If you’re in the business of providing a service, you own the unique task of figuring out what to charge it. Of course, this task varies by industry, but universally, it can be hard to determine how much you should charge. You want to charge enough so that you make a margin against your COGS. You want your price to be competitive and fit into the ballpark of what the market demands. You (hopefully) want to be fair. You don’t want to be so outlandishly expensive that demand dries up. On the flip-side, you don’t want to be in a race to the bottom and risk appearing cheap.
So what’s a solopreneur to do?
Well, as mentioned, pricing is going to vary by industry, so there’s no singular answer. But we have gathered up a few questions and ideas worth considering when setting your price…
Start with Some Math
Say you have a target annual revenue figure in mind for your business. (If you don’t, set one! Take a look at the gross revenue figures of the last few years. If they’ve trended a certain way, you can plot one out for the coming year.) Now break that down into a monthly figure. Then a weekly figure. Then daily. Then hourly. (We’re going to talk more about hours later.) The point is, figuring out what to charge is a little bit easier when you’re looking at bite sized chunks of what you need to rake in.
How Much Would it Cost to Hire for What You Do?
This is a clever little tactic. Say you’re a freelance web designer. You can probably estimate what it would cost your potential client to hire you full-time, right? Let’s say that’s $50,000. But wait, we’re talking about full cost. Including benefits, total compensation is more like in the $65,000 ballpark. Now break that number down to an hourly rate. Assuming two weeks of vacation, most full-time workers work 50 weeks a year. That’s 250 days or, assuming an eight-hour work day, 2,000 hours. That boils down to $32.50 an hour. While we’re not going to make a specific recommendation, you could double that figure and arrive at an hourly rate to charge. Right about now you’re probably wondering how you’d get away with that. This is where your value, your experience and expertise come in to play. That’s what differentiates you from an everyday potential hire! And that’s what you sell on.
Do Some Recon
It sounds counter-intuitive, but you’d be surprised at how open others in your space will be when it comes to talking numbers. This is particularly true in the freelance space. After all, everyone’s trying to learn and improve, right? So talk to your peers. Attend some Meetups. And rather than just straight up asking, start a conversation around how you structure and organize your business. Ask questions, be transparent and provide feedback. (Pro Tip: Asking “How do you figure out how much to charge?” is a lot different than asking “How much do you charge?” Feel the difference?)
Ask Yourself: Would You Negotiate?
Everyone’s going to tell you to stick to your guns, but there may be situations in which you show some flexibility. What if you’re super-hungry for business? Or what if you see potential work beyond the first engagement? Or maybe the client just can’t afford your services yet. Situations like those may call for a little flexibility in what you charge. No matter the reason, if you do decide to be flexible with what you charge, make sure you’re getting something in return. For example, if you pitched a client on X and they can only pay you Y, you need to adjust X accordingly. Alternatively, if you’re going to provide a one-time discount, say so! Better yet, document it into your paperwork that any future work will be at the full rate.
So like we said, there’s no magic formula to figuring out how much you should charge for your services. But the more experience you gain, the better you’ll get at it. Have a tip of your own? Comments!