First things first, your pricing strategy and amount you charge is ever-evolving
As an Online Business Manager (OBM), trying to work out how to deciding how to price your services can be a difficult task. In the world of business management, there’s a continual conversation about whether to charge hourly, opt for a retainer, or package services. The reality is, there’s no one-size-fits-all solution because pricing is an ever-evolving strategy. It depends on various factors such as market trends, the specific needs of the clients, and your professional growth. This podcast aims to provide insights into the different pricing options, the biggest success factors, the challenges of pricing, considerations, and how to increase your prices.
Listen to The Audacious OBM Podcast
This episode shares:
- Review of common pricing structures: hourly rates, retainers, and packages.
- Discussion on value-based pricing and articulating client benefits.
- Factors influencing pricing: personal time, business expenses, desired profit.
- Guidelines on price increase: workload, demand, and strategic reassessment.
Common Pricing Strategies: Hourly, Retainer, Packages
When it comes to pricing your services, there are three primary models OBMs often consider: hourly rates, retainers, and packages.
Hourly Rates
In an hourly rate model, you charge based on the time spent on the job. It’s simple and straightforward. However, it may be less effective in showcasing the real value you provide.
“Hourly billing isn’t just about charging for the time you spend on the job. It’s about reflecting the value of each hour you dedicate to a project. Think about the depth of experience, industry knowledge, and unique skills you bring to each hour of work.”
Let’s say you’ve dedicated a few hours to crafting a social media strategy for a client. However, behind those hours is years of marketing experience, a deep understanding of audience behaviour, and skills in analytics. When pricing hourly, remember that you’re charging not just for the hours, but the cumulative value of those hours.
TIP: When billing hourly, make sure to factor in the unseen aspects of your work: planning, brainstorming, and administrative tasks.
Retainer
With a retainer model, clients pay a fixed monthly fee for a set number of hours. This gives both parties predictability and ensures the OBM has locked in work each month. However, dependence on a retainer can be risky if a major client decides to end the agreement.
Packages
Packages, often tied with value-based pricing, are services bundled together to achieve a specific outcome for the client. Here, clients pay for the results rather than time spent. This method can be beneficial as it allows you to charge based on the value provided. But, it requires a good understanding of the client’s needs and careful consideration of what’s included in the package.
“Packaging your services allows you to step away from the hourly mindset and focus on the outcomes you deliver. It’s about emphasising the comprehensive solutions you offer, rather than the individual tasks.“
Let’s say a client needs a website redesign, content creation, and SEO optimisation. Instead of charging for each service separately, you can bundle these services into one package aimed at improving the client’s online presence.
TIP: When creating packages, keep your clients’ goals in mind. Tailor each package to address specific needs or solve particular problems.
The Importance of Value in Pricing
Regardless of the pricing model chosen, the most significant factor in successful pricing is demonstrating the value you provide. This is where value-based pricing shines. Instead of billing clients based on the time spent, you charge them based on the outcomes or results you can deliver. Value-based pricing enables you to charge more as it considers the tangible benefits clients gain from your services, rather than merely your time.
When adopting value-based pricing, it’s essential to clearly communicate and demonstrate the value you bring to clients. Clients should understand why they are paying more, and you should be confident and transparent about the value you provide.
Overcoming Pricing Challenges
The biggest struggle OBMs face when pricing their services is the tendency to tie their self-worth into their hourly rate or pricing. This mentality can cause stress and affect the quality of work delivered.
To overcome this, you need to separate yourself from the service you provide and consider pricing objectively. The price set for your services should reflect the value it brings to your clients and not your personal value or abilities.
Pricing Considerations
When setting your price, consider factors such as your time, operating expenses, the experience provided, a buffer for unexpected events, the involvement of others, and most importantly, profit. Remember, your business needs a profit to thrive.
“Your price isn’t just a number; it’s a reflection of your value, the quality of your work, and the benefits you bring to your clients.”
ACTION: Always revisit your pricing strategy. Consider changes in your expertise, market trends, and client feedback. Adjust your prices accordingly to ensure they remain fair, competitive, and profitable.
When and How to Increase Your Prices
One straightforward trigger for a price increase is when your books are full, and you still have clients wanting to use your services. This indicates a high demand for your expertise, which can justify a price increase.
When you increase your prices, it should apply to new clients, not existing ones. This ensures your current revenue stream remains stable as you experiment with your new pricing strategy. If the conversion rate drops slightly, but your new rate covers the decrease in volume, you’re still ahead, and you’re actually doing less work.
