How to Determine The Price For Your Business/Service:
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How To Price Your Consulting Services
One of the most challenging aspects to starting a consulting business is determining how much to charge for your consulting services.
When businesses under-price their product, this can be extremely detrimental to their bottom line and reputation.
Often times, businesses under-price their products to drive demand and volume, but that last thing you want is for customers to view your product/service as "cheap." Additionally, this can have a big impact on the type of customer you attract, which can be difficult to recover from.
On the other hand, when businesses over-price, this tends to be just as damaging to the business.
When customers buy, it's likely that they will explore the internet and look at other competitors to ensure they're getting the best value + deal. This is why it's so important that you research your competition and understand where you land in the marketplace.
Here are some factors to consider when pricing your product:
Understand your customer
It's important that out of the gates, you identify the type of customer you want to attract and how much they're willing to pay for your service. One great way to do this is by surveying your customers. Here are some important items you'll want to takeaway:
- Customer demographic: Age, gender, location, etc.
- Buying habits of your customer: What they buy + when they buy
- Level of price sensitivity with your customer
All of these segments will help you identify the type of customer you're attracting and how to price your product accordingly.
Understand your costs
When pricing your consulting services, it's critical that you first identify all of your costs and consequently mark up your consulting services so you can factor in a profit.
The actual cost of your consulting services may include things like:
- The actual cost to make the product (ie. raw materials, supplies, manufacturer).
- Shipping + overhead fees
- Operating costs to run your business
You may want to consider creating a spreadsheet with every single expense involved in operating/owning your business. This will give you an idea as to what you need to generate in order to at the very least, break-even and will help you price your products to factor in a profit.
Create revenue goals
When determining the price of your consulting services, you'll want to create goals for revenue + how much profit you want your consulting business to make.
This process is simpler than you may think:
- Think about your breakeven cost (by completing the above step).
- Create a revenue goal based on your break-even cost
- Evaluate the # of items you plan to sell in a given period (make sure this is a realistic number)
- Divide your revenue goal by the number of items you plan to sell
This figure will help determine your estimated price per product in order to meet your revenue goals.
Evaluate your competition
The last piece in determining how to price your consulting services is by simply looking at your competition.
The best way to do this is by finding like-minded businesses that offer product(s) with similar perceived value. Then, you can compare prices of the different businesses and determine where your consulting services fits best in the marketplace.
All of these factors play an equal part in pricing your consulting services, so it's important you evaluate each one individually to come up with an accurate price that will help optimize your business from the start.
More Tips On Pricing Your Consulting Services
Lauren Costanza, founder of Bluminary provides us with a detailed spreadsheet of all of her costs associated with running her business:
I knew this would be a self-funded adventure, and I set aside $3,000. During the first three months, I had a detailed spreadsheet where I tracked where the money was going and what was going toward products versus researching and developing new products.
The spreadsheets involved columns and rows of numbers to craft a budget and gain an understanding of how much would need to be invested at each stage of the process - from gathering supplies to building a website, and shipping materials.
Thanks for reading. We wish you success in your business endeavors.
Examples of a successful consulting business
kalaboukis from San Jose, CA, USA started hellofuture over 10 years ago, a consulting business.
- Revenue: $293,220/ month
- Founders: 2
- Employees: 2
- Location: San Jose, CA, USA
My name is Kalaboukis, I am a futurist and innovator. Over my career, I’ve worked with both major corporations and startups to futurize their enterprise, and envision, create, build and ship great, profitable new products.
I help humans and companies to forge their ideal future by teaching them to embrace the future instead of fear it. I do this via creating tools, workshops and educational materials, and personal or group coaching.
I’ve been in business for around 10 years, and have built a practice that works with both major corporations and startups in the technology, financial services, and retail space, with revenues around $293k per month. I’m named inventor on 122 patents and cited on 1181 patents in the internet, social networking, and fintech space, plus I’ve authored several books on innovation and the future and blogs and podcast at thinkfuture.com
Consulting Success® ($1.2M/year)
Michael Zipursky from Vancouver, British Columbia, Canada started Consulting Success® about 12 years ago, a consulting business.
- Revenue: $100,000/ month
- Founders: 2
- Employees: 3
- Location: Vancouver, British Columbia, Canada
My name is Michael Zipursky, and I’m the founder & CEO of Consulting Success®. We help consultants optimize their consulting business. That means helping them improve their service offerings, pricing, marketing, messaging, lead generation, and more.
We have two flagship products:
- Momentum: our course for new consultants who are looking to transition from the corporate world to starting and growing their own consulting business.
Xena Intelligence by Parzenn Partners ($240K/year)
Akhil Suresh Nair from City of Westminster, England, United Kingdom started Xena Intelligence by Parzenn Partners over 3 years ago, a consulting business.
- Revenue: $20,000/ month
- Founders: 3
- Employees: 0
- Location: City of Westminster, England, United Kingdom
Hey guys! I am Akhil Nair, the co-founder of Parzenn Partners. We are a management consulting firm focused on the small and mid-sized businesses.
Along with my co-founder Dhvanish ‘Danny’ Shah, we started off a couple of years ago by taking up marketing and operations projects with small businesses in the Greater Boston area. With the vision of helping out many more SMEs across the US, we started working on building a tech platform which could automate a lot of data analytics through machine learning and AI.
Our aim was to provide free basic business assessment tools to be made available to all business owners and entrepreneurs across the country since they do not have the resources to hire consultants from any of the large consulting firms but are in real need of support.
Liz Illg ($0/year)
Liz Illg from Phoenix, AZ, USA started Liz Illg over 2 years ago, a consulting business.
- Revenue: $0/ month
- Founders: 1
- Employees: 2
- Location: Phoenix, AZ, USA
Early on in my entrepreneurship, I learned that I needed help if I wanted to be a brand visionary. I couldn't do all of the daily duties while still being the dreamer and strategist for my business so I became the systems and documentation expert.
Once I was able to effectively train my team members to tackle the daily tasks, I stepped into my dream role and became the visionary. Now, with the systems we created, I’m able to focus my energy and brainpower on epic launches.
Before I started my first business, Puff & Fluff Grooming and Pet Sitting in Phoenix, Arizona, I had a very successful career in corporate sales. I felt like I was called to do something for myself and to start a business in my community. I bought my first location when I was 26 and now, I’ve grown that business to six locations.
Since I was a little girl, I always had big ideas and when I became an entrepreneur, I was able to turn my ideas into profitable businesses. I graduated with a Master’s Degree in Educational Leadership and a Bachelor’s Degree in Business. My studies did prepare me for much of the work I would be doing in my consulting career but much of my business experience came from boots on the groundwork while growing my company.
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