February 5, 2009
Pricing your skills and talents is not easy at all. No matter how comfortable you are with what you can produce, it is never easy to figure out how much to charge someone when you are first starting out. Pricing is obviously one of the more important parts of your business - after all it is your income potential you are setting. While there is always room for improvement down the road, it is important to take the right steps from day one when you are setting your prices. It’s not a good idea to go back and forth between different ranges, otherwise prospective clients and customers can get confused and decide to turn to someone else for product or services.
Here are a few considerations to take into account when determining your own pricing schedules:
Total Overall Costs
If you set your prices too low, you will never be able to make enough money to cover your expenses let alone have any money left over to be considered profit. It is best that your begin crunching the numbers as best as you can, even if you are just starting out. While it is great for a new business to break even in their first year, it is certainly not a plan for long-term success. Don’t forget to take into account all of the costs you have a business owner including taxes, insurance, and payroll, as well as rent, utilities and the other standard expenses.
Total Business Profit
As mentioned, breaking even in a business can be a good sign that things are going to be successful. But if you are only going to keep breaking even, there is not much point in maintaining a business that never sees a profit. Your prices need to reflect the cost of your expenses and the amount you need to make a profit.
Your Market-ability and Skill Level
If you are in a competitive business, it makes sense to keep your prices competitive. In today’s economy it can be pretty tricky to set prices that people who are suffering their own financial setbacks can afford to pay to keep you in business. On the other side of the coin, if you have a niche business and the competition is relatively low, you can price yourself a bit higher if there is a strong demand for your services or your product. If you are just starting out in a certain area, you may not be able to command a higher rate as someone else who has been in business longer. Not all freelancers have the same productivity standards or experience level so you will have to take into consideration your skill level when pricing.
Your Customer Service
Some freelances will only provide one individual service for a price while others will offer some additional services that are included in the price, such as 24 hour support or the like. Depending on what sets your business apart from the competition can be factored into your pricing.
If you are selling a service, you might wish to forgo a standard rate sheet and create a pricing system dependent on the client. For clients who provide you with long-term income potential, you might consider charging a reduced rate. For clients that are riskier, for instance those that don’t pay reliably, you might want to charge more. There will be times when work opportunities are presented that you would love to do from a personal standpoint but the client has a budget that won’t accommodate your standard rates so you can be more flexible with situations like that. It is best to outline a standard charge for services to use as a personal reference point so you can always do fast quotes when necessary.
As time goes on and you become more familiar with pricing what you sell, you will get more confident in your decisions. It can be an overwhelming task to tackle the first time out but stick with it and you’ll be able to set your own standards.