The Pricing Decision — Why You're Still Undercharging (And What to Do About It) | Ep 8

The pricing decision is the one Meagan sees stall more often for established businesses than for almost any other. Owners know they're undercharging. They've known it for months — sometimes years. In this episode, Meagan digs into the real reasons the price hasn't changed yet, and shares a framework for finally making the move — without blowing up your client relationships.

Transcript

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Welcome back to Amplify and Act. I'm Megan Van Wart. Last week I named five decisions that stall most businesses. And today we're going deep into one I see come up most often, and that is the pricing decision. If you've known that you're undercharging and you still haven't changed it, then maybe this episode is for you. Now, from our last episode in episode seven, pricing was one of the most common stalls that come up for me and my customers today in so many conversations. And if you're listening to this, you may already be thinking about your pricing, and you may have a feeling that one of your prices might be too low, whether you have products or services. And then if you should be making a change to your price or not. Maybe you have this gut instinct, like I should be doing this or not. I'm looking forward to digging in more with you today. So let's get right into it. Now, the real reason that your price hasn't changed is not a surface reason. The surface reason is always that I'm afraid of losing clients. I'm afraid of missing out on an opportunity. I'm afraid of making a sale. Everyone's at different points in their business. So one thing or the other may or may not resonate for you. But the real reason that your price hasn't changed is much deeper than that. The first reason is around the fear of losing current clients. The ones who may not be your best clients anyway. That is one thing I see come up again and again. Maybe you have an existing service, maybe you have recurring product costs. These are the things that business owners are fearful of changing because they don't want to lose current customers that are a part of this current system or current pricing plan. But the important thing to recognize is that your best clients will understand that you are evaluating your worth. You are evaluating the benefits that the service or products gives back to our customers. And you're really making modifications to your price to reflect that. And if they're truly a partner and truly a customer, they will understand that, right? It's about you providing the right context to your decisions and really about digesting that for yourself. That's a really important thing. So that's one reason why price doesn't change. Fear of losing customers, fear of losing sales, right? Another one is the fear of being wrong about your own value. And what if no one wants to pay your new rate? Now that can has a lot of fear, a little bit of stickiness to it, right? And we're creating awareness here. We're not solving the problem of your fear in this comment, but we're highlighting it for you. I want you to look at this comment in the eye. The fear of being wrong about your own value. And we're gonna work through this, okay? Another may be the identity attached to being affordable. Now I love these uh for such so many different reasons. And the identity attached to being affordable. So what does affordable mean? Affordable means, oh, I'm gonna get good value from this. It may be related to something being cheap, especially if it's it's a lower cost compared to others. And when we associate the word cheap or the relevancy of cheap, it sometimes could reflect in lower quality. So can you see where we're going here? I um I've been an entrepreneur for 20 years and lessons upon lessons through my master's programs and working with customers, there are proven in countless stories in businesses where the product and service must reflect the worth and the value of your business, of what you are delivering. That cost, that value must reflect on what you are delivering. So if you are delivering a really high-quality service or a really high-quality product and your price isn't high enough, what does that say? They're gonna say there's something wrong here. This seems for this really great service with these five-star ratings. I I've had referrals. Wow, this is a really good price. Customers expect to pay more for top-of-the-tier services. So consider that as you're reflecting on making pricing updates for your business. Isn't that powerful to think about? The other one I want to go back to is around the fear of being wrong about your own value. Now it's back to the quality that you're delivering. Think of quality with regards to value. If you're delivering a high value, high-quality product or service, your your price should reflect that. One way you can think about it is the number of years you've been in business, your reputation, the thoroughness of your services, the quality of the product you're delivering. All of those incredible attributes about yourself and your contributions should be associated to what you are charging for your products and services. And the reason I'm giving you all these insights and just boosting your confidence a little bit is because these elements of understanding where you're at today and if you're reflecting on that pricing decision, it really allows you to say, wow, the light bulb just came on for me. I am doing all these incredible things and I am undercutting myself. My price for my product or service does not represent the value or worth on what the customer is getting. If you talk to your customers about these products and services, you can associate and stand up for your pricing because of what you're delivering. And it's your confidence as a business owner, knowing you are really good at what you do. And these are all bits and pieces to help you with that pricing decision. Now I'm gonna help you with pricing framework with three steps to help you actually implement what your new pricing may be. Because you may have this gut feeling like, I know that I am worth it. I know that I I maybe I have the confidence now, you have the confidence now to make these changes, right? These are things that I want you to think about. But we'll go through the pricing framework in just a couple minutes. Now, the thing I want to highlight is this that many owners haven't done the math to figure out what their pricing should be. Maybe you think about how many clients would you need to lose for a price to increase to be neutral. I can tell you that most owners discover that they would lose 20 or 30% of their clients and still come out ahead with revised pricing. Isn't that