Find Your Pricing Sweet Spot: A Step by Step Guide

Many of my clients, whether they’re seasoned consultants or brand new freelancers, find themselves frustrated with pricing. It’s really the nature of being in business—finding that sweet spot is a result of testing, tweaking, and, above all, knowing your audience. So, I want to delve into the intricate world of pricing for services or knowledge businesses—a topic that's as daunting as it is crucial for any business. Whether you're a seasoned entrepreneur or just starting out, understanding how to price your products or services can significantly impact your bottom line and your business’ longevity (and I want you to last a long time!). So, let’s walk through this journey together.

Influences and Resources on Pricing

I don't have a one-size-fits-all formula for pricing, but I do have a strong cadre of influences that have helped shape my thinking. Over the years, books like "The Pumpkin Plan" by Mike Michalowicz (this is an affiliate link) and "Profit First" by the same author have been foundational in altering how I approach the concept of pricing and service delivery. These resources taught me how traditional profit margins might not align with service industries, which often have differing expense structures compared to product-based businesses.

Jonathan Stark’s work, particularly his advocacy against hourly billing in favor of value pricing, has been another game changer. Understanding these nuances is critical when shaping your pricing strategy.

I also love Rochelle Moulton’s dynamic, thoughtful writing on pricing and its intersection with how it communicates your work’s value to your potential clients.

I encourage you to not only check out these resources, but explore anything around this subject that piques your interest. Like I always say, take what you need, and leave the rest behind. And that’s never been more apt than when it comes to pricing.

My Journey to Understanding Pricing & Services Businesses

A profound moment for me was realizing a business I worked with couldn't scale. When I sat down and looked at their services, something didn’t sit right, and I couldn’t put my finger on it. I sat down and did a back of the napkin calculation of both their revenue in different scenarios and their costs. And then it hit me: Their model resulted in diminishing profit margins as sales increased. More sales equalled lower profit margins. This scenario, although initially stressful, highlighted the importance of critically examining scalability and pricing.

Around that time, my good friend Mark Schiralli, a business mentor and creative consultant in Sydney, Australia, introduced me to the concept of simple math in business, reinforcing the idea that sometimes pricing issues require more than just an intuitive approach—they need straightforward calculations to uncover underlying problems. (I did a fun webinar with Mark in 2024, all about joy in business that you’ll want to check out!)

Step 1: Understanding Your Numbers to Get Pricing Clarity

Begin by compiling your monthly expenses, considering every possible cost, from subscriptions to labor, and even those infrequent business insurance payments. Afterward, determine how much you need—and want—to bring home each month, factoring in your lifestyle needs.

It's crucial to face these numbers head-on, despite any initial anxiety. Not only does this reveal gaps between your earnings and expenses, but it also provides clarity on what needs to be adjusted in your pricing strategy.

Step 2: Documenting Sales History of Your Services

List all current and past offerings alongside their respective prices. This exercise reveals your historical pricing mindset and sheds light on past successes and missteps. I’m going to warn you: this can be very scary!

Ready to Price & Deliver Your Services with Ease + Joy?

Check out my Productized Services Quick Start Course inside the Alignthority® Academy. I cover pricing, services evaluation, and the steps in developing an ease to sell, easy to deliver simple service as a product. Use the code PRICING25 for a blog reader special price.

Buy the Course

Do not beat up your past self for not getting things perfect—we all start somewhere. When I taught my pricing workshop live inside my productized services course, I got a lot of emails from students regretting their previously too low prices—but that’s all part of learning. No one nails it the first, second, or even third time!

Step 3: Analyzing Profit Peaks and Valleys

Identify hose services that are not only profitable but easy to sell and deliver. Understanding these intersections can guide decisions about focusing energy on core offerings or re-envisioning others for better market alignment. I’m not saying you need to ditch your beloved lower profit services—but knowing that one is lower profit will allow you to make decisions about how aggressively to market different services, and what to sell on sales calls.

Step 4: Competitor Research and Market Positioning Equals Smart Pricing Strategies

Though some might dismiss competitor analysis, claiming they have no competition, understanding the market landscape is vital. It ensures your offerings are competitively priced and highlights unique positioning opportunities. No one specifically offers much of the services I do, and yet my leads are still deciding between me and some other service, even if they’re quite dissimilar. For example, I have a client who offers a unique strategy service, and they have discovered that their real competition is group coaching programs. Understanding the various options your audience is looking at means you’ll have pricing clarity around where you fit in the market.

Step 5: Crafting the Ideal Product Ladder

With all this data, it’s time to draft a refined product ladder. Consider your current baseline needs and your aspirational goals, then assign pricing accordingly. This exercise helps envision not just immediate offerings but future scale by prompting considerations of what the business’s structure might need to look like for growth. Product ladders can feel overwhelming—my Spark Sessions clients are often surprised by how much strategic thinking goes into really refining this suite of interconnected offers.

Step 6: The Value of Regular Pricing Assessments

Finally, regularly revisiting your pricing—quarterly, ideally—ensures you stay informed on what’s working, what’s profitable, and what needs to be reassessed. These regular check-ins prevent surprises and empower you to make informed adjustments. And, if you find that it’s time to nudge those prices up, there’s no need to announce this or make a “last call.” Be brave and just make the change—there’s a good chance no one will even notice!

Key Takeaway About Pricing Your Services

When we get down to brass tacks, pricing is an ongoing conversation between your understanding of business needs and your audience’s expectations. By engaging in thorough analysis based on data AND your own experiences (don’t discount that), you can craft a pricing strategy that not only sustains but thrives.