3 Pricing Strategies to Make Money (and What to Consider to Make the Best Decision)

As business owners you want to make money and get paid (right?)…but most solopreneurs don’t take the time to back up to confirm that their pricing strategy has them set up to make money.

Which means oftentimes, there’s a better option.

And it’s worth looking into, when a better pricing strategy means you get paid more or more consistently so you can make those adventure plans happen, enjoy friend dates to the movies, go camping with the family and/or buy that new ‘thing’ you’ve been lusting after.

In this post, I’m digging into the most common pricing strategies: retainer, project, and hourly pricing; peeling back the layers of each one to understand the pros and cons, keys to success and views from the client side.

Let’s get started.

Pricing strategy #1: Retainer-based pricing

A retainer is a pre-set fee for a set period of time. The fee holds a set number of hours to do work during a specific period. Retainers generally don’t specify the type of work to be done. Virtual assistants, graphic designers, and website maintenance professionals frequently use a monthly retainer for a set number of hours.

Examples:

  • Virtual Assistant: 10 hours a month, $200
  • Graphic Designer: 5 hours a month, $300

Pros, as a biz owner:

  • You can predict your hours
  • You can rely on steady income
  • You can work with clients consistently and build longer term relationships

Cons, as a biz owner:

  • Multiple clients may all request use of their hours at the same time
  • Vacation, illness and time away coverage is essential since your time has been committed and paid in advance
  • Projects may require more hours than the retainer covers since clients may be uncertain what projects would be needed or how long it takes
  • Without proper planning, you may not know what type of projects you’ll be asked to do can lead to projects outside your expertise

View from the client side:

  • Great for routine activities
  • Predictable monthly expenses
  • Use or lose: may not use all the hours purchased

Key to success with retainer-based pricing:

  • Set clear guidelines on how you’ll work together and your work hours (which may not include email requests at midnight or phone calls at 7am). This avoids clients who expect you to be ‘on call’ for those hours they’ve purchased.

Pricing Strategy #2: Project-based pricing

Project-based pricing: a pre-set fee for a specific product or package with a defined set of components. This pricing strategy is based on delivering an agreed-upon result regardless of hours or costs it takes to do the work.

Examples:

  • Squarespace website set up with four page layouts, $1,500
  • E-course content development with 10 lessons, 5 worksheets and 3 videos, $997

Pros, as a biz owner:

  • Ideal for routine types of projects when you can easily calculate the time required
  • Increases ability to predict income
  • Incentive to minimize your time, be efficient and still deliver a quality result

Cons, as a biz owner:

  • Difficult to estimate pricing if you haven’t completed enough similar projects
  • Have to manage client expectations for elements not included in the defined project (scope creep)
  • Projects may take longer than you estimated, which means less profit for you

View from the client side:

  • Easy to know and plan for the project cost
  • Lack of transparency to the level of effort required for the project
  • Project definition may not exactly align with what they need

Keys to success with project-based pricing:

  • Be diligent in defining what’s including and not included in the project and how requests outside the definition will be handled
  • Don’t be afraid to iterate your packages with what you learn each time you do the project

Pricing strategy #3: Hourly pricing

While perhaps not the most advantageous, hourly pricing is by far the easiest to implement and is, from my experience, the most commonly used pricing strategy. Hourly pricing is simply the price charged for each hour of work.

Pros, as a biz owner:

  • Easiest to use
  • Increases likelihood of being paid for all the hours you work (if you estimate well in your proposal)
  • Great approach if you haven’t done many projects
  • Easiest for managing time off

Cons, as a biz owner:

  • No incentive to be efficient with your time
  • Requires you to work a set amount of hours to reach your revenue goal
  • Difficult to incorporate value as part of price

View from the client side:

  • Most transparent pricing
  • Easiest to compare between competitors
  • May not get most efficient work from you

Keys to success with hourly pricing:

  • Ability to provide a solid estimate of the time required for a project
  • Clarity on what’s included in the scope of work for the time and price and how requests beyond the scope will be managed

Choosing your pricing strategy

What makes the most sense for your business where you’re at today? Consider your ideal clients, your specialty, and the results you can deliver. Know yourself and your ability to estimate time. Give your ideal clients the best opportunity to say yes(!) to working with you.

But perhaps most important to know is this: You don’t have to pick only one pricing strategy. Offering a combination approach may make the most sense for you and your client. Have a routine set of activities you offer? Consider project-based pricing, with hourly pricing for additional, ad-hoc requests. For highly customized and tailored services, retainer and hourly rates may be ideal. Offer a retainer package of hours then add in hourly rates for unexpected needs.

(What you should charge for your services is a separate and super important topic, too. Be sure you understand both your pricing strategy and what you should charge, because they go together like wine and chocolate or peanut butter and jelly. Yum.)

The easier you can make pricing for your clients, the easier it will be for them to say yes. It makes it easier for you too, so you can spend less time on preparing proposals and talking about pricing, and more time doing the work and growing your business.

PS: Want even more on pricing? Rebecca Tracey’s Get Paid (How to Price Your Services + Programs) e-course will be in this year’s Solopreneur Success Bundle! Head over to the Bundle page + sign up to get notified when it launches in September.

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Tess Blankenship builds and grows better virtual teams, helping entrepreneurs reach their revenue goals. Spending over a decade focused exclusively on contracting virtual teams across the globe for big business, she shares her secrets at tessblankenship.com. To keep her business running strong requires a big mug of coffee, a good pastry, and a dose of the outdoors.

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