How to Price Your AI Services as a Beginner

Summary

In this video, Leam Motley, founder of Morningside AI, shares key insights on pricing strategies for AI products and services, emphasizing the importance of getting pricing right to turn small wins into bigger successes. He outlines the value formula, the importance of gaining experience over immediate profits, and suggests starting with low-cost or free projects to build case studies. After gaining experience, he recommends using a Cost Plus pricing model with a 2X markup. He also stresses the value of structuring deals with 50% upfront payments and learning through hands-on delivery to grow your business over time.

Takeaways

• 😀 Experience is more valuable than money when starting out in AI automation. Focus on building your skills and portfolio before aiming for profits.
• 😀 Begin with offering free or low-cost services to gain practical experience and build a case study to increase your value to clients.
• 😀 Your pricing strategy should evolve as your skills and experience grow. Start with a cost-plus pricing model, then transition to value-based pricing as you gain more credibility.
• 😀 Use the value formula: your skills and experience determine your value, and the more experience you gain, the higher your rates can be.
• 😀 Start by using low-code or no-code tools to deliver simple projects without the need for large initial investments or resources.
• 😀 A 50% upfront, 50% on completion payment structure is ideal for early-stage projects, especially those under $30,000, to secure cash flow and reduce risks.
• 😀 Don’t rush into high-ticket, complex projects too early. Take smaller steps and gain experience first to avoid potential failures.
• 😀 Cost-plus pricing allows you to ensure you're covering your costs while adding a reasonable profit margin. Start with a 2x markup for beginners.
• 😀 The more projects you deliver successfully, the more you'll be able to justify raising your rates and scaling your business.
• 😀 Building case studies and collecting testimonials early on is key to growing your reputation and proving your ability to generate value for clients.
• 😀 Understand that every AI expert you meet likely has experience, not just theoretical knowledge. Successful deliveries are what truly define expertise in the AI space.

Q & A

What is the key takeaway from the speaker’s experience with AI product and service pricing?

The key takeaway is that getting your pricing strategy right is essential to turning small wins into larger, more profitable ones. It's important to focus on gaining experience first, and prioritize learning over immediate profits.

How does pricing impact your AI agency?

Pricing directly affects the profitability of your agency, as it determines the revenue you generate. It also reflects the perceived value of your services and influences how your business operates, shaping the types of projects you take on and how much profit you can reinvest into growth.

What is the 'value formula' mentioned in the video?

The 'value formula' combines your skills and experience to determine your value in the market. Your skills are your technical abilities, and your experience is the practical knowledge gained from delivering AI projects. The more experience you have, the more valuable you become to clients, allowing you to charge higher rates.

What are the two types of pricing models discussed in the video?

The two pricing models discussed are 'time-based pricing' (for services, which is based on the hours required to complete a project) and 'value-based pricing' (for products, which is based on the perceived or real value the product delivers to the client).

What should beginners focus on when starting an AI automation agency?

Beginners should focus on building experience rather than seeking immediate profits. The speaker recommends starting with straightforward, low-cost or free projects to gain hands-on experience, collect testimonials, and build case studies to increase value over time.

Why is it recommended for beginners to offer free or low-cost projects?

Offering free or low-cost projects helps beginners gain practical experience and build credibility. It reduces the risk for clients and allows the agency to improve its skills before trying to charge higher rates.

What is 'Cost Plus pricing,' and how does it work for beginners?

'Cost Plus pricing' involves estimating the time and resources required to complete a project and then adding a markup to the costs to determine the price. Beginners should start with a 2x markup to cover their costs and generate profit, with the option to increase the markup as they gain more experience.

What payment structure is recommended for beginners in AI automation agencies?

A 50% upfront and 50% on completion payment structure is recommended for projects under $20,000–$30,000. This structure helps beginners cover their costs upfront and reduces risks associated with delivering the project.

How important is experience for success in AI automation agencies?

Experience is the most important factor for success in AI automation agencies. Gaining hands-on experience with real projects allows beginners to increase their value, improve their skills, and ultimately charge higher rates for their services.

What advice does the speaker give for hiring a developer?

The speaker advises that once you have gained some experience, hiring a developer can help you scale your agency. However, it's important to ensure that you can clearly communicate your value and have the necessary project experience before bringing on additional team members.