Raising your prices in an online business is an awesome way to scale up your income without needing to add on MORE to your plate.
And if you’re reading this blog, you’ve probably been flirting with a price increase, but haven’t gone “full send” because something is holding you back.
That ‘something’ may be timing, it may be knowledge around the right next price, and it might be a little bit of fear – fear that when you do increase your prices, you’ll turn away the audience you worked so hard to grow.
I want to start by talking about that fear before we get into the how-to, because if you’re still living in the “what if” no amount of educational content is going to be able to move you out of your comfort zone until YOU move you out of your comfort zone.
Instead of focusing on ourselves, let’s start this pricing convo by focusing on who you’re looking to serve: Best-fit client.
Best-fit clients are those that:
- Value time and don’t waste it
- Ask a question and then take action
- Commit fully to the package
- Take responsibility for their life/health/business
- Don’t abdicate decision making to you simply because you’re the authority, and instead takes your insight into account and defines a final choice that aligns best with their goals
If that list of 5 has NOT been your experience with clients, it can be due to a lack of structure in the package, a lack of boundaries in communication, a lack of setting realistic expectations, & more… but oftentimes one of the main culprits is underpricing your offers & services, and attracting someone not quite ready for the experience you’re providing.
Why is it that lower prices seem to attract people with an abundance of scope creep, questions that they don’t take action on, and some of the highest expectations…? Typically because they’re more beginner and their budget doesn’t yet allow for something more advanced.
Now “beginner” doesn’t JUST mean they’ve been in the game for a short amount of time. There are beginners who have been wanting to get a result for years, but not fully committing to taking action. They’ve been consuming knowledge but not putting that into effect.
Imagine if you wanted to learn how to fly a plane and all you did was read about it without practicing. That’d be a very different experience once getting into the cockpit.
It’s easy to question ourselves/our offers when a beginner client (presenting as a more advanced client) comes in with misaligned behaviors, but oftentimes we’re just a stop on their journey of consuming-without-committing. And while we care about them and want the best for them, we can’t control others’ actions.
The easiest remedy? Raising your prices to attract best-fit clients.
Did you just mentally bite your nails and say “zoinks!”?
Raising your prices can be scary AF… But why?
- What you think it is: You get a lead and they say no because it’s too high and then your lead pool dries up and you don’t make ANY sales
- What is actually is: The fear of rejection.
Rejection is scary for two reasons:
- Due to whatever experiences you’ve had through life where you were rejected, and it HURT, so now your brain is hardwired to protect you from those feelings
- The meaning you attach to rejection
Let’s unpack #2.
Genuine non-rhetorical question: If someone doesn’t want your offer, what does it mean?
Think about it for a sec.
What just came up for you?
- “It means I’m not that good at what I do.”
- “It means they’re going to go whisper about me to their friends in my niche.“
- “It means they see me as the fraud I am, I don’t have as much schooling/experiences as “so and so” and they can see that… the jig is up!“
Most commonly known as: Imposter Syndrome
Now I don’t aim to be able to unravel all of this for you in one blog, but I do believe that when we can wrangle our mental monsters, bring them ‘front of mind’, and stare them firmly in the eye… we can begin to do something about them.
So, if you have an inkling that your reason for not increasing your prices yet is due to this seven layer brain dip, then…
- A. You’re SO not alone, and
- B. I hope that helps us move through the rest of this blog with more “self-given permission” to take this a true option for your business because you’re worthy and ready just as you are.
And trust me, there are TONS of best-fit clients LOOKING to pay premium prices for a top tier experience and results. Clients and opportunities are everywhere when you rise to the occasion. If you’ve been selling this service/offer already and the demand + need for it exist, then it’s not a matter of the leads not existing. You just need to go upmarket in your pricing and messaging to attract them.
Now let’s jump into the educational stuff!
Start from the current price of your offer
Here’s my pricing strategy found within the Revenue Roadmap spreadsheet in Business Expansion Blueprint (this is the espresso shot version):
- Identify your hourly rate (& the hourly rate of your team members if you have them)
- List out your offer’s deliverables + the time associated with each item
- Whose time is required? What’s their hourly rate? Sum up the hours x’s the “hard costs” of those individuals
- Add a profit margin to the hard cost
- Perform a quick competitive analysis to see where your price is landing within your industry and make small tweaks as needed to best reflect the position you’d like to take in the market
How high should you increase your price?
Step 1: Before we increase the price, we want to first optimize this offer by looking for ways to get the “hard costs” down.
Can you spend less time on this package by including automations, a software that does some of the manual work, a junior staffer / virtual assistant / co-coach can take on some of the “doing”, does your offer have “nice to have” deliverables within it that aren’t utilized or appreciated by clients… can we cut them?, etc.
If you’re able to make the offer “cost” you less (i.e. taking less of your time), you could go from a 40% profit margin* to 50%.
