How much should I charge my customers?
This is an important topic and one that I like to talk about a lot.
Today, we will discuss how much to charge your customers and how much should your profit margins be.
In my experience the absolute number 1 thing that determines how much you should charge your customers is value.
If the value expected is met after the service is received, hardly ever will a customer have an issue.
Does this mean I should ignore what everyone else is charging?
In my opinion, yes you should, because you don’t know the types of customers that are buying from other services.
Your goal is to learn about your customer and give them everything that they want.
1: Figure out what marketing platform you are focusing on first.
For example: If your customers are coming from Craigslist, your audience will be a lot different from folks that are coming from Yelp or even Angie’s List.
One important and advanced tip (especially for those on a small budget) to consider when picking your first platform:
Find a platform that is new, has a lot a steady increase in traffic month to month and has little competition, yet enough to prove that it is going to work for you and your business.
If one person on that platform is growing their review base at a regular pace (1 review per week for example), while everyone else is not, that is an indicator that something is working for that person.
Finding a secret gem, meaning an untapped platform will allow you to acquire your customers at almost no cost because your competition was not yet sold on the idea of that platform.
After some time, the platform will grow and you will get ahead, to the point that no one will be able to catch up to you as long as you are pushing your business to new heights.
This strategy requires patience because until that platform grows, you won’t see a consistent flow of customers.
Your goal is to grow with that platform so that by the time your competitors find out about it, you are already too far ahead, taking away all the market share.
Later you can use the money you earned from that platform to look for new ones and/or expand your business into new locations.
2. Build a service or a package for that customer.
Now that you found your platform, you will want to learn everything you can about the audience that goes and uses that platform.
Remember, every platform can be different and you should tailor your service specifically to that platform (later you can start to branch out).
For example, one platform might have customers who are willing to pay only $60 for your service (Craigslist), while a different platform might have users who will pay $100 for the same exact service (Yelp).
This is the exact information that you want to learn before you start setting up prices on your website.
Build your website to support that platform ONLY.
Later, once you start to branch out, you can tailor to new platforms by building landing pages, offering coupons, etc.
For now, all your focus should be on one platform.
3. Figure out a way to sell the service
Often times, people will start marketing their product or service and the outcome is not a satisfying one.
This is not necessarily a pricing issue.
Selling your service or product is an art, a certain skill that you learn over time.
It is a combination of many things and it all starts from the very moment you start brainstorming your business.
When selling; your name, your logo, your website, your slogan, your service, all of it contributes to selling a customer.
In order to make your brand stand out you need to push yourself to be the best and look professional.
People need to gossip about your service, about your customer representatives, about your website, about how much they love your name.
Once they start doing that, they emotionally get attached to your brand.
The more good things they see and read, the better chance of you selling them at double the price of your competitor.
You should also check out our online booking forms, which are designed to help you sell more customers at cheaper costs.
They will also help you bring in more customers for free.
4. Optimize for high profit margins
Once you figure out how to sell your product, the next important thing to look out for are your profit margins.
Obviously, the more you charge the higher your profit margins are but that is often easier said than done.
Typically from what I learned and gathered from other successful entrepreneurs in the service industry, your profits before taxes should be at least 20%-24% in order to fall into the average category.
25%-32% into the great category and 33%-45% into the excellent category.
Those numbers should be something to focus on when growing your business over the course of several years.
The more you know about these percentages the better you will be able to optimize your business and increase those percentages over time.
Don’t get frustrated seeing 20%-24% your first year.
Having those numbers in year one is a sign that you have a great service and that you built a base to work with for the next several years.
After year one and possibly even year 2 you will have enough data to start increasing those percentages.
Those that are using BookingKoala, make sure you take advantage of your reports section:
If not, then you MUST use something that will help you track all the data you need to optimize your profit margins.
I hope that this blog post helped you see that it’s not always about charging what your competitors are charging.
At the end, it all matters about the value that you give your customers and figuring out a way to market those values to them so that they buy from you and not your competitor.