How do you set price

Most motels charge a set price for a full night of accommodation. Any motel that charges by the hour usually means one thing. I imagine they’re booking the time for a romance reality TV show that they’re embarrassed to watch at home. Shameful.

Surprisingly, we ask how much someone charges when we book a service. Often we hear an hourly rate and decide if we think it’s too expensive. Isn’t it crazy that for so many services, we don’t find out how much the job will cost total? Saving money per hour makes no sense, if it takes someone twice as long to do the job.

Never set price by the hour

Herein lies the challenge when you set prices for your own services. Naturally, most people work out what they are worth per hour. First of all, no one actually cares what you are worth per hour. They want to know what value you will bring and what it is going to cost them to solve their problem.

Sabri Suby talks about how much to charge as a consultant

Conflicts of hourly pricing

When you charge by the hour, there are always conflicts. From your point of view, you don’t want to sell yourself short. After all, when you run your own business, you need to make anough money to cover the hours you are not working. Travel between jobs, prospecting, having sales conversations, invoicing clients and collecting payments. All “down time” that you don’t get paid for.

Clients don’t care what you think you’re worth

From your client’s point of view, they have a problem that needs solving. They don’t care what you think you’re worth per hour. They care if you can solve their problem in a cost effective manner. No matter who they are, they also have a budget. They don’t want to write you a blank cheque, which is effectively what you are asking them to do when you provide an hourly rate without an upfront price for completion.

Efficiency kills the per hour model

As a service provider, you may start to develop systems. You might find better methods and faster ways to solve problems. When you charge by the hour, that effectively means you do that same job, faster, for less money. When you are not charging by the hour, it makes sense for your to find ways to work smarter, not harder. It’s difficult to grow your business when finding more efficient methods does not help you make more money.

How your clients compare your offer

Let’s say, as a Marketing Professional, I decide my time is worth $200 per hour. I can create a strategic marketing plan for a client and $200 per hour would be reasonable. But what if that same client wants me to create 10 social media posts, following a plan she already has? Given I’m now competing against people who are qualified to offer a similar solution, in weeks, not years. Chances are if I do charge $200 an hour for that service, my client may not see a great value benefit. I might think I’m worth that much but no one is going to pay me that for mowing their lawn or performing another service that doesn’t require my qualifications.

Alternative pricing methods

Guarantee pricing

I know a hairdresser who promotes themselves as a “no frills” option, yet they charge $10 more per cut than most barbers. Why? Because they have a 30 day money back guarantee. You can go back and get your haircut fixed if you don’t like it. I’m willing to bet nearly no one ever does back. Do you offer a satisfaction guarantee? If so, do you set price with that in mind? Peace of mind is worth paying a premium, for some clients.

Lifetime deals

App Sumo sells software packages bundled up into lifetime deals. Some luxury products, including watches, come with a lifetime warranty. One of the most interesting I noticed was was when then college student, Alex Tew, started the Million Dollar Homepage. He sold One million pixels at $1 each. Once an advertiser paid, they owned these pixels (and could publish on them) for a lifetime. Does your service have the equivalent of a lifetime deal? How much would it cost for someone to own lifetime access to your services? Of course, this might not make sense for every business but it’s food for thought when you set prices.

“Productise” your service

Imagine if there is a physical product that can solve part of your client’s problem, for which you normally provide a service for. You could make and sell the product for a set price, without sacrificing your time. What service do you provide that could be turned into a product? Perhaps you can create a tool, video course, a cheat guide, planning kit or resource to sell. Products can scale because they don’t require massive time investment. Alternatively, you can give it away as a lead magnet, to attract new potential clients.

Set price in tiers

Think of your core product or service and what you need to charge for a complete solution. You might be asking clients to make a major purchase decision if your service is likely to be priced at thousands of dollars or there is a lot of risk involved. Either way, you might break down your problem into smaller mini problems and create a low cost solution to solve one of those. You get a small income from solving this problem but, more importantly, you are winning your prospect’s trust.

Freemium pricing model

An idea you can borrow from the software industry is the freemium model. Start by asking yourself, “If there was a free version of my product or service, what would it look like?” Strip away everything that costs you more time or money than it’s worth. People using the free version of your offer become qualified sales leads. They might need to pay for an upgrade to “unlock” special features. Demonstrating your value through a freemium product might allow you to set price higher for the premium version of your product.

Product ladders and add ons

Remember we talked about pricing in tiers? In addition to opportunities to attract new clients and earn trust by solving mini problems, there’s also an opportunity to increase the value of each sale through add on products or services. You have already won the client over with your witty charm. Why not let them know what else you can do for them and increase the value of each sale? Turns out there is a service version of, “Would you like fries with that?” Even better if that’s a subscription (see below).

Solution and outcome pricing

Even consultants can charge for outcomes, although you may believe your outcomes are less tangible. Whatever you plan to consult on, fix, teach to your client or solve, chances are you can articulate that by getting clear about your outcomes. An outcome is valuable if it addresses a specific need or pain point. When a client has a pressing problem, they’re happy to pay for a solution. That’s a better way to set price than telling people “you need to pay for my time”.


Is there a club, loyalty or rewards program that can increase the value of what you offer? People like to belong to something. You can look at almost any product or industry and chances are someone has created a club or membership program. What would a paid version of that membership look like for your business? What would it entitle your clients to? Remember, not everyone who pays for a membership will cost you time. Consider gym memberships, where people join for 12 months leading into summer and often don’t return to workout after 1-2 months. Gyms still get paid.

Subscriptions and recurring revenue

Selling takes time. Subscription services let you sell once and continue collecting payments until a client cancels. Think about subscriptions in your own life. Music services, streaming movies, security monitoring, smartphone apps and websites, just to name a few. How many do you keep running because you might use them one day, they don’t cost too much or you couldn’t be bothered going through the hassle of turning them off? Subscriptions provide a base recurring revenue for service providers. In other words, you start every month with income before you have ever sold anything.

Don’t set price by the hour

Most service providers know the old accounting model of calculating what your time is worth, so the hourly rate is an easy next step. You can set yourself apart and get off the hourly rate treadmill by getting creative about how you set price for your services. No one cares what an hour of your time is worth, so they don’t want to pay for that. Clients want a set price to solve their problem.

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