Pricing your online services is not an easy process. It can sometimes take years to learn how to price and package your services right. There are many advantages for you to stop charging hourly for your online services and start packaging your services.
No matter which pricing model you decide, the first step you must take is to know your value. Doing competitive and market research is key. Not to copy others, but see where there is a gap and whether your pricing is comparable.
Having services packaged together shows clients you have a higher value. Packaging your services together versus providing them on an hourly basis has many additional benefits.
Benefits of Package Pricing
- Clients like to know exactly what their cost will be each month, unlike with an hourly rate that could fluctuate.
- Both clients and providers are most often satisfied with this type of pricing.
- Great way to provide clearly defined, similar services together in a grouping.
- Similar to a flat rate when offering project pricing, but it is based on the type of services provided.
- The service provider knows how much they can anticipate each month.
- Help create loyal clients who stay longer with the provider.
- Creating tiers (ie, small, medium, and large) of packages will cater to different clients’ needs.
- Provides a more predictable income (most contracts have a 30-day cancellation policy).
- Package pricing gives your client choices with pricing tiers. A client can start smaller, and as you earn more trust and have proven your help to the client, they often increase their package to the next level.
Example: Packaging services take into account that clients like options and often purchase services together, such as social media management and email marketing. When providing social media services, you can package them as “social media management.” Provide details of what is included (bulleted) in this service. Items like posting, commenting, liking, and reporting are common. Every social media manager can provide their own list of services they include in this package.
Providing tiers within the service packages helps you reach a wider client base. The tiers may be small, medium, or large packages. You can name them whatever you like as long as it makes sense to the client.
Each item you provide within the service package tier would increase to add more to the package, so the client may choose which is right for them.
Flat rate pricing is typically used when the scope of work is well defined and the time required to complete the task can be estimated accurately. Hourly rate pricing is used when the scope of work is not clearly defined, the project may have unknown variables, or the customer prefers more flexible pricing.
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Cons to Hourly Pricing
We are focused on the benefits of pricing your services together in package pricing versus hourly. Therefore, compared to packaging services, I will discuss the cons of the hourly model.
- You must keep track of all of your time on each client. Some clients may require a report as well.
- Charging by the hour means you cannot charge up front (unless offering blocks of hours*), which may mean you do not receive the entire amount owed you at the end of the month.
- You should charge a deposit so that you know you will be paid in part until the end of the month, when the invoice goes out to the client.
- You are dependent upon the client’s ability to pay you.
- Charging hourly as a Freelancer or solopreneur gives a perceived lower value to the work you provide.
- It is much more difficult to predict your monthly income.
- One of the biggest deterrents to hourly pricing is the better you become at a client’s task, the less you make. In essence, you are penalized because the hourly rate decreases the faster you become.
*This means your clients purchase blocks of hours and are billed monthly (or when the hours run out). It can be very confusing for clients and cause runover hours you have to keep track of if they are not used. It is not recommended by most coaches and those with experience.
Masterclass: Pricing Your Online Services Right
Join Me On September 24th at Noon, Eastern Time
What Will You Learn?
- Influencing Factors
- 3 Pricing Models
- How to Package Your Pricing
- How to Calculate Your Rate
- When to Raise Your Pricing
- And More
Package Pricing Simplifies Onboarding
Another benefit of packaging your services is that it simplifies onboarding for new clients. Clients actually appreciate packaged services so they do not have to guess what their invoices may be each month.
When onboarding a client, it is much simpler to provide the invoice after they sign your contract. Then you can also include any other informative items you want to include in your onboarding process.
In my client onboarding, I included a welcome email, a checklist of items to be returned (like a signed contract, etc.), their invoice, and the contract if not included with the email.
From Chaos To Streamlined New Clients
Anytime you can create a smooth, easy process for your clients (not to mention yourself), it is a huge benefit. Writing articles and copy for your social media that reveals to potential clients how you have gone from chaos to a streamlined process will attract new clients.
Whether you write up a case study to exhibit how you’ve helped your clients go from chaos to streamlined, or if you write a study based on yourself and your packaging services, it will be a sure hit. Break it down step by step for your audience and make it repeatable to attract clients who will want you to do the same for them.
Even if clients do not need help with this item, you can reveal how creating easier and streamlined processes (as you will do for them) helps the entire business. This will help potential clients realize new freedom and allow them to bring on new clients.
My Real Examples of Blocks of Hours:
I billed hourly, initially, as I began as a VA & Virtual Bookkeeper. Truth be told, I didn’t know there was any other way. As I became more familiar with virtual assistant work and VA communities, I started hearing more about packaging services. I found one that discussed this type of pricing. It took some time, but when I invoiced a client and they could not pay an invoice that had built up to $1,000, I knew it was time for a change.
