With a product-based business, it is very easy to identify some of the costs that should be wrapped into the price that the customer pays so that a profit is made: wholesale cost of the product, shipping, handling, etc… With a service-based business, because the overhead is often seen as only the service provider’s time, it isn’t as clear what pricing should be for the client so that there is a profit at the end.
There is quote that I’ll paraphrase, “You are not paying for the hour. You are paying for my years of experience that allow me to perform my expertise.” But most service providers do not charge enough for their time to provide the service. On top of the true value of their time, service-providers are not recouping other costs that should be passed along to their clients in the pricing. Let’s talk about four considerations that should be wrapped into the price of your services.
Hardware/Software. Service-based businesses tend to use a lot of technology to provide their services. In fact, without the use of some technology, they could not provide the service seamlessly or at all. So it only makes sense that these costs pass through to clients. For example, Microsoft Office Suite, GSuite, video conferencing, scheduling platforms, project management systems, industry-specific software, data cloud storage, etc… Is any of this reflected in your pricing?
Fees. The more credentialed you have to be to provide your service, the more fees you are prone to have to pay. Some of the fees you are paying like licensing fees, professional fees, fees associated with security measures, etc… are stand-out elements that benefit the client more than if you did not have them. That means, if you are have them, you should say in your marketing and messaging that you have them AND you should charge more for having them. For example, if you are paying fees to house my business and personal data in more security cloud storage, like PCloud that can house data in Switzerland known for having the strictest data security measures, then clients are more reassured than those using Google Drive and the cost should be passed on to them.
Location. If you have a brick-and-mortar, then that overhead should be passed along to clients. The “better” the location (either more convenient or in high-end neighborhoods) the same service costs more than if located elsewhere. Easy peezy, but what of a home office? The increase in utility costs due to providing services from home is a consideration.
What next? Use the feedback to plan your next moves, the next round of doing. When redoing, you aren’t starting from the beginning. You are moving forward with more information. Strengthen the foundation of your process and build up using the feedback. And as you get better and better, have more and more results… do not forget to celebrate.
If you are having problems with revenue or any of these costs of doing business in your service-based industry, let’s talk. ShaCannon.info/talk