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It would be considered by most ‘natural’ that a professional should aim to price their services at a ‘fair’ price; perhaps a little like Goldilocks not too high, not too low. The truth is that who you ask for advice in this area could determine the answer to the question.

Do I need to discount my fees to get clients?

Ask an entrepreneur who has been in business and who may have sold one or two businesses and they will says: ‘never sell yourself too cheaply.’ Ask another, moderately successful practitioners and they’ll say ‘Don’t charge too high, people won’t pay it.’ At a recent conference of coaches I met a coach who specialized in coaching chief executives. He said he would not get any customers if he charged under $1,000 an hour.They would not accept that I had the high level credentials if I charged less than a rate commensurate with the potential value of the service. It is perfectly ‘natural’ to expect the potential client to question your ‘value proposition’.

But do note:

* Discounting inevitably gives the pricing power to the buyer. That may be valid if you feel you have no power in the negotiating but this should not be a presumption upfront.

* Discounting inevitably leads to a downward spiral in fee income. Once established that you are prepared to discount, it is difficult to claw back to the base level and even more difficult to position one as a ‘premier’ professional.

The ‘natural’ expectation here is that good professionals should be appropriately compensated.

It is the biggest trap is for aspiring consultants and freelancers and the response is unanimous: don’t under-price your services. Too many set off to win business and price themselves with urgency as the driver; inevitably creating the impression that they are simply not up to the job. My experience based on more than 10 years of consulting and freelancing is to build ‘posture’ not the physical body type – and to adopt an attitude of ‘can do’. It’s more important to project an image that that you can add value to the client. Your price is not negotiable because you have the confidence that will deliver the value expected from the engagement.

Easier said than done of course. Most professionals will be limited by their track record and the prevailing ‘market price’ that competitors may have adopted.

Following the competition can have its pitfalls

The first pitfall is that you cannot assume the competitor’s price is a reasonable price. It may simply be a loss-leader. In other words the competing firm may need to win the project in order to win future projects. This may be mandated in the price. Competitors with deep pockets may be able to withstand such deals and may in fact also be negotiating from alliance deals or affiliate deals that compensate them for a low bid.

Cost analysis

In making something, it is relatively easy to cost a product. In the world of consultants, coaches and freelancers, such benchmarks are almost always of a ‘virtual’ variety. Indeed when most work these days is delivered across the Internet, or by phone, transaction costs are effectively removed. Delivery costs aside, there still remains the need to account for overheads, communications costs and the non-costed component of a service (usually referred to as ‘non billable hours’). This underlines the need to have what is referred to as a sound value proposition.

The value proposition

Ask Zig Ziegler or any salesperson worth their salt and they will tell you the way to sell yourself or your services is to sell the benefits to the prospect. There is no shortcut here. In fact it’s the methods which will secure the maximum fee.

Moreover, price is only one part of the customer satisfaction outcome. Correct pricing is as much about perception and customer satisfaction as it is about costly analysis. It’s important to know your customer satisfaction levels – dissatisfied customers won’t pay any price.

How to price your services

There are a number of methods for determining the price of your services. Let’s be clear: you want to build relationships and optimal profits. Here are some different points to consider and some pricing approaches with merits and pitfalls.

* Many coaches, freelancers and consultants do not correctly factor in all the running costs of running a consultancy. Factor in overheads, depreciation of furniture and computer and telecommunications equipment as well as accounting and administration costs.

* Home-based coaches, freelancers and consultants mistakenly price them less as ‘home-based’ operators thus disenfranchising potential clients who want to deal with full service firms. Establish a professional office (shared is fine).

* Too many consultants and freelancers become ‘small’ in their thinking and translate this into charging what they believe the job is worth and hence undercharge. Establish your value proposition ( for example: ‘In 12 months we will have implemented a new prospecting system that will generate 100 more leads than you have now’).

* Use the ‘money back guarantee’ approach. ‘If you are dissatisfied with the service, after three months we will refund the fees.’