interesting? People are willing to pay. So I encourage you to let go of the fear that your customers are not gonna pay for your services because of your value and your worth that you are delivering to them. And you are good. You can tell them the details, you can go into the depth of the qualities of your products and services, you can sell that to them, right? You're good at that. But it's really important for you to know based on historical data that 20 you that some customers will, that some businesses will lose 20 to 30 percent of clients and still come out ahead. That means you're still gonna be making more than what you did before having the lower price. Now, running those numbers before the fear gets to running the decision itself. So I'm gonna go through the framework. There's pricing framework I'm gonna share with you. Okay. There's three steps. If you want to get a pen and paper, feel free to do that. Step one, calculate your new rate based on outcomes that are delivered, not hours spent. So you could do this uh saying for X and Y services, these are the things, A, B, C, D, E, F, G, that you're gonna be getting for this price. You're not gonna be saying, I'm gonna spend 10 hours on these items. You're gonna say, we are gonna be doing these things together. These are the things I will deliver to you. This is what you get for the investment. This is the thing, right? Outcome delivered. So calculate your new rate based on outcomes delivered, not hours spent. Step two, identify which clients you'd raise for first. Maybe start with new clients before existing clients. You will quickly see that new customers will identify the value of your delivery compared to the price rate itself. Your price should reflect the quality that you're delivering, right? And new customers don't know. So just start marketing it. Do the math that we're going through now, start with new customers and see what happens. Now, step three is communicate the change clearly, confidently, without over-explaining. So think about marketing on your website as a really easy example. Your your new uh service rate is X compared to B, right? And these are the outcomes expected based on the service rate. Market that, and that's it. You associate your value, worth, and high-quality services to that new rate. The clients who leave when you raise your prices weren't your best clients, anyways. And I want to reinstate this: you are not raising your rates because you need more money. We know that. You are raising your rates because your current rate is a misrepresentation of the value you deliver. And that that reframe in your mind will change everything. And the clients who stay when you make your rate updates are the ones who belong working with you, and they're the new ones that say, Yes, I cannot wait to engage with you and to partner with you on these things. So I want to highlight something here. This is the moment where we are all completely honest, and if you've raised your own prices at some point, it can feel really scary. Like, let's talk about that. I have done it, and you do not know it's gonna happen until you try. And one of the things I've learned the most about being a business owner, especially for so long, is to not live my life in fear around the decisions I make. And this is where I'm here to support you through these podcasts in so many different ways, around just being really honest with yourself. I have so many honest conversations with my customers around what is most important to you right now and why. And if one of those things is reframing how you make decisions and having less fear on the outcome, but leading with your heart, leading with your strategy, leading with your intent first, really wonderful things can happen because the risk is much lower than you think. And that is a lot where a lot of our fear comes in. Now, I've watched several capable, experienced owners undercharge for years out of fear. And the most common thing I hear from owners after they finally raise their prices is that I should have done this two years ago. And we've talked about that invisible tax in previous episodes of our podcast and in conversations with you guys is that invisible task of missed opportunity of, oh, why did I wait? Why was I so afraid? And it's about having these conversations. It's about you having the support and the confidence you need to be able to make some of these changes. And the pattern I see is the fear of change is always worse than the fear, the change itself. Now, your price is a statement about your work. And let's make sure it's an honest one. And we've talked about that a lot today. So here's a little bit of an action plan I can share with you. My goal for these podcasts are always to give you enough context for you to think about what res what really is most relevant for you right now. Take what you can from it, and then to give you tips and tricks and give you an action plan for you to actually put some of this stuff in motion for yourself. So I want you to do the math this week. Calculate how many clients you would need to lose for a price increase for that to be revenue neutral. I want you to write down that number. How many clients you'd need to lose for a price increase to be revenue neutral? Then I want you to ask yourself: is that number actually as scary as the fear has been making you feel about making this pricing decision? Is that number actually as scary as you thought it would be? No. But I want you to digest that and I want you to think about that. But I believe in you, I know you can do it. Open up an Excel sheet, open up your Google Docs, put down, you know, an example maybe I have, you know, 50 clients, 10 clients, whatever, at these rates, this is my current revenue. What if you put your 10 to 50 clients at an increased revenue and then do the difference, right? And then do some of the math on that price increase to be the revenue. That loss of clients, you will still be at more than than that starting point if you even lose clients. But it's incredible math to do. You can do it. I believe in you. But I want to thank you so much for being here today. Until next time, I want you to continue to amplify your thinking and act on it. Now, next week, we're going deep on the hire or not decision. Maybe if it's not hiring a person, it's should I invest in this to help me with that? It's spending money to move your business forward with additional resources. And there's so many things that can mean, and we're gonna go into that together next week. The one that keeps capable owners doing the work they shouldn't be doing for way too long. This is the decision. I want to say thank you so much. Thank you so much for being here, and I look forward to seeing you all again soon. Take care.