TIP: Remember, it’s not just about how much you charge, but how you communicate the value behind that price. Be clear, confident, and transparent with your clients about your pricing strategy.
In conclusion, pricing your services as an OBM involves a balance of understanding your value, gauging market demand, and aligning with your clients’ expectations. It’s crucial to remember that increasing prices isn’t just about boosting revenue; it’s about demonstrating the value you bring to your clients. Thus, when and how you raise your prices should be thoughtfully strategised, keeping in mind the overall growth trajectory of your business and the perceived value of your services.
Over time, as you continue to hone your skills, expand your portfolio, and receive positive feedback, you will find that your value and the demand for your services naturally increase. This, in turn, justifies periodic price increases and helps establish you as a premium OBM service provider in the industry. Always keep in mind that your pricing is not merely a number, but a reflection of the value, expertise, and quality you bring to your clients.
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Follow along with the transcript
How to Price Your Services as an OBM: Hourly vs Retainer vs Packages
First things first, your pricing strategy and amount you charge is ever-evolving
How do you charge as an OBM?
This is the biggest struggle OBMs tell me they have, knowing how to price, knowing what to charge, knowing whether you should do hourly or something else. It’s a never ending conversation. It’s a never-ending thought process.
How could it not be? Unless you’re offering the exact same thing to the exact same market in the exact same timeframe, your pricing will always change because you change the market changes, people change. There’s lots of moving pieces here, which means there is no 100% right way to go about pricing and there is no solution that lasts a lifetime.
It is ever -evolving and so don’t feel guilty if you never quite feel like you’re finished with pricing because that’s the point. Alright. So, today I wanted to talk to you about some of the main things with pricing and knowing what to charge. So we’re gonna look at some different pricing options. We’re going to look at the biggest success factor when it comes to pricing.
We’re going to look at the biggest struggle I see with OBMs and pricing. We’re gonna have a look at the considerations for pricing. So what’s included and what things you need to be thinking about. And we’re also going to think about how to increase our price, when to increase our price. All right, so let’s get stuck in pricing options.
Common pricing strategies used by Online Business Managers and Business Integrators
Hourly vs Retainer vs Packages
When considering how to price your services, you’ll hear a lot about value-based pricing, hourly rates, retainers and packages. There are lots of different ways a service provider can set up their pricing structure and there is no 100% right way, but each of them does have some benefits. And, also some pitfalls.
- Pricing based on an hourly rate
Generally, it is the easiest one to pick up because you just charge based on time taken.
Scenario: “Okay, I’m gonna charge you $70 an hour for however many hours this job takes”. That’s one option.
- Retainer
Scenario “I’m gonna set you up on a monthly fee structure.I’m going to bill you for 10 hours at $70 an hour. And then that will just be rolling. So every month I have locked in time to do your work.
- Packages of hours
Scenario: “Okay, you can buy a pack of five hours at $70 an hour upfront.”
So you pay me upfront and then when those hours run out, I’ll come back to you and I’ll say, Hey, your hours are out. We need to we need to do another package now”
and then there are packages. So packages usually tie in more so with value-based pricing, and that means that you include certain tasks, jobs, or objectives, and you price for that.
So I’m going to paint your entire house. I’m going to do only the external. I’m not going to do the internal walls. I’m going to use this type of paint and it’s gonna cost you $20,000. Right? So in that there is no mention of how long it’s going to take me, it is more so the outcome that we are looking for now, all of those options, and it can seem like there are a lot of options.
But it is all about what’s going to suit you and what is going to be beneficial to your business and to your client. There are some pitfalls that you need to be aware of and the biggest one that I see is with an hourly rate. Now you’ll find clients push for an hourly rate. Some clients, because that’s easy.
They can, they can plan for that. They know that they don’t want “how long is the piece of string?” Quote because you could say, “Okay, can you set up my email marketing?” Well, that. Could go on forever. There’s no parameters there. So although hourly rate can bring some clarity in terms of, yep, it’s 70 bucks an hour and that’s it.
It’s like, well, yeah, that’s really clear, but what’s actually included in that? And how long will each job take? And then it can become messy in itself. And then, the issues that you face, when you’re looking at retainers, is we can become really dependent on those retainers.
So, let’s say you get a really big retainer and you have 30 hours a week for one client, and you’re sitting here and you’re going, this is amazing. I’m set. Like I don’t have to do anything else. But what happens if that client leaves?
