Oh pricing. It's such a challenge for many entrepreneurs.
On the one hand, too many online entrepreneurs—especially women—charge prices that are too low. On the other hand, many make the mistake of raising their prices too fast, so that they run out of potential clients. In this post, I'll tell you how you can raise your prices step-by-step and grow your business.
Like many other coaches, I started my business by offering one-hour coaching sessions. I had a decade of experience running other people's businesses, and an MBA from a top business school, and still, I struggled with my pricing as a business coach.
Pricing Lesson #1: Charge what you would pay for
I decided to start with $180 an hour and prove my value. I picked $180 an hour because that was the rate I had seen professionals in Switzerland charge by the hour.
I knew my colleagues from London Business School who were working for the top consulting firms in London were charging about $1,000 an hour. But I didn't believe I could charge that rate because my ideal clients were solo entrepreneurs. So I picked the rate that I felt I would be willing to pay for something similar myself.
Since I really wanted to make sure that people got the most out of that one-hour coaching session, I prepared for an hour by reading my client's intake form, visiting their website and social media sites and preparing notes and questions. After the session, I would spend another hour making notes about our call so I could send my client a summary.
When I did the math, I realized that at this rate, I was actually only earning $60 an hour. But I was still unsure about raising my prices. I was worried that the entrepreneurs I wanted to help couldn't afford higher prices. Turns out, I was wrong.
After selling several of my one-hour coaching sessions, I decided to give my first clients a 30-minute follow-up call to see if I could help them more with their business and potentially sell them another session.
Get Client Feedback
One of my clients, Malika, also a graduate of a top business school in the US, told me that she'd been testing me as a potential business coach, and that she'd also bought one-hour coaching sessions from three other business coaches.
She shared that not only had I been the cheapest business coach at only $180 for one hour, I had given her the most value. The other coaches had charged $250, $300 and $400 and she did not get as much value from them as she had with me.
Based on her experience with me, Malika thought I should increase my price. I was honestly shocked when she suggested my new price should be $350 an hour.
A few months later, when about 10 people had already booked at $180, I finally took her advice and raised my price to $350. I immediately had two clients book a call with me at my new rate.
Not only did I raise my prices, I also learned to take less time to prepare for my calls. Instead of spending time after each call summarizing our conversation, I sent my clients a copy of my notes. I wasn't reducing the value of our sessions because these notes were valuable and helpful and directly related to what we went over.
I was now earning $350 an hour instead of $60.
Today, I no longer offer one-hour coaching sessions. The last time somebody booked one hour with me, they paid $750, and my official rate is now $1000 if I would offer it to anyone.
Pricing Lesson #2: Raise your prices once you've tested your initial rate
Raise your prices when enough people have booked with you at your first rate.
If no one is booking at your current price and you're uncomfortable or unhappy with the price point, this is not a good enough reason to raise your price.
You need to be able to sell at a lower price as well. You can see that Malika, someone from a top business school who was willing and able to spend the money on a business coach, still hired someone for $180.
When to increase your rates
There is a misconception that if your rates are too low, nobody will buy from you. Of course if you've been business for a while and you are still at low rates, there is a problem. But when you're at the beginning stages, I would say prove your value first.
I didn't stay long at $180. I had not built a big list. I was just testing out my prices. Once I had a bigger list and more people looking at my website and checking out my prices, my prices were already at $500 an hour, which I think is quite common for a business coach.
If nobody had actually booked me at $180, they wouldn't likely buy at $350 was my thinking. Doubling your rates might be too much for you, so instead of thinking how you can increase your rates that way, start with 10% after every 10 bookings. This is a less risky way of increasing your prices.
Don't just double your prices because I did. Make sure you have potential clients willing to pay those prices that you have first, and, as I mentioned before, only charge prices you're willing to pay yourself.
When I raised my one-hour coaching session to $750, I booked, at the same time, a call with a well-known copywriter who charged the same rate. I felt good about paying $750 for copywriting advice from this copywriter, and I wanted people to feel the same way about booking my coaching services for $750. Shortly after I raised the price, a person booked a call with me, and that confirmed to me again, that the price was right.
Pricing Lesson #3: Offer longer coaching packages
Offering one-hour coaching sessions is not sustainable, and it's not something I'd advise you to do for a long time. But in the beginning of your business, it is something you can test. It may help you even to fill up group coaching programs if you have them.
