I met a smart, focused, insightful young entrepreneur recently who reminded me of myself three years ago. And it drove me crazy.

New in business, she was in pursuit of something I worked a long time to achieve: a 6-figure business that I started on a $200 budget. But I could tell right away that she’d never get there without raising her prices.


My new friend didn’t even need to tell me how much she charges her clients; all she said was that it “wasn’t enough”, and I could tell that it was true. I made the same mistakes a few years ago. I knew I was charging half – or less – of what my competitors were charging, but I was afraid I’d lose all my business if I raised my rates.

In fact, the opposite was true. By looking at what profits I wanted to make, evaluating my competitor’s pricing, and selling my services based on the value I knew I could provide, demand for my business planning services actually increased.

The thing a lot of new service-based business owners miss is that even if you work from home and you don’t employ any staff, it still costs money to run a business. It also takes significant time to market for new clients – up to 50% of the entrepreneur’s time, in fact. For these reasons, a lot of people who are new in business don’t realize that not only do they have half the billable time they thought they had…but the time they do bill for doesn’t go directly into their pockets, and they often end up working more than full time hours.

Wondering if you’re anything like my friend – or the 3-years-ago-me? See if you relate to any (or all) of the following reasons your pricing strategy might be killing your business:

1. You set your pricing based on what you consider a “good” employee’s wage.

If you used to make $20 per hour at your job working 40 hours a week, you might think charging clients $30 per hour is plenty. But you’re not accounting for the time it takes to go out and get that work, and that could be up to 20 hours a week. A quick calculation reveals that your income just dropped from $800 to $600. Not good – and then you have business expenses to pay out of that. Ouch.

2. You apologize for your prices, or set them based on what you think each lead is willing to pay.

I used to feel guilty about how much I was charging – like I was somehow taking advantage of people. Since I developed the understanding that I was providing a massive return on investment for my clients, and I learned how to explain this to them, I’ve managed to double my prices – twice – and still maintain a full practice. Don’t be sorry for your prices (they are probably too low). Remember that people want to work with you because you can solve their problems. They are willing to pay for that. So give them another way to evaluate what you’re worth, beyond the sticker price.

3. Your prices don’t accommodate for increased costs as you grow your business.

Sure, these are many ways to run a business for cheap or free. Unfortunately most of them aren’t scalable – if you want to grow your business, you’re eventually going to need tools, people, and resources that all cost money. So building those costs into your pricing now is key, so your price increases can be gradual instead of sudden.

What can you do if you’re priced too low?

Give your current clients and leads a heads up that you’ll be raising your prices soon. This lets them know that you appreciate them, and you want them to stick around, but that you’re also in demand. Raising prices signals that you offer high-value stuff that’s worth paying for, so in order to serve your best clients better, you have to charge more. I usually tell my clients about a price increase a month or two before it happens, and give them a chance to make a purchase at the discounted rate now.

Whenever you’re talking to leads or clients about your prices, emphasize the value and benefits of working with you. Avoid words like “discount”, and when you give a quote, don’t ask prospects if the price is okay with them – the price is the price. You don’t need to apologize or offer money off at the first sign of resistance.

Your low prices might not be killing your business now, but they will. What step can you take today to create a pricing strategy that’s fair for both your clients and your bottom line?