Millions of small businesses sell personal services like consulting, website development, or janitorial services, instead of something tangible like a computer or a kumquat.
Unfortunately, pricing a service is not as intuitive as a tangible product. Consequently, service businesses too often don’t charge enough to sustain themselves profitably because of how they think about what they sell to customers.
Don’t make the professionally fatal mistake of comparing what you charge customers to deliver your product — a service — to how much you would expect to make per hour as an employee. Doing so, to paraphrase Mark Twain, is like comparing lightning to a lightning bug. You must think like a business, not an employee. You have to think pricing, not wages. Here’s why:
1. You’re a business now, which means you offer customers a price list, like you would see on a wholesale catalog or a restaurant menu, not a wage list. And you collect revenue, which is what businesses produce to create the gross profit that pays expenses, including the salaries, taxes and benefits of employees — and owners.