can sell 20 units where you used to sell 40 and spend the extra time developing new products? Your customers will be so excited to see fresh inventory.

Higher prices aren’t about greed. It’s about earning what you’re worth to create a cycle of abundance that keeps your business operating for years to come.

Educate on the Cost

When you do increase your prices, it’s okay to anticipate a stronger need to educate your customers or clients. You might have to provide more detail regarding why you’ve valued your offerings at this price point. 

You might have to educate on the uniqueness of your offering or the materials used or the added benefits compared to others who may be priced lower. 

We’d argue that 9 out of 10 small businesses aren’t underpricing their products and services because those things are undeserving. It’s all about the mindset of the owner themselves and nervousness about demanding too much. Believe in your value and others will too.