Strategy squared

These days pricing policies are rarely out of the headlines, whether it’s stories about supermarket power driving down the cost of goods or industry monopolies resulting in high prices for consumers, an optimal pricing policy remains a key business strategy . When you’re running your own business deciding how much to charge and achieving it can be complicated – there are lots of elements to consider and what might seem initially a relatively simple task can quickly bog you down in math and paperwork.

However, establishing your charging rate is one thing, obtaining it is is another. In a competitive market we can all sometimes be reactive to price sensitive customers needless to say this can be a dangerous strategy so how do you ensure you get just rewards for your efforts? Here are our five tips in getting paid what you want – if you have advice you want to share use the comments section below.

1/ Don’t be afraid to turn down work
All businesses have a break even point – be sensible about how reactive you are to customer negotiations– accepting a lower rate may secure the job in the short term but could be detrimental in setting market expectations of you and your organization in the future – if it something costs $100 to produce then there is little point in consistently selling it for $50. Remember that profit shouldn’t be a dirty word you have expenses and overhead to cover – if the client isn’t willing to match your expectations you have the right to take your business elsewhere.

2/ Understand your clients need
We can’t stress how important this is. Understanding your clients need is imperative, what problem they are trying to solve, its importance and your contribution – how critical is the service that you are looking to provide. Remember that cost is only going to be one of the selection criteria that secures you the client – find out what other buying criteria is being used – is it quality, availability or something else – using your clients needs as a pricing factor is nothing new but shouldn’t be missed.

3/ Know your market
Your market and the competition that operate both represent pricing factors you should take account of. Knowing the relationship between price and demand is crucial in setting your strategy – bear in mind that there is likely to be a relationship between the two in that raising prices will slow demand but consider your margin – selling fewer items at a higher price might be represent an effective strategy – there might also be seasonal variables or demand profiles that need to be taken account of – your pricing should take account for this.

4/ Know your costs
Establish the base price for your service, ensure you know how much it costs you to produce your product – make sure you spend time adequately calculating your overheads and then consider what you need as profit – estimating the likely demand will then help you establish the right selling price – the fundamentals of knowing your base price will ensure you make a profit and help when it comes to negotiating with clients.

5/ Be flexible
Consider a range of pricing options – consider breaking the job down into steps with option payments if need be – consider performance driven pay – could your charge be tied to the performance of your customer once you have completed the job – remember that there are a variety of choices when it comes to charging and being flexible may help achieve a higher fees in the long term.