First-time entrepreneurs can have a lot of misconceptions about business. These miscalculations can rear their ugly heads at any point during an entrepreneur’s journey. One of the most harmful beliefs is that “affordable” messaging will yield a surge in clients and sales. It’s simply not true–especially in certain industries… specifically, service-based businesses.
Let’s look at why low prices aren’t always the answer and how you can transform limiting beliefs that hold you back in business.
Low prices can be a red flag
Service-based businesses, like coaching, agencies, and other professional or health services, are not commodities like physical goods, they are experiences. It makes sense to compare costs on things like dish sets and fidget spinners. However, when it comes to plastic surgery, therapy, transformational coaching, and other personalized experiences — the budget solution isn’t at the forefront.
As a matter of fact, if your services are priced too low, it can signal to ideal clients that you’re inexperienced or unskilled. Neither of those assumptions will inspire confidence and can lead to missed opportunities and lost sales.
Consider the contrast between Walmart and Tiffany’s. Both retailers sell engagement rings. However, Walmart’s rings are significantly less expensive than Tiffany’s. They’re also lower quality. You can purchase a warranty from Walmart for two years, while Tiffany’s rings come with a lifetime warranty. Not to mention the difference between the in-store experiences (e.g., champagne and dessert at Tiffany’s is a far cry from the crowded aisles at Walmart).
For many professional services, you will want your audience to associate your brand with high-level transformation, incredible service, and top-tier experiences. That starts with your brand and messaging, which is reinforced through your pricing strategy. If your brand and message align with the high-quality value you provide, and your pricing is too low, it signals confusion. That confusion can send customers straight into the arms of another expert who may not serve them as well as you.
Low prices can lead to burnout
Often, service-based business owners, especially coaches who want to make a big difference in the world, allow guilt to inform their pricing strategy. They believe if they want to help more people, then they need to price affordably. The problem with this approach is that these business owners end up trading their limited time and energy bandwidth for insufficient funds. When we think about high-ticket services, it can feel like we’re asking for a lot. The problem is how the messaging of benefits is framed.
For example, if you charge $10,000 for four months of coaching, that can sound like a lot. However, when you may spend three hours per week with each client. At 16 weeks, over four months of coaching, that rate yields $625 received per week (or $208 per hour). This looks good on the surface, but this math isn’t “mathing.” This is where service-based business owners get into trouble.
Like product-based businesses, service-based entrepreneurs need to deeply understand their cost per acquisition (CPA) for each client.
“How much time do you need to spend marketing to get a client, and what is your time worth?”
How much time do you need to spend marketing to get a client, and what is your time worth? When business owners price themselves too low, the labor associated with client acquisition puts them beneath minimum wage. This often leads to burnout and resentment, subconsciously not wanting clients, and creates a cash-starved business. None of this is good for a business owner or their clients.
If you find yourself falling into the low-pricing trap, it’s time to reorient your money mindset. Value-based higher pricing higher allows you to:
- better care for your body, mind, and spirit, which gives you the power to be fully present with your clients.
- invest in further education and skill development to be of greater service to your clients.
- get the rest your body and mind need so your time with clients is exciting and fulfilling, which helps you unlock your genius to serve clients on deeper levels.
- create more space to enjoy your life and increase your profit margins
Pricing services too low starves your business of high-quality clients and profit margins. Fortunately, you have the power to course correct or set the proper foundation from the beginning.
Juliana Garcia is a Latina online entrepreneur who has created a $2.5 million dollar business helping skilled coaches clarify their marketing message to attract premium clients. She’s pioneered a cutting-edge, client-centric approach that breaks the old-school marketing rules and focuses on selling through intimacy, integrity, strong mindset tools, and zero BS. Juliana worked on the movie launch of Think & Grow Rich: The Legacy; Napoleon Hill’s work had a strong influence on her approach. Juliana’s company helps coaches set new standards for what’s possible so they can create a rich, fulfilling, and sustainable business without burnout.
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