When you own your own business, it can be a struggle to decide if you are charging enough for your work. It can be hard to ask others what they are charging because it is often taboo to talk about prices. So, how can you decide how much to charge your clients?
When I first started my business quite a few years ago, I started out charging an hourly rate that was similar to the hourly rate I had been paid as an employee. BIG MISTAKE. I hadn’t taken into consideration all the non-billable and administrative time required, like quoting projects, not to mention the costs of hardware, software and other hard costs. It wasn’t until some years later, and after learning the hard way, that I learned from Cameron Foote (in the first point below) that I needed to charge 4x to 5x what I hoped to end up with. Here then are my 5 tips to help you decide how much you should charge for your services:
- Calculate your expenses and overhead. According to Cameron Foote of Creative Business Newsletter, you need to charge four to five times more than what you want to end up with. This is so that you account for you other expenses, such as rent, non-billable time, overhead, taxes, software, and anything else that it takes to run your business.
- Calculate how much you need to make. To do this, you should calculate how many hours you want to work and how much you want to earn. So, let’s say you want to work 10 hour/week and you want to earn a $100/week, you may think you need to charge $10/hour, but you still need to apply the 4x to 5x rule (above), so in reality, you should charge $40 to $50/hour to end up with $10/hour. This may (or may not) be realistic in your market. You may have to adjust your rates, depending on what people are willing to pay and the fees charged in your surrounding market.
- Determine what others are charging. Though you can’t always ask others what they are charging, you can do an online search. Check out other websites of businesses similar to yours and see what they are charging. Though there might be some differences due to locations, you can get a general idea to base your own prices off of.
- Determine what people are willing to pay. People are willing to pay more for certain tasks such as technical and computer tasks. Also, if you have specialized training, you can charge more than someone who is doing basic administrative tasks.
- You have to be happy with your fees. You are going to be the one discuss your fees with others, so you have to be comfortable with them. You, alone, need to be able to talk to others about your fees so that you can close deals and get paid. Bottom line, be happy with the fees that you are charging. And be proud to state them to your prospects and clients. The better you are, the more you’re worth it!
It can be very difficult to figure out how much you should charge for your work. You need to consider what your expenses and overhead are and charge accordingly. You should also determine what people are willing to pay and what others are charging. Lastly, you need to be comfortable speaking about your rates.
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This article is published by Will Sherwood | The Sherwood Group |Website Design | Graphic Design | Marketing Communications: The Sherwood Group has over 30 years of experience working with all sorts of companies, small and large. Our clients range from entrepreneurs to Fortune 500 firms, in nearly every business sector, from across the street to around the world (and yes, even Europe, China, and South America). Our goal is to create advertising, graphic design, website design, and marketing communication that still looks fresh and relevant 10-15 years later. Our mission is to stir your imagination and leave your competition shaken and wondering, Now what do we do?” We are located in Myrtle Beach, South Carolina.
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