How to Price Your Services: A Proven Formula

  Learn several different pricing options including offering discounts to "reference" accounts to get your business rolling.



I’m Steve Davis and I want to talk about selling and pricing services. First you have to figure out who your target market is going to be and who the buyers are going to be. Once you’ve got that profile in place, you have to figure out what is their main pain that they’re going to be trying to solve.

Build a Personal Brand

Now, if people have a pain, they want to go to the expert in the field. So what you need to do if you’re a consultant, is to focus on building your personal brand as the expert in the field.

There ways to do that for example by writing articles for publications, whether it’s online or in print; or doing workshops. The workshops can’t be pitches; the articles can’t be pitches. They have to be directly addressing pain points of potential prospects and give enough information to say ‘geez I hadn’t thought about that’, but not enough information for them to actually solve their problem.

So if it peaks their interest, who are they going to call? The expert. And that’s who you want to be when building your personal brand.

Pricing Your Products and Services

There are different ways you can price your product or service – hourly, on a monthly retainer basis, or per project basis.

Corporations typically like the deal on an hourly basis, most small to midsize firms are all over the place – hourly retainer and or project basis. Basically, your hourly rate will be used to set all of those.

Now, you might also want to have a success fee. Basically by having success fee, you can reduce your hourly rate or your retainer or project basis, but it gives you back end potential.

You may also want to offer a discount based on the length of a contract. So if you have a retainer for companies where you’re working with them six months to year, that’s time that you don’t have to go out and find new business. That’s a marketing effort that you don’t have to put in place, because you have this income coming in. So it might be worthwhile for you to actually reduce your hourly or retainer, because it’s a year-long contract and you’re not going to have those additional expenditures.

Get Some Reference Accounts

Once you’ve built your personal brand and you’re ready to go out and start selling your services, the key is getting reference accounts. Any target market you deal with, you want at least a half a dozen reference accounts, because people want to know how you’re going to work, how you’re going to be to work with, what your value was, did the contract work out. So you want to basically get your first six reference accounts, treat them well under promise, over deliver, because you want them happy, because they are going to be your referrals to better clients in the future.

Offer Free Consulting to Help Build Your Brand

When you’re building your personal brand, you may also want to do free consulting. Now when I talk to a client the first time, I give them half an hour to an hour just off the bat, because I need to find out a little bit about their business. I need to understand what their problem is, what their business is, is there a fit, can I really work with them, can I really offer them a service that is going to fulfill their needs?

And I do office hours, as a freebie, in several startup vehicles here in the Boston area. But that helps build my personal brand, because I have these major institutions basically saying ‘Steve’s an expert in business development, sales, and operations for startups’. So it helps build my personal brand as well.

Review Your Pricing Model

Before you’ve had these reference accounts, to get them on board, you may offer them a discount, but don’t be afraid when you’re no longer looking for reference accounts of charging full dollar.
The only way that you’re really going to find out if your pricing model is correct is getting out and starting to make calls to prospects and actually working with your pricing structure. It’s always easy to go down in price, it’s almost impossible to go up in price.

If people have an understanding that this is how much you charge, it’s $50 an hour, that’s what you’re going to wind up getting. If you try to charge more than that, you’re going to get a lot of pushback because people know, in the industry, information gets out and shared that you’ve been selling your services at a much cheaper rate in the future.

So make sure that you charge your pricing structure as you see fit to make a living. You want to under promise and over deliver, keep them well, keep them close, keep them happy, because there actually provide the references to bigger revenue coming in.

About Steve Davis

Stephen Davis, Principal and Founder of The CXO Advisory Group provides interim COO and VP Sales and Marketing services focused on improving the performance and profitability of emerging and established companies. Steve has worked with companies in North America, Europe and Asia to assist them in establishing US market operations, strategic alliances, joint ventures, business development and sales management. He has assisted clients with due diligence and preparation for venture financing.

Steve has more than 30 years experience as a senior executive, including COO and CMO with P&L responsibility in the computer, software, consumer electronics and Internet industries. Steve has successfully built, managed, and restructured numerous sales and marketing organizations. He has successfully developed new markets and has introduced over 300 new products into various industries.

Steve is an industry pioneer whose visionary marketing and sales strategies were instrumental in two of the PC industry milestone products. Among his many successes he was responsible for introducing ATARI’s home computer and Corvus OMNINET, the PC industry’s first local area network.

In 1989, Steve founded the Davis Management Group, a company whose proprietary sales management and marketing methodology promoted growth in client’s revenue and profitability. He is an executive strategist and problem solver who conceives, plans and implements new business practices to produce measurable improvements in market position, revenues and profits. Previously, Steve spent 15 years in senior level positions at major corporations including Qualogy, Corvus Systems, Atari, IBM and GE.

Steve is active with many groups that support entrepreneurs. He is a frequent speaker and prolific writer on marketing and sales topics. Davis has given speeches at some of the leading business and technology forums and his articles have appeared in a variety of engineering and IT business publications.