All of a sudden you’ve gone from 30 hours a week of work to nothing. And you’re scrambling. So when we are doing retainers, we need to really be thinking about our limitations on them, what they include. And if we’re discounting it because they’re on a retainer, a lot of people will do that.
And the same with packages of hours. If I’m gonna sell you these hours upfront, is there a discount for if you buy more hours? And what happens if I don’t use up? Is there a timeframe for those hours? If I don’t use up those hours in a month, do they roll over? So there’s different things to think about based on what it’s now.
My favourite type of pricing is value-based pricing in packages. This ties into what the biggest success factor is when you’re pricing yourself as an OBM. This factor is all about value. Whether your pricing is successful or an utter failure will be your ability to give value and to show that value.
Something that we can get caught up thinking is that it is the job of other people to see the value we provide, and I actually really strongly disagree with that. I think that it is your job as the service provider, as the OBM to lead your clients through a demonstration of what the value is that you provide, tell them.
Because how can someone who’s not you know what’s involved in what you do and know what that’s worth? If we’re sitting here as OBMs going, “oh, I could charge a hundred dollars for this, or I could charge $200 for this and I don’t really know which one”. How do we expect a client to know which is the better option or why something would be a hundred dollars versus why something would be $200?
So we really wanna walk them through where the value is coming from.
Now, the beauty of value-based pricing is that you can charge more because you are really considering the things that the client is walking away with. It’s not come down to a transaction of time. So it’s not just if I spend two hours, I charge them two hours. If I spend three, I charge them three. And then the onus is on the client.
Pricing this way, in a package or looking at an outcome, the onus is on you. So if you take 10 times as long to do something, the price doesn’t change . You don’t then charge the client more and you lose out really. If you faff around, that’s on you. But if you do it faster, which as you do things over and over, you’ll get better at it, and you should be rewarded for being better at it.
You shouldn’t have to earn less because your skill increases. So this allows for that. You can build in some of that, which is really exciting, and it gives you some boundaries.
So when you are looking at an outcome, And you’re going, okay, by creating this email campaign once every month, I can sell this based on the fact that it’s gonna take me an hour to do it, or I could sell it based on “What if you could reengage your audience. Every single month with a unique perspective that lands right at the top of their inbox at the time they need it most.”
So it is all about what are they actually getting from this? Why would they want to be using your service for this? Now I’ve been using a really simple example just to demonstrate the concept.
Obviously it gets a lot more complicated when you add in all the things that an OBM can do and does do which is something that we cover in OBM Academy. And we look at all the different facets. But for the sake of this episode, I just really want you to see the differences between hourly, retainer, outcome-based, value-based, and Get a little bit of a feeling of what you might like or what resonates for you.
So our biggest success factor is creating value and showing that value. But with great power comes great responsibility. So what I mean by this is you can’t just decide, okay. I think I am more valuable than what I’m charging, so I’m gonna double my price and let everybody know. And that’s gonna be that. There’s no reasoning there.
You need to provide the reasoning, you need to show the value. And I’m not saying don’t double your prices, I’m just saying make sure you’ve thought about how you’re going to present that and this is a business transaction, right? So what’s the benefit for the business on the other end? There’s lots of things to think through, and as long as you can come across in a logical manner, and know what it is that you’re doing and why you are doing it, and be able to have those conversations with confidence, you will be fine.
But if you just go, oh, actually. I listen to this podcast and I realise I’m doing all these things and I should be charging more for that, and you double your prices. You’re gonna get a lot of whiplash. Clients will not be happy, and it might be that that’s not your audience anymore, or it just might mean you haven’t focused enough on articulating the value when explaining why you are changing things.
So we’ve looked at our pricing options. We’ve looked at the biggest success factor. Now I wanna talk about the biggest struggle, and that is pricing objectively and the internal struggle that comes with it. A lot of the time, we tie our value and our self worth into our dollar per hour, into the price tag we assign to things, and you’re doing yourself a massive disservice by doing this.
But here’s the thing, right? We all do it. It is so easy to be your business and not be able to separate your worth from your business’s worth or your offer’s worth. Which is then why we always wanna take a really logical and tactical approach to pricing. We wanna be objective and treat our pricing like a service, a standalone being, how can I make this service more attractive?