*A profit margin is the amount of cash you bank after the expenses are subtracted from the revenue generated. In an online business we don’t have a lot of expenses, so we calculate profit margins and “hard costs” heavily based on the time committed to the fulfillment of the package. The average profit margin in other industries is around 10%. This expertise-based industry allows for some of the highest profit margins around.
Step 2: Now we work on that price increase by increasing the profit margin again (instead of fixating on the dollar amount).
Let’s say that margin increases again from 50% to 65%, what does that make the price?
Example:
- Starting price: $1,000
- Hard costs: 4 of your hours x $150 hourly = $600 hard costs
- Which means the profit margin is: 40%
Step 1: Look for ways to get the hard costs down.
- Hard costs: We automate a process and it takes your hourly commitment per client from 4 hours ➝ down to 3 hours x $150 = $450 hard costs
- Which means the profit margin is now: 55% (nice!)
Step 2: Without increasing the deliverables, simply increasing the price, increase the profit margin.
- Profit margin increase: Let’s say you take it up to 65% without decreasing any of the hard costs…
- Percentage Calculator: Using a free online percentage calculator tool (to make your life easier!) use the function “[blank] is what percent of [blank]”. Start by entering in your hard costs, and then play around with the price to get yourself to that 65% profit margin (i.e. the calculated percentage is 35%)
- How does that price look in comparison to the market? High, average, lower? Where do you want to land based on your brand positioning, vision for the company, and who you want to work with?
By focusing on the profit margin it puts us in a “business mindset” versus fixating on the dollar amount and attaching emotion to what that dollar amount means.
AKA let’s trick your brain so the ‘scary factor’ is lowered out of the gate.
When should you increase your price?
If you’re intrigued by the concept of raising your prices, but not sure if you’re there yet, this part’s for you:
There’s a framework in the book Traction by Gino Wickman titled “GWC”. It stands for “get it, want it, and have the capacity to do it”. Wickman uses this as a way of delivering new tasks to team members, but I like to also use it as a self-analysis prompt.
Within this offer or service ask yourself:
- Do I “get” the work I’m doing on a thorough enough level that I’m able to facilitate a result for a myriad of different clients? If yes, move on to the next one.
- Do I “want” to serve the more premium clientele and charge luxury pricing within this offering? Or would I rather keep this package the same and instead expand my Anchor Package or Private Offerings for alumni clients? If yes, move onto the next one.
- Do I have the “capacity” to do this work? Mentally, emotionally, physically, financially, logistically? This could come down to skill, time, team, or mental white space. Take a moment to check in with yourself that we’re making this increase due to OUR vision, and not general “I’m supposed to scale my business so I guess this is what I should do…?” industry advice.
If through those Qs you find you’re wanting to move forward with increasing the price of this offer, but would like to acquire a bit more experience first to ensure your frameworks & skillset are producing results and are transferrable to clients of varying levels, experiences, and needs…
Then we’re going to set a QUANTIFIABLE minimum:
For Example: Take a Copywriter
“I’ve only worked with people in the financial sector due to most clients coming from referrals. In order to increase my prices, I’d like to work with 3 clients outside of the financial industry. Once I do this I’ll be able to make a couple of small tweaks to my method so that I’m better prepared to write copy for a wider array of clients, which will support my price increase and overall vision.”
Next let’s look at your sales goals
Say you want to make $20,000.
Former pricing: $1,000 / $20k = 20 Clients
New pricing: $1,300 / $20k = 15.4 Clients
It’s great that we’re able to make the same amount of money with fewer clients as this will give you more time to go deep and excellent with fewer…
But we can take this up a level.
Next we think through adding on upsells to increase our Average Order Value (AOV).
AOV: The average dollar amount each client spends at checkout.
To look at this big picture you can divide your annual revenue by the number of clients you worked with that year.
($100k / 100 clients = $1,000 AOV)
But in this instance we’re looking at an individual offer’s opportunity to increase AOV by adding an upsell.
Back to our $20,000 goal.
- New pricing: $1,300 / $20k = 15.4 Clients
- Add on an upsell of $800 and 20% of clients take you up on it = that’s 4 people
- 4 people say yes to the $800 upsell = An additional $3,200
- New total with increased pricing: $23,200 with 5 fewer clients
These small strategic tweaks make such a big impact to your bottom line – today, quarterly, and annually.
One more thing I want to bring up about your pricing…
Different pricing dependent on the “sales pathway”
There are three sales pathways…
- Direct Selling: Privately OR publicly selling a specific amount of spots, or direct inviting to the offer. A direct sale can also happen automatically by the lead navigating to your sales page and making an investment on their own.
- Automatic Funnels: Automatic sales pipeline presenting an option to buy or apply, typically with an incentive.
- Live Launching: Live campaigning the offer with a specific incentive and open cart availability window.
If you choose to use discounted pricing as an incentive to purchase, then you may have three prices for one offer based on the sales pathway used.