Selling one hour is almost as much work as selling a package of six or twelve coaching sessions. So it makes much more sense to sell a package, rather than hours. Instead of earning $350 for one hour, I started to charge $1,500 for six sessions. Once I had booked five or six clients for the new six session package, I started to offer twelve sessions for $3,000, which was basically doubling the time and not really increasing my prices.
This meant that my hourly rate with packages came down to about $250. While this was lower than the rate I had for a single hour with me, it makes sense to offer a little discount to incentivize people to book your packages.
Malika was actually one of the first to book a three-month package with me. She told me that she wanted to book it before I would raise my prices, and eventually stopped working one-on-one with clients.
Move away from one-on-one sessions
I had been thinking about raising my prices, as I was getting fully booked with my first coaching packages, but her comment about not offering one-on-one anymore was not on my radar at all. At that point, I did not imagine that I would stop working one-on-one any time soon. But wouldn't you know it, two years later, I didn't work one-on-one anymore, and the last client that booked a 12-session coaching package with me paid $7,000, which is about $580 per session.
When you have longer packages, you don't need to offer necessarily more sessions, but you give the client more time to implement, and there is value in that, that they are also willing to pay for. With essentially longer access to you, possibly over email, or you thinking about your client and kind of holding their hand, even if it's not about being on the call all the time with them. That's why you can increase your prices for longer programs although the number of sessions stay the same.
Working one-on-one with clients is very rewarding, but not scalable. Offering group programs and online course is a natural next step when you're fully booked with one-on-one clients and want to scale further.
Pricing Lesson #4: Recognize your own value
I started offering group coaching programs after doing 1-1 coaching for a year, and I've now run more than 30 mastermind groups.
Malika came back as a client and joined one of my group programs. This time, she paid $3,000 for 12 group coaching sessions, instead of $3,000 for 12 one-on-one sessions, which is 4x increase when you look at the time she actually gets with me 1-1. When I did one-on-one my clients got a full 60-minute coaching call, but in the mastermind groups I ran a client typically gets 15 minutes on the hot seat.
I must admit I was a bit surprised when Malika came back as a mastermind client, and was ready to pay four times what she had paid before. But this just proves the point that there are clients out there that see your value. They will go on this journey with you and they're willing to pay more when you raise your prices because they understand what you can do and the value you provide.
My hourly rate in group programs has gone from $750 to $3,000.
Now, I'm only calculating these sessions and not all the time that I also spend in Facebook groups so you get an idea of approximately how much I've been able to increase my rates. I sell out all my group programs, so I have not just increased the rates for the sake of increasing the rates.
How Raising Your Prices Also Helps Your Clients
When I see the success of my clients, I know that a lot of that success is due to me helping them owning their own value and being able to raise their own prices. That's why they come back. About 50% of my group coaching and mastermind clients are repeat clients, and that's because they see value in working with me.
When I raise my prices and own my value, I'm reflecting my mindset to my clients. They are seeing what's possible for them when they see that I'm doing it successfully.
It's important to understand that it's not about comparison. When somebody tells me, “Oh, somebody else is charging a higher price. I should be charging a higher price, too,” I don't agree with that.
You should look at your rates and see how you can slowly start to increase your rates as you are delivering continuous value to your clients. They'll give you testimonials where you feel, “Hey, this is worth so much, why am I charging so little?” Then you can increase your prices.
It's all About Confidence
Charging prices is not just about comparing yourself to other people and what's out there, it's actually a lot more about you. It's about confidence. I've noticed how my confidence in my pricing has grown over time. Now, when I charge $25,000 for my VIP Mastermind, I can state that price without blinking an eye.
My programs sell out because people get a multiple return on their investment. When you can earn $100,000 more in your business, wouldn't you be willing to pay $10,000 or $20,000 for that? Yes. Of course, you would. So that makes absolute sense for you as a coach, consultant, or trainer to look at the value your clients get.
If you're not a business or online marketing coach and your coaching is not about helping your clients make more money, you're helping your clients have more confidence, and confidence, that's key in raising your prices and knowing your worth.
It's only when you're confident in your own abilities that you can say to someone, “My prices have gone up 20%. These are now my rates.” The client is not going to doubt for a second that these are the rates that they need to pay in order to work with you.
So when are you going to increase your prices?
If you’d like an audio version of this post, check out the podcast episode here.