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"Must Know" Tips for Pricing Your Services
One of the worst moments in a business owner's life is that silent moment between when you quote your rate to a potential client and his response. True, that hardly a second goes by, but it can feel like an eternity.
"Will he hire me?"
"Did I go too high?"
And when he says "YOU'RE HIRED!", a new set of doubts creeps over you:
"Should I have gone higher?"
"Did I lowball the price just to get a client?"
You know the feeling. You've got the job, the project, the new client and it almost always turns out to be more work than you thought when you signed up for the task. Be sure that you know your worth and communicate it to the client up front.
1. Know your worth
If you charge your clients hourly, how do you know what to charge them? Did you pick a number out of the air? What was your rationale?
For those who choose to bill hourly, I recommend the following approach to determining what you charge:
(a) Determine what you want your salary to be. How much will you take out of the company?
(b) Add to that any subcontractor expense that you may have. This is your "labor total".
(c) List out and then add all your expenses: advertising, promotion, rent, self-employment tax, supplies, etc. This is your "non-labor expense total".
(d) Add your labor total to your non-labor expense total.
(e) Add in any profit goal you may have for your business.
(f) Bullets (d) plus (e) equal your Total Required Revenue.
(g) Divide your "Total Required Revenue" by the number of BILLABLE hours for the year. Remember that you will not be billing 40 hours/week. The result will be the amount you need to charge per hour to make your salary goal.
If you bill hourly, take the time to complete the above exercise and, if necessary, increase your rates accordingly.
2. No haggling
It can be hard when you have few clients or need more money, but whatever you do, do not haggle with your clients/prospective clients over your pricing.
You can haggle at a flea market. You can haggle for the price of a house. You can negotiate (a.k.a. "haggle") for a corporate job salary. As a self-employed individual, you must not haggle over your pricing. To do so immediately lowers your perceived worth with that person and will set you up for a relationship of nitpicking over every nickel and dime.
3. Provide a "solution" and not a "service"
Insure your clients understand the benefits they will receive from hiring you. You are not providing them a service; you are providing them a solution.
The difference being that people value solutions more than they do services. Whenever discussing price with a potential client, focus on the benefits, i.e. the "solutions" that she will receive as a result of hiring you.
Will she have more free time? Will her business see an increase in profits or clients? Know the benefits and speak to them!
4. Be prepared to say "Goodbye"
Not everyone is going to accept your terms. Deal with it. They weren't meant to be your clients anyway and would have just taken up the time that you could use for a better qualified client. Save your time and energy for those who recognize your worth – you'll both be happier and more productive.
Pricing your services is one of the most emotional things you'll do as a business owner. Be sure to take the time to review the project at hand before just blurting out a price – doing so will save you a lot of time and frustration down the road.
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