When you are starting out this is one of the things that you ask yourself – how do you decide what to charge, when you don’t know where to start?
Pricing starts with knowing your costs. This is the only place to start, because if you don’t know what it costs you to make a product or provide a service, how can you possibly know if you are covering your costs at all, let alone making a profit?
One of peoples main fear is the numbers, they are scared of them!
First things first…
Get out your notepad and start to write down all the costs of your business. Some of these will be direct costs, meaning they are directly related to producing a product or service.
Next to each of them, write down the monthly cost of each, adding up the total for the month.
These can include:
- Equipment (computers, phones, tablets, microphones for podcasts etc)
- Rent for premises
- Support Team members
- Facebook advertising
- Other marketing costs
- Office supplies
- Software costs
or some other things that you need to pay but are not directly related to producing a product or service still need to be factored in.
Now take a step back and look at all these costs.
These are you overheads. You need to cover the cost of your overheads before you can make a profit.
This can be a scary start as doing this can help you realise how much you are spending every month.
How to work out how much I should charge?
Well this depends on what type of business you are running. If you are providing a service and require premises, you’ll also have to include all the costs to provide that service including your time.
If you are a coach/trainer – you need to factor in your preparation time and the time it takes to deliver the session, including the travel time plus costs.
If you are creating a product, you have to include the costs of the components to create that product.
Where to start?
A good place to start is by looking at other jobs in your field. If you were going to take a job with a minimum hourly rate you would be comfortable with? £10/$10 per hour or £20/$20 per hour?
Whatever rate works for you, start pricing your time in your own business in the same way. As you get more confident and increase your client base, you can increase your hourly rate.
Points to avoid…
- Don’t unpriced yourself, it’s not an expensive hobby, it’s a business you’re running.
- Don’t avoid adding in your own time it takes and not pricing it into your rates.
- Don’t think that your clients won’t pay for it. Remember your values and the type of clients that you are looking for. They will pay the price that you are charging as they believe in you and the service/product you are proving.
How not to price your products or services
Have you researched what your competitors are charging? Are they charging higher rates or lower rates for similar product and/ or service? Have you put yourself in the pecking order?
When you look at what everyone else is doing – yes, this is a good place to start to get an idea or average cost of the rates your competitors charge. However, all your competitors are doing the same thing. Working off the mindset that if they lower their rates they’ll be the one to grab the clients!
Having a value of your time and effort that it takes to run your business will resonate with your clients. These are the clients that you want to work, you’ll enjoy working with them and they’ll come back for more.
So go ahead, get started today. Write down your costs, value your time, and charge your clients your worth!