As a business owner and entrepreneur, one of the hardest challenges is figuring out a consistent pricing system for your services. Even with almost two years now under my belt, this is one area of my own business which can still be overwhelming and stressful at times – mainly because it also carries so much weight. How you price your products or services has a direct impact on the money you make or the clients you turn away. There are many reasons to want to undercut competitors and to offer the cheapest bargain around, but then there is the challenge of putting a price on passion. As entrepreneurs, we are much like artists and inventors. It’s hard to keep an unbiased perspective on something we quite often view as priceless.
A quote by Henry David Thoreau that I truly love is, “The Price of anything is the amount of life you exchange for it.” Though I appreciate the underlying message of valuing our time, this mindset would make it impossible to ever set a price for my writing and creativity that was fair to both me and my clients. But luckily, just as much as I am an artist with the pen, I am also a businesswoman. This balance has allowed me to build a smart and strategic method for pricing my services without undervaluing my time or talent. Here are just a few of the guidelines that I’ve come to rely upon when placing a price tag on my passion:
Determine your hourly rate
The first hourly rate I set for myself when I was still freelancing my services in college is a mere fraction of what I now charge. However, it was a price that was fair for both me and my clients at that time. It was a nice increase over the minimum wage I was making at my other side job and to my clients, although they were working with a college undergrad, the price was a steal for the quality of work they received. After graduation, I was able to increase this price because of the formal degrees I had earned. I was sure to communicate this with existing clients and positioned it as a “value added” to my work and professionalism. Because it still remained well under the industry’s going rate, I received no negative kick-back from this increase. With the start of every New Year, new contract or new client, I have the ability to adjust my pricing. For clients who remain with me over the months and years, I offer them the loyalty benefit of “grandfathering” them into their starting prices so long as the scope of work remains the same and it’s not a significant opportunity cost.
Your years of experience and education/degrees will have an impact on how you price your services. I’ve found that remaining even just $5 under the hourly rate of the “industry norm” gives you a sizable advantage. While I don’t dismiss that this small difference in hourly rate can certainly add up over a large project, a small discount still earns you far more money than not being selected to complete the project at all. The best way to get a feel for the pricing of your competition is to talk with clients and people within your network who have worked with other similar contractors – they can also give you their honest opinion of what price range they are most likely to hire within.
Bundle your services
It’s standard – and smart – to have a set hourly rate because this is a common question clients potentially seeking your services will want answered. While I do have an hourly rate, I rarely charge by the hour on my proposals. Most often, I use this hourly rate to estimate the maximum cost for a project, but aim to lower this significantly for a client by offering service bundling. With bundling, I discount my rate in exchange for a client who chooses to hire me for more than one service. For example, I may offer a proposal with several communications strategies including writing web site copy, newsletter content and updating their social media profiles. When contracted separately, these services would be higher than if a client should choose to do them all together. The benefit to the client is of course the cost savings and the benefit to me is the security in work. Often clients will just want to know your hourly rate before you discuss much else, but I am sure to include that my hourly rate is discounted when combining multiple projects. This also helps me to create a more cohesive and effective communications strategy than just one project alone. The service bundling is an incentive to do more for the best price possible.
When providing my clients with a proposal for my services, I emphasize that the price I quote them for is the guaranteed maximum that will not increase so long as the scope or size of the project remains as we discussed. This is important because all too often we’re hit with unexpected price increases from every angle in the form of electric bills, cable and internet and the list goes on. It’s nice to offer clients something that’s a bit more stable which allows them to better budget. Also, once I provide my clients with the best possible price (bundling services, maximum price guaranteed, etc) it’s now to my advantage to work efficiently. If I estimate a project taking me 8 hours, I certainly don’t want to procrastinate and stretch this project into 14 hours. That’s a waste of my own time and earning potential! Instead, the way I price my services encourages efficient work which means my clients often receive their project days if not weeks before our agreed upon deadline. When pricing your own services, I suggest structuring this in such a way that you reward your efficiency while offering your clients stability. This is a great way to earn respect and trust while earning the most money for your time.
What are your thoughts on pricing your services? Where do you most struggle or what are some ways to make this less of an overwhelming task? Share your comments or questions and let’s get this important discussion going!