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Women in Business

Pricing Strategies of Women-Owned Businesses

Pricing Strategies of Women-Owned Businesses

The gender pay gap has long been an issue for women in the workplace in general, but women entrepreneurs in charge of pricing strategies all-too-often may be shortchanging themselves. A 2006 study conducted by the Neeley School of Business showed female entrepreneurs consistently underpriced their services as compared to their male counterparts. The study’s authors said their research revealed that even when women have substantial discretion over the amounts they charge, they still make less.

This mindset can not only be seen in female entrepreneurs’ pricing strategies, but also in how they pay themselves. In one UK study, researchers followed 159 social entrepreneurs, meaning business owners who work to create social as well as financial value, and found that the female social entrepreneurs paid themselves 23 percent less than their male counterparts. They noted, however, that the women had a higher job satisfaction rating than the men.

What’s the psychology behind this behavior? It could be as simple as a lack of financial or business knowledge. If you’re not sure how to determine your value and set your rates, check out this practical advice to help women business owners price their services. But it’s probably more complicated than that, since deeply engrained cultural norms and society’s expectations heavily influence behaviors, especially those around money.

Stereotypical Gender Roles

Traditional gender roles and expectations no doubt have played a part in molding women business owners’ attitudes toward money and determining their worth, especially for older generations. Crystal Stranger, tax operations director of 1st Tax and author of Pro-Choice: A Financial Guide for Women, thinks women entrepreneurs undervalue themselves because they just aren’t used to asking for more.

“Men tend to spend a good bit of time talking about money, how much they earn, how much they charge, etc. Women are much less likely to come out with these specifics unless pressed,” Stranger says. “I’m not sure if it comes down to worries about hurting others’ feelings by boasting, or fears we will get told we are underpaid, but there seems to be a lot of mental anguish amongst most of my female friends in this area, even those who are successful entrepreneurs and business women.”

Sweeping this issue under the rug makes it even more difficult when it comes to asking for more money from clients. She recommends shining a light on the issue and talking about it with others to help women make changes, if needed.

Lack of Confidence

Women who undervalue their worth probably do so in many areas of their lives, not just in their business, and it may come down to a lack of confidence that began very early. Again, it’s related to gender roles.

Author Nelli Oster writes about gender and “the confidence gap,” specifically as it plays out in the area of finance. “Researchers have found that gender differences in overconfidence tend to show up in tasks considered to be more masculine and in fields such as mathematics. What’s more, they’ve found that men’s good performance is often attributed to skill, whereas women’s is often attributed to luck. Elsewhere, in finance, women tend to admit ignorance more openly than men, describing themselves as inexperienced.”

Fear of Losing Clients

Some women may fear losing clients if they charge more, and so they are willing to drop their rates to secure the business. Stranger said she shifted her attitude when she likened charging her value with expecting to pay a fair price to others.

“I had never been afraid to ask for a discount in a store if something was damaged or the price seemed higher than expected, why should I have a hard time asking for a fair price when it came to my work?” She said, just like when buying an item and asking for a discount, you have to know if you will walk away or buy it anyway, even if the price doesn’t get adjusted. Same rule applies to pricing strategies in your work, you have to be willing to let some clients go who don’t want to pay your fair prices. “Before you ask for money know how far down you can negotiate without losing out, and never cross that boundary.”

Entrepreneur Kristin Bales, owner of KJB Writing Services, said she initially based her pricing on fear. “I had no idea what hourly rate would be acceptable to customers. I worried that I would shoot for the moon, and clients would balk.” She now charges what she’s worth. “In the last couple of years, I’ve increased my pricing substantially with new clients. Not a single one has rejected my rate…Always value your work and never be afraid to ask for what your skills and time are worth.”

Generational Differences

A few years ago, The Huffington Post reported that millennial women (those between the ages of 18 and 35) were well on their way to closing the gender wage gap. This trend is most likely translating to the realm of women entrepreneurs, as well. Ambar Januel, co-founder of the creative agency J+J, is a young entrepreneur who says she doesn’t feel the pressure to lower value, but does adjust her fees relative to the value she gets from the work, beyond a dollar figure.

“There have been times in my career where I underpriced my services only because I knew that to be given the job/project I had to meet a certain budget. I would make the decision to do this based on my interested in the company/brand or person who I would be working with, and then I would consider whether I would be learning a new skill or working in a unique environment.”

Januel said as a millennial, her experience with pay has mostly been positive. “I hope that this new generation (especially of women) are able to stand up for themselves and ask for what they deserve, but if saying no to a position while not considering all of the benefits is the alternative, I would prefer my generation continue to learn so that we can grow our value even more.”


Are you a female entrepreneur? Share your experience with us and how/if you plan to make changes in the comments below. If you’re interested in learning more about Kabbage, visit our business loans for women page.