Let me put this out there up front: there is a lot of advice out there about how to package and price your services.
It all works.
Sometimes it’s easy to get wrapped up in looking for the “right” answer instead of the answer that works for you.
This is how I approach packaging and pricing, and it’s how I recommend others do it. But there are other ways that are equally good.
Now, let’s get into it.
Why should you package your services?
Imagine you’re looking at bids for a contractor to come in and remodel your bathroom.
Contractor 1 says they charge a flat fee of $2000 for the service, and it includes everything you want it to include (and a few things you didn’t think to include!).
Contractor 2 says they charge $100/hour to do the work.
*Important note: I do not watch HGTV or This Old House religiously so I’m pulling these numbers out of my ass for ease of metaphor.
Hmmm…you’ve got a bit of a dilemma. Surely the remodel won’t take more than 20 hours, right? From your experience watching House Hunters Renovation it seems to all happen overnight!
You ask Contractor 2 for a time estimate and they tell you that it really depends on the wiring/load-bearing beams/your requirements/any unexpected issues they run into, but on average they take about 15 hours.
You decide to go with Contractor 2. What a steal! You just saved $500!
And then the contractors find mold in the bathroom. And your wiring isn’t up to code. And that claw-foot bathtub installation will require another contractor’s help. And now we’ve surpassed 20 hours.
And, suddenly, you’re actually mad at Contractor 2 for costing you so much money! You don’t know anything about “Code,” what if they’re lying to get more money out of you? Should it really be taking this long? Are they taking a lot of breaks and counting it as billable time?
Packaging is best for both you and your clients.
Your clients are paying you for a result, not for the hours you’re spending doing something. Frankly, your clients don’t really care that much about you. Yeah they bought into your Why in choosing you over another business coach/designer/VA, but they really just need you to get your work done.
- Prevents clients from nitpicking your timesheet, looking for “unnecessary” charges (like that time you spent preventing people from hacking into their site–who needs that?!)
- Instills confidence that you are the expert and know exactly what they need to achieve their solution
- Allows you to get paid for your skills and experience, not your (wo)man hours.
- Simplifies life for you with a repeatable process rather than millions of custom proposals
I’m sure I’m forgetting some things, but you get the idea.
How to package and price your services
In my mind, packaging and pricing are unnecessary to fully separate from one another. Your process will generally involve thinking about what you want to offer first, but pricing will immediately come into play.
Now, it can be useful up front to work hourly for a few clients while you get a feel for how you work and how long something takes you. I’ve personally made the mistake of pricing a new offer at a “high” rate (e.g. $2000) then discovering that the amount of time it takes me to complete the project leaves me with an equivalent hourly rate of $40. As a “premium” consultant. Whoops.
So kicking off with a few beta clients at an hourly rate is fine. However, if you want to simplify it and package from the start for all the reasons listed above, I’m with you.
Here is my recommended process:
1. Write out exactly what you want to offer
This is usually easiest if you’ve got some experience with clients already, but all hope is not lost if you haven’t. This is a mini process within the big process that ties back into your elevator pitch from last week:
- What problem are you solving?
- For whom are you solving it?
- How have they tried to solve this problem before?
- What experience do you want to offer?
- What steps are involved in solving the problem?
- People who want to run their first half marathon
- Men in their 20s
- Blog posts, Hal Higdon’s training program
- An in-person 6-month training program with weekly group runs and digital support for the rest of the week
- Learn some running theory, understand not to increase mileage too quickly, introduce the pros and cons of cross-training, follow a running training regimen
That’s all you really need to get started. Feeling ambitious?
Ask your clients what they want!
There’s no need to package in a vacuum, and while you don’t want information overload, it’s better to have too much information than too little.
2. Scope out your competition
Remember last week, when I said that a big point of differentiation that I have as “another online business coach” is how I think competitor research is important?
Yeah, it still is for this too.
Down the line, you’ll completely ignore competitors, and that’s great. But if you’re reading this, I assume you’re still struggling a bit with your packaging strategy. And that’s fine.
So see what your competitors are offering, and make a nice spreadsheet laying it all out.
Obviously, you’ll want to go fairly apples to apples here, as in your VIP day shouldn’t be compared to a 1-on-1 service and a 1-on-1 service shouldn’t be compared to their course (but depending on how a group program is offered, it could be compared to a course).
So how are others offering solutions to your audience? What is your audience already responding positively to? And how can you make your solution different?
At this point, stop to decide exactly what will be included in your package. Write it down before moving onto the next questions, which will help you think mostly about pricing.
