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For many small business entrepreneurs, pricing is one of the most challenging aspects of their business. Properly pricing your services is a bit like the story of Goldilocks and the Three Bears – What price is too high? What price is too low?  What price is just right?

In most cases, under-pricing for services is a common dilemma. Unfortunately, with underpricing comes underearning. In a 2010 article at survey administrator, PayScale, the average income of small business owners varies widely ranging from $34,392 to $105,757 per year.

Just like with anything in our business, it’s important to recognize the root causes in order to identify a permanent solution. The most common causes of underpricing include:

Low self-esteem

This is the most common form of underpricing and underearning experienced by small business entrepreneurs. If you don’t believe in yourself, its challenging to charge a fair price for your business services. Along with believing in yourself, the ability to clearly articulate and define your value strongly influences your pricing.

Ignorance of market rates

Market rates vary from region to region. What may cost $75 in North Dakota, could cost $150 in California due to the discrepancy in the cost of living. It’s important to know the going rate for your services based on your expertise and perceived client value.

Unfinished pricing model

In a rush to get to market, it’s not uncommon to slap a price on your services, cross your fingers and hope your business makes money. Assessing all the elements that go into your pricing takes time. Like my Dad always said, “If you don’t have time to do it right, how much time will you have to do it over.”  Eventually, an incomplete pricing model catches up to you.

We’d love to hear from you. What are some additional root causes of underpricing (and underearning) that you’ve experienced?

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Brooke Billingsley

Vice President
Perception Strategies

Synnovatia is a strategic coaching firm that is detailed and knowledgeable about business. i have a small business that grew from $150K to $750K because of the goal setting and resources that Synnovatia provided. It saves me years of learning on my own.

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