The first way I packaged my pricing was to sell blocks of hours, paid up front. This was helpful, but I still had to keep track of my hours. And I found that if the client didn’t use them all at the end of the month, I had to figure out what to do.
Questions I wondered about when I was selling blocks of hours were:
- Would I let them roll over their leftover hours to the next month because they were invoiced monthly for the hours?
- If I did, how long would I allow rollover hours? One month, two months, or more?
- Or would I let them buy a big block of hours, and then not invoice again until they needed to add more hours? [This meant I could not count on those monthly amounts.]
Selling Blocks of Hours
Let’s examine some examples of these questions and what they really look like.
When a Client purchased 10 hours for the month and paid me, they began using the hours right away. If, however, they only used 8 hours out of the 10 that month (leaving him with 2 hours unused), I tried to give them their leftover hours so that they were allowed to roll over for one month.
This, however, often meant that the client still had rollover hours at the end of the next month. And it would continue on and on for months.
I eventually had to go to a no-rollover-hours policy. Clients had to use what they purchased within the month. The reason why I did this was not to be mean or unfair, but rather because it added significant work on the backend for me.
I had to not only track my time for clients, but I also had to keep track of how many hours in a month they actually used, and if they used their many rollover hours from last month. Then I had to figure out if they had leftover hours in the current month. If they did, I had to add them to next month. It was quite a cycle to keep up with if you have multiple clients doing this. Not to mention, most of my clients didn’t keep up with their hours, which is why it was important I do it for them.
This also helped my clients because it meant they had to schedule out their work and when to send it over to me.
Another Way to Sell Blocks of Hours
Some VAs offered blocks of hours, and the client was not to purchase any more hours until they had used all the hours purchased. It didn’t matter how long it took them to use them.
This can be problematic because it means you do not have a monthly retainer client. To be fair, some would argue, however, that you did get paid for a large number of hours. This could be budgeted to be used wisely.
What is a Monthly Retainer Client?
A client who has retained your services on a monthly basis. They would be your client month after month. Most often the services are packaged together with like services so you that you can invoice once a month.
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It also means you are able to count on a monthly amount from each client who is a retainer client. These are usually month-to-month clients, although most stay for a long period of time; they can exit with a month’s notice.
No Time Limit On Block Hours Example
As I said, you could have no time limit on the hours they purchased. It can, however, take some clients many months to use all their hours. This is especially true if you offer a discounted hourly rate for each tier.
If each tier of added hours they purchase is less per hour, then they may purchase the larger block of hours but not use it all for months.
Does this sound confusing? Stay with me, as I will spell it out for you.
Let’s say, for example, that these were your tiers for your blocks of hours.
- Ten-hour block at $45 per hour = $450
- Twenty-five-hour block at $42 per hour = $1,050
- Fifty-hour block at $40 per hour = $2,000
Each tier saves the client money. if you purchased the twenty-five-hour block at $1,050, you are saving $75.
[Here is the math and how it saves you: 25 hrs x $42 = $1,125; Then take $1,125 – $1050 = $75].
[The client could save $100 if purchasing the highest tier rather than the mid-tier block ($2,000 – $2,100* = $100). And if they purchased the Fifty-hour block, they would save $250 ($2,000 – $2,250* = $250).
[*Math again for the above example: $45 x 50 = $2,250; then take $2,250 – $2,000 = $250]
Therefore, it would be wise for a client to purchase the largest tier if there were no time limit put in place. This is very advantageous to your clients; however, not to yourself. I like it to be advantageous to my clients and myself, if I am going to make a profit.
This is another reason why I also switched to packaging my online services together rather than hour. It is better than charging hourly or selling blocks of hours.
Find Your Package Pricing Sweet Spot
It is important to find your sweet spot in your package pricing. Most will say that the average client will sign up for the middle package. I found, however, that many of mine signed up for the smallest package. Then, when I had shown them what I could do, and earned their trust, they would sign up for more of our services.
Simply make it easy for them to see and understand your pricing. List them on your website under a heading (make up one that the tier will make sense, like silver, gold, platinum) with bulleted points listing all the services you provide under each.
Provide as much detail as possible. If it is confusing, they will just go to the next service provider who has a more clearly defined service package.
Get Individual Help With Your Package Pricing
It is not easy when you first try to package your services together. That is why I am offering my 30-minute coaching session. If you are struggling with pricing your online services, please set up a free 30-minute coaching session with me, if you have not already. If you have already, then try one of my Quick Wins Coaching Options as they are a great option.
Tammy S. Durden is an award-winning business coach who specializes in helping women online service providers grow a business to fit their lifestyle rather than squeeze a life around their business.
She is also a thought leader, course creator, and speaker in the online service industry.
Tammy has established herself as an authority figure over the last 17 years while creating and growing several online service businesses.