3. How much of a solution are you providing?
If you solve part of a problem, you can charge less than you can if you solve a full problem. If you surface-level solve a full problem, you can charge less than you can if you deep-level solve a full problem. This ultimately comes back to return on investment. If you solve a person’s problem, the ROI is going to be much higher than if you solve the first part of a problem. And people will pay more for a higher ROI.
Let’s go back to our original example. Are you training them to run a full race over a long training time period? You can charge more for that than you can for a 5k training program. People looking to get into half marathons are more invested in running than the casual 5k-ers, so they’re more likely to see the value in paying for support to get to the next level (usually, unless you’re my husband, whose first race ever was a half marathon at 22, and now he is an ultra marathoner less than a decade later).
Provide a full, thorough solution to charge top dollar most easily.
4. What does your audience expect to pay and receive?
Slightly tied into your competitor research, what are the options that are available to your audience? If your audience expects to pay $99 for a full course on web design, and they’re unfamiliar with the concept of $2000 DIY courses, you may have a harder sell than those of us who are selling to the BSchool-style community.
When you’re just getting started, and no one knows who you are, it’s hard to come on the scene at price points that are unfamiliar to your audience. Is it possible? Yes. Are you creating a lot of unnecessary work for yourself if you try? I think so.
5. How does the offer fit into your brand vision and sales funnel?
Both in style of service and pricing. If you’re going to be a VIP coach who charges $10,000/hour, why are you planning to be in a Facebook group 24/7 for your audience and offering 1-on-1 call add-ons to your $500 course? It’s incongruent, and frankly comes off as inauthentic, and that throws people off.
You also need to take into account your other offers, which make up your sales funnel (not to be confused with your email marketing funnel). Your sales funnel generally involves a low-cost starter offer, a mid-price offer or two, then premium offers (often your 1-on-1 service). If you discover that your group program costs more than working with you 1-on-1, you’ve got a problem, and should adjust your offer or pricing accordingly.
Adjust your package if you find inconsistencies at this step.
6. Putting it all together for pricing
Now, thinking back to your positioning, how should your pricing fit in the list of competitors? High end? Low end?
Here’s another unpopular opinion I have: we can’t all be high-end service providers.
We literally, statistically can’t.
There will always be more people in the middle than at the low end or high end.
Now, is a $500/hour coach high-end? To most people, probably yes, but others would say no, because there are people like Tony Robbins charging $10,000+ an hour for their time. Your middle-tier pricing is going to be somebody’s version of premium.
So when you’re starting out, I highly recommend you consider landing somewhere in the middle with your pricing. Upper middle, preferably, but middle.
1. Competitor Pricing. From your list of competitor offers, consider what all is included in their comparably packaged packages–again, don’t compare your 4 calls per month over 6 months coaching package to someone else’s 2 calls per month 3-month package–and your first stab at pricing will be somewhere in the middle. From our 2-person group/course spreadsheet example above, that would be around $3000.
2. Hourly Pricing. Next, take a gander at how long you’ll have to spend on your offer per person.
25 hours of your time is going into this group program example, not even including the time involved developing it or the time you spent developing your expertise! Let’s give you a simple hourly rate of $100, and that puts you around $2500, conveniently aligned with our competitor pricing step.
3. Value-Based Pricing. At this point in my business, almost all my pricing is ROI based, because I have the testimonials to back it up. Value-based pricing says that your customers should get at least a 10x return on investment from implementing your advice/program/process. What price can you put on the result you’re getting your clients?
Finally, take into consideration all 3 pricing steps, and price your offer somewhere in the middle of the 3 numbers you came up with.
Double check with your sales funnel and brand positioning to make any final tweaks.
That’s the exact process I use for packaging and pricing my services.
Now, are there other considerations you need to make if you’re paying out subcontractors or dealing with overhead or trying to bake in some extra profit? Sure. But this is a great starting point for you, as a service-based solopreneur, to test things.
It goes against the advice to ignore your competition, but it works. It’s market research meets competitor research meets value to the client.
If our woman in the first example had hired Contractor 1, she would have been a happy camper. Maybe Contractor 2 got paid more for the project, but, in the end, was she going to refer him to any of her friends? Unlikely. Even if she logically knows that the mold and the wiring and the bathtub were not Contractor 2’s fault, she emotionally has a negative reaction from feeling like she was cheated out of money.
And your clients are making emotional decisions too.
Help them make an emotional decision that feels good by packaging and pricing your services the smart way.