Yesterday I mentioned why the first objective for consultants with a new practice should be bringing in $100,000/year in revenue. That's typically the point you can start investing in the business rather than just working on it. But how does this number impact your pricing?
Typically you start with only one core offering. This means that the pricing decision becomes, in a sense, a question of math. Here are some examples of how you can get revenue to $100,000/year:
- If you charge $1,000 for your offering, you need 2 new clients every week.
- If you charge $2,000, you need 1 new client/week.
- If you charge $4,100, you need approx. 2 new clients/month.
- If you charge $8,300, you need approx. 1 new client/month.
- If you charge $16,500, you need approx. 6 new clients/year.
This is painfully obvious, to the point it's almost embarrassing for me to put this in a blog post. But still, time and time again I see new consultants promoting a $600 workshop as their main offering. Can you really sell more than 3 of those every single week?
Those consultants often argue that this is a trust-building tactic. Charging low prices for their core offering opens the door to upselling clients with bespoke engagements or retainers. I strongly disagree and know for a fact this is not effective.
Yes, you should aim for smaller transactions to earn trust with prospective clients. But you don't start a new practice with an offering mix - you start with a core offering and build the mix from there. Lowering prices will only decrease perceived value. There are other ways to build visibility and interest in your services.
Every industry, field, and specialization requires a specific analysis. But if I had to give a piece of generic advice for consultants starting new practices, I'd confidently recommend they price their first offer between $2,500 and $10,000.
If you go under $2,500, you need to make sales every week. If you go above $10,000, you'll struggle to create momentum and your clients will likely require significant access and time investment from you. Finding that sweet spot will make it easier for you to get to $100,000/year and start seriously investing in your business.
Use the target price to reverse engineer how much value your clients must get from it to be delighted and ask for more, and develop the offering features accordingly.