I’m going to make a bold statement, but just bear with me.
Set your prices for your product or service before you build it. You heard correctly: Set prices before your product or service exists.
Now, let’s unpack why and how…
“How much does it cost?” is the first question anyone is going to ask you when you launch your product or service. Now, you might be wondering, “How do I develop my pricing?” There are some really great resources out there on this topic. I recently stumbled onto a really great podcast episode of the Side Hustle School podcast with Chris Guillebeau. The 15-minute episode, released July 30, 2017, is called Pricing Your Product or Service. Here are some highlights from the podcast and insights from my own experiences to get you started on structuring your pricing:
Setting your pricing.
The first place to start in figuring out what you should charge for your product or service is finding out what your competitors are charging. Are you aiming to charge more than them or less? With that information, you will have the ability to have a confident answer to pricing questions you’ll be asked when you know what your competitors charge.
Insider tip: If you want to know what your competitors are charging, just fill out an inquiry form on one of your competitor’s websites using an email address you don’t often use. Ask them for their prices and learn more about their services.
The importance of pricing.
The reason pricing is one of the first important decisions you can make boils down to time — as you deliver your product for free, you discover the amount of time it takes to deliver or make that product or service. By this point, you should have a pretty good idea how much time and resources it takes to pull off your business or service. Once you have this general idea, you can compare how much energy and effort you put into production and if it aligns with how much money you can make after putting the time in. Think about it: Making $1,000 on 100 hours puts you at $10 an hour. That’s not very compelling. However, making $1,000 on five hours of work is a different story altogether.
Remember: Sometimes, just a simple understanding of pricing not only helps you serve the prospective customers well, but it helps you determine really early on what makes sense from a time and financial standpoint.