Years ago, I tried to start an agency and I failed miserably. There were many reasons I failed, but easily the biggest one was: I didn't know how to price my work. I'm so ashamed to say this, but I was barely charging anything above what I was paying my team. If I was paying them $50/hour, I was charging $65/hr. I thought I was doing good.
I lost about $15,000 doing that for a year. More importantly, I let every one of my clients down, and I burnt out a couple really good developers.
You see, I've never had money. Up until a couple years ago, I was the poorest professional person you know. Because money was so scarce *for me*, I projected that scarcity onto my clients and assumed what they cared about more than anything was keeping the costs low.
I was wrong. What clients want is to get their projects done and get them done right. They don't want to spend more than they have to, but they want to get the project done.
I've bought several "cheap" computers over the last ten years. Every penny I spent on a cheap computer was a wasted penny. In contrast, I've spent thousands on nice Macs and never regretted any of that money. The Macs meet my needs, and therefore, I (and millions of others) would gladly spend the money on them.
Your customers don't care about your price as much as they care about you meeting their needs. If you meet their needs, they will gladly pay you what it's worth.
I wish I knew who told me this so I could thank him, but the light bulb went off for me when I heard this phrase:
Charge enough that you can keep your promises.
You see, I thought I was doing clients a favor by keeping costs low, but in actuality, I was hurting them, because *I couldn't keep my promises*. I couldn't hire the best people. I couldn't use the best tools. I couldn't make sure that there was margin to get us through the hard times. I couldn't give my full attention to it because I was always hurting for money.
When I understood that raising my prices and making a reasonable profit were actually **helping** my clients, it was like the chains fell off for me and our agency could actually start making money. Rather than running a skeleton crew and working them to death, I could hire more people and give them the structure they need to succeed and thrive. Rather than being one slow month away from closing the doors, we had the margin to deal with the setbacks and make sure we were still around to help our customers when they needed us.
If you are starting an online business, whether that be a service or a SAAS, be sure to charge enough that you can keep your promises. Do your customers the favor of having enough of a margin that you can handle support requests and give them the attention they deserve.
Charge enough so you can keep your promises.