[OBO DIGEST] Price your way to a scalable business

Everything you need to know today about value-based pricing, staying competitive, boosting your margins and more

Online Business Owner • February 13, 2023

Today we’re covering the single greatest barrier to profitable scaling: pricing, or lack thereof.

How you price your goods and services not only affects your margins... It has a ripple effect across your entire business—even when you don’t feel it.

It’s a complicated topic, though—how do you make sense of all your costs, value delivered, market forces, and more...

And use it all to determine the right pricing for you?

There’s no one answer, but in today’s edition of The Digest, our aim is to give you practical solutions you can use to determine the ideal pricing for what you do.

Let’s dive in… 

Although before we do, don’t forget to share The Digest with your biz besties, clients, and friends so they too can be in the know about what’s happening in online business!

Enjoy,

The OnlineBusinessOwner.com Team

---

Simple pricing techniques to help you scale

How you price your services is intricately tied to your ability to scale profitably; it’s not enough to simply observe what others are doing and attempt to replicate it.

Often, those pricing models—while appearing to work on the surface—lead to incredibly unprofitable companies that are in the exact same position…

Looking to others to see “what works”.

Prices become standardized as everyone looks around to see what they should charge because everyone else is doing the same thing!

Buy in reality, price should be based on:

1. Your fixed costs + purchases and labor

2. The value you provide to the client or customer

3. What you want to charge

4. The time it takes you to fulfill (i.e. if you know a project will take you weeks to finish, account for the time you can’t spend on additional projects)

Your costs will expand as you grow, and that’s totally normal... though your prices must increase accordingly!

Instead of finding ways to cut corners so you can afford to charge competitively, focus on adding things none of your competitors offer.

Distinction is one of the biggest factors in commanding higher prices!

Put this into practice and you’ll be able to fairly charge far more in no time.

To ensure you set a pricing model that works for you:

1. Decide how much you want to charge and articulate what you need to offer to justify it; if you can’t deliver all of it, deliver the most you can at a higher price with significant margins.

2. If you want to take on a variety of projects, you can have a couple of different pricing models—just be sure to make them consistent with the value you provide and aim to make the majority of your revenue from high-value clients.

3. Systematize your offer and expand your team as necessary in order to scale; the less variance in the offer between clients, the easier it is to scale.

With more effective pricing comes a better business, so don’t shy away from this topic if you want long-term success and scalability!

---

Social Media News + Updates

📸 Instagram launches new Quiet Mode to help users combat social media-based anxiety
🐦 Twitter’s API is no longer free to access for developers, meaning many bots will stop operating on the platform
📌 Pinterest is up to 450 million active users, showing the lifestyle platform is far from dead
🐦 Twitter rolls back its decision to block free promotion of other other social platforms
📸 Instagram’s founders are launching a new social media app called Artifact, but this time they’re focused more on “media” than “social”

---

News + Happenings

How to price business services

Pricing goods is (relatively) straightforward—the accepted standard is a doubling in price every time the product exchanges hands.

Manufacturer, distributor, seller, etc… each company involved takes a little and the price jumps to allow for suitable margins until the product gets to the consumer.

But what about services, where the dominant expense is time?

You can look to competitors for a suitable answer… Though it’s unlikely they have the same team size, costs, positioning, marketing, etc. you do.

(if they do, it’s time to make some changes)

You can try cost-plus pricing and factor in the hourly rate of your team...

But this carries the risk of underselling your services and eliminating your margins.

The gold standard is and likely always will be value-based pricing, of course...

However, there’s an art to this and far more room for misunderstanding and error.

Factor in the way you price services (flat fee, hourly rate...) and it quickly becomes a mess—then you have to factor in labor, materials, overhead, and more while maintaining a fair margin!

It’s a difficult balance to achieve, and no matter how much digging you do, the answer often remains subjective.

Why this matters for online business

The way you price your services directly determines your ability to sustain your business and have enough profit left over to live comfortably and scale...

And your pricing is one of the biggest factors in how potential clients perceive your value against competitors.

It doesn’t have to be so complicated, though — Inc.com has a simple guide you can use to help determine the right pricing for you!

---

Want more customers? Increase your prices

Value isn’t just about the service you provide clients and how you deliver it.

Price is intricately tied to perceived value!

While there’s something to be said for not wanting the appearance of price gouging, low prices can damage your business beyond simply cutting into your margins.

Even if your prices are only slightly low, this sends a signal to clients of what you think you’re worth...

And they’ll rarely (if ever) value you above the price you set.

But how do you know when it’s time to raise your prices, and by how much?

Sunny Bonnell discovered her answer while growing her branding agency Motto.

She discovered her agency priced its services too low, so she decided to increase prices to be in line with competitors… 

Which ended up being the most dangerous position to be in.

Because when everyone uses the same prices, it’s easy to be seen as a commodity.

Especially when you’re new to the game.

Why this matters for online business

Determining how much you can fairly charge for your work allows you to take control of your business’s destiny.

By doing the uncomfortable work of putting a clear, definitive price tag on what you do, you can take on better projects at better rates...

And possibly even have more work coming to you than before.

You can check out Sunny’s story and see how to apply the same principles to your work over at Entrepreneur.com!

---

In Other News

💻 Tech stocks see a 5-week rise, the longest since November 2021.
🚫 New York City public schools ban ChatGPT from schools’ devices and networks.
🤖 Google opens its new AI tool, Bard, for testing in response to Microsoft’s partnership with OpenAI.

---

With that, another digest comes to a close. 

We hope you’ve found this edition both interesting and practically helpful.

If you follow the steps outlined above, you’ll be able to set better prices for your work and probably find a few spots where you haven’t been charging what you’re worth.

Now it’s time to change that!

The way your competitors price their goods and services should never be the dominant force behind the decisions you make.

By following what you’ve read in this issue, it won’t have to be!

Until next time ❤️

About The Author

---

You May Also Like…