It has nothing to do with your ability. It has nothing to do with who you are. It’s as a service, what is this worth and how can I make this more valuable for the person who’s going to buy it? Because the second that we continue down the rabbit hole of I can’t charge that much, or I charge them way too much, or, I have no idea how to meet my bills because I can’t increase my price, but I need to increase my price.
But then what are people gonna think of me? We spiral. And you know what happens? Business becomes really hard and it becomes stressful, and all of a sudden you’re stressing about money instead of doing your best work.
So what we wanna be able to do is find a way. For you to be at your best, deliver your best, and you’ll be able to charge infinitely more if that’s the level you’re operating at.
But to do that, we have to separate ourselves from our business, from our product, because you are not the product. The outcome of what you are doing is the product. It might be your advice and you might be a crucial part of that, but at the end of the day, you are wanting your clients to walk away with something and they don’t walk away with you.
They don’t take you home for dinner tonight, but they do get the benefit of working with you and all of the things you achieve together. So this is something I really, really want you to focus on. Is that separation and being able to look at things from an objective lens.
Okay, so the fourth thing we’re gonna talk about is the considerations when you price, and I’m actually going to go a little bit further into this point in the next episode, but for now, the things that you should consider when you are setting your price.
So whether that is you’re creating a package. And you’re going to include a set of five things in the actual doing part of that package. These are still things you need to consider or whether it is when you’re setting an hourly rate, whatever that rate is, these are things you need to consider.
So they are you, your time.
Yes, you need to be paid. The expenses, the operating expenses of the business. The experience you are providing by charging this rate, have you included any buffer for things taking longer for something going wrong, for the ability to surprise and delight clients, the people? Sometimes it’s not just you working on something, so we need to consider this.
When we’re setting a price and finally the profit, we don’t wanna walk away every single day breaking even. That’s not what business is about. And if you wanna thrive as an O B M, you have to treat this as a business transaction. And you are the business. You are working as a business. So a business needs profit.
It is lifeblood. So there’s some chunky pieces in that, which is why then I’m going to chat about that. In our next episode, and the fifth point is when to increase your pricing and how to increase your pricing.
So this is just a really quick little trigger for you to know. “Ooh, now is when I increase my pricing.”
And it’s a rule I’ve always followed and it’s a rule I felt gives me security because all it is is. When your books are full, you are at capacity and you’ve still got people contacting you to work with you – increase your price. Not for the people that you’re with right now, but for anyone new up that price on your website, change the way you price now because you’ re already secure in the revenue that you’re making and as you teeter and work out what the new price should be, you have a little bit of room to play right now because it’s not impacting your current clients. This is for new clients, right? And so if you still have leads coming in, and let’s say your conversion rate drops a little bit, so with your new price it’s a little bit higher, it might look a little bit different.
Instead of say, winning, one client in every two or five clients in every six, you might start winning three clients out of every six or two clients out of every six or one client out of every six. But as long as the amount you’ve increased, your price allows for that. You are still ahead, but you are actually not doing as much work.
So, that’s my gauge. If I’m at capacity, I can’t actually do anymore. I can’t work out how to take anymore on, and that’s whether that’s for you or your team or however you’re structured. Now’s a really great time to look at your pricing and see if there needs to be a shift. And then the how of that is always start with new.
So we don’t ever wanna rapidly change things like price with people who are used to it overnight, without explanation, without lead in. Whereas people that haven’t met you, haven’t talked to, haven’t seen the way you operate yet they don’t have a baseline for what they’re used to. So it gives you a clean slate.
So it’s a really easy way to start with them first and play with that price. See what happens if you all of a sudden start getting no one sign up because you’ve increased your price way too much and you haven’t articulated the value properly. It shows you something needs to change. So then you tweak it and you try again, and you tweak it and you try again.
And as long as your, foundation client base is still there, that’s what gives you the wiggle room to do it. So, it’s all play.
Alright, they are the five things that I wanted to talk about that will impact how you charge as an OBM and what to charge as an OBM. And as I said in the next episode, we’re gonna go through some of the considerations in some more detail, but I really hope that that gave you a foundation for what to think about.
And that you feel a little bit more confident to price a little differently or to think differently about pricing or just to ask questions about pricing. I love questions. I love helping people.
So, if you do have questions around this, please reach out. You can @audaciousempires, Instagram, Facebook, you can Leanne Woff on LinkedIn.
You will find us. Or leave comments on this podcast and we’ll get back to you, or I’ll answer it in a podcast episode. Reach out, let us know what you think. Have a great day.