- Direct Selling: Full price
- Automatic Funnels: 5-15% off*
- Live Launching: 15-25% off*
*Optional, this is just an example percentage discount, don’t take this as gospel. Everyone’s pricing strategy is unique to their market, revenue goals, and the type of offer they’re selling.
Example:
Let’s use our $1,300 price increase.
- Direct Selling: $1,300
- Automatic Funnels: $1,200 (8.3% off – $100 savings to support the colder sales style)
- Live Launching: $1,100 (18% off – $200 savings to support the urgency of the sales style)
What’s my point here?
→ If you plan to use price incentives within your sales pathways, make sure the price you’re increasing to gives enough wiggle room to provide a discount that doesn’t impact your profit margin too drastically.
The simplest way to go about this: Don’t discount the price lower than the former price.
Using our example: We’re not discounting the price lower than the $1,000 it started at.
The step-by-step price increase plan
If we’re just meeting, let me tell you – I love to leverage everything.
Step 1: Identify your leverage opportunities
The 5-to-1 Opportunity Ratio: In order to say yes to something new, I like to challenge myself to figure out 5 additional ways to leverage the opportunity (I probably won’t use all of them, but the exercise helps me find the ROI in the time, money, and energy – in order to determine if I say “yes” to the opportunity or new idea).
Let’s take my client’s event hosting opportunity, here’s what we discussed:
The Idea: Hosting an event due to the resounding request from her audience to get together in-person
The Question: If you do this, how can it be further leveraged?
Opportunity 1: Hire a videographer and…
- Sell a “virtual ticket” to those that can’t travel to make it in person
- Use the recordings of yourself in your program, social content, or for your next launch
Opportunity 2: Include a couple of guest speakers and…
- Host a JV webinar with the guest speakers before the event to create an opportunity to cross sell tickets to their audience
- Upon contractual approval, bundle the recorded session together as a pop up product: “Insights from the experts” (this could be sold to the in-person + virtual attendees as “extended replay access”, AND/OR to the additional members of your audience who didn’t purchase their ticket initially… But once they saw it go down on IG Stories really wanted to get access. 😉)
Opportunity 3: Get testimonials & case studies at the event
- Bonus points for using a videographer to film some of these! (Make sure you have legal waivers in place at the event)
Opportunity 4: Make an offer at the event
- This is the typical “sell from stage” opportunity. There’s nothing like being able to support your warmest prospects through making a hyper-informed decision due to having access to you to talk things through.
Opportunity 5: Use the event tickets to grow your audience
- Host pop up giveaways of the tickets
- Create a referral kickback opportunity for frequent attendees to bring their friends and receive a small prize or commission
*end quickie client example
TL;DR: I want you to leverage your price increase.
Step 2: Host a “prices are going up” sale at the current rate
If you’re game to work with more clients at the current rate, a “prices are going up” sale is an AWESOME way to drum up quick conversions.
This is simply enrolling for as many spots as you have at your current rate (i.e. $1,000) before the price increases (i.e. to $1,300) on X date.
With the factors of urgency (due to the timeline for the increase) and scarcity (due to only having so many spots available) it helps to support those prospects who have been quietly lingering on the fence – wanting to work with you but not having a reason to go for it, until now.
Share about the sale publicly! Treat it like a mini launch by giving specific enrollment windows and making a big deal about it on social/email.
Step 3: Communicate with current clients FIRST
But! The FIRST thing you want to do before ever announcing this publicly, is speak to your current clients.
- To offer them the sale opportunity before the public
- To communicate what’s going to happen to their current pricing
Option 1: Honor the current pricing forever
i.e. if you promised them when you first sold your membership that they would lock in this rate for lifetime, then you’ll need to continue honoring that.
Now if that pains you due to how much that price point cuts into your profit and you’re kicking your past self for using that jargon in your early sales messaging, then you do have the option to try and upgrade these clients to a higher package / offer / tier.
Typically how this will work is that you continue to provide the same historical features / assets that their current rate promised, but you continue to upgrade the offer with new features that are not automatically included in the OG version. If they’d like to pay to unlock those features, this may only be found within the new pricing model thus forfeiting their OG price if they value the upgraded experience enough.
Not your style? Take what you want and leave what you don’t from this blog, I know pricing can be a sensitive subject since it’s tied to our “money stories”.
Option 2: Honor the current pricing for a set time
i.e. 6 more months on the current rate to thank you for being a loyal client, but after that time the price will increase to $XYZ… This also helps to create more resign contracts as people tend to want to get the good deal while they can!
If this article aligns, I hope you take the leap to increase your prices (strategically + highly leveraged) so you can work with the clients that light you up, and continue to scale your online business with the assets you already have (versus being on a quest for MORE and NEW).
You have SO much “scalability” available to you right now – harness it!
Have any questions? Want to chat it through?
- Come see me on Instagram. I hang out in the DMs daily and would love to hear from you!
Ready for more business scaling tips & magnetic marketing tactics?
- Subscribe to “The Goods” our free weekly newsletter that sends every Tuesday morning.