For Starters #40: Four Pricing Principles for Solopreneurs
Two that are not about you. Two that are.
#1. Price to Your Customer’s Perceived Value, Not Your Costs
In most B2B solopreneur businesses and most B2B software businesses the costs to deliver are ridiculously low. It's mostly people's time. This is why it's common for SaaS and professional services firms to have 40-60% margins. No, not all businesses are able to command those margins (food, most anything B2C).
I've hade multiple conversations this summer that have started with, "Talk to them, I'd pay them more if they charged me. But I can't ask my manager to expense something this low." or, "a client just laughed at my rate and said, 'oh, I'll just pay you double that'."
Underchanging is not uncommon out of the gate - simply because the founder doesn't yet know how to think about their value to a B2B customer.
One question to ask yourself:
If I multiplied this price by 20x would it still seem like a reasonable price compared against other operational costs they have? 30x? Maybe just 10x?
If yes, you’ve got plenty of headroom.
It's rare, but their perceived value could be well below your costs. In that case, you need to consider the offering may need new marketing, new packaging, or simply be shuttered.
#2. Articulate Value in Your Customers Language, Not Yours
Similarly, customers don't care about your internal processes. They care about how the results from those processes will make substantial progress on their goals. This means your proposals, your marketing materials, the descriptions of your offerings need to be written from their perspective. Not yours. Think outputs rather than inputs.
It's easy to fall into articulating value in your language - I found myself doing it as recently as last week. In drafting a proposal, I was so caught up in thinking through my own delivery process, it took a trusted friend to point out I had yet to articulate value to my prospect. After smacking my own head, I rewrote it - and like magic all the cruft evaporated.
Even well established firms are guilty of this. Pull up nearly any /pricing page and you'll likely see technical specifications, features, or processes. All of those things mean the potential buyer must work to translate those terms into their own benefits.
#3. Revisit Pricing Every Quarter If Not Every Customer
The world is continually changing.
As a solopreneur or small team, it's highly unlikely you're delivering exactly the same value to exactly the same customer time after time after time. Yes, keeping pricing static means one less thing to think about, but it also means risking not looking credible to new clients or not keeping up with the market expectations.
This is why I advise scheduling a Quarterly Price and Value Review session.
Quarterly is usually enough time to compile at least 10 won and lost deals to review in a structured, objective manner. This quarterly feedback loop is best combined with a per-deal feedback loop where we at least consider revising pricing for each new customer engagement.
My founders and business owners hesitate to ever revisit pricing out of concern for how it will impact existing clients (this can be easily navigated around).
However, this week a founder told me a story of how a mentor challenged him to increase his prices 10%, just cuz.
He did, fully expecting pushback from existing customers.
None did.
#4. Continually Tighten Your Niche
Under every rock is an entire universe.
As a solopreneur or small team - you don't need that many engagements to be profitable. Maybe a dozen or two over a year. This means you can really focus - uncomfortably narrowly in defining your ideal customer. Counterintuitively, the more narrowly you define your niche - and hold to it - the more of the right customers will find you, and you'll likely be surprised just how big the niche is. Additionaly, specializing in a specific niche makes the work easier because you can more easily productize your offerings and see patterns for new offerings specfic to this niche.
This is why in my 1-sentence pitch requires two adjectives to describe the target business.
And a target metaphor is apt here, targets are not binary - they're a spectrum. Your niche is the bullseye. Prospects will land on the target but outside the bullseye. You then get to determine if you shift the bullseye or not. Over time, the bullseye will likely get smaller and migrate around the target. That's the amazing thing about your business.
If you're struggling with applying these principles to your business, I've opened up a few more end-of-year $495 SoloPrice slots..
The time between now and New Years is the perfect time to get your pricing in order.