So you’ve found your niche, you took the plunge and you started your own business! Congratulations!
Now you are faced with pricing. For most creative people, this may be an area they aren’t as comfortable dealing with. Let’s say your new business is Interior Design, how do you determine your hourly rate? Since you aren’t a household name (well, at least not yet) you can’t possibly charge what Martha Stewart does, or can you? With your personal touch and attention, I believe your services are more valuable than hers. So, what are you to do?
Just for you, I’ve spoken to a few successful small business owners and came up with items of consideration when determining your value in dollars and cents.
Jeff Mangas of Dayton Backup & IT Services was gracious enough as to share a few words of wisdom he has discovered through personal experience. When asked, “What do you take into consideration when determining as a small business the rates to charge your clients?” this is what Jeff had to say:
“If you are working for yourself, figure out how many hours you can realistically bill for in a week. In most industries this is nowhere close to 40. If you are a plumber and you spend one hour fixing a sink, what else has gone into that billable hour? You have to pay for a Yellow Pages ad and/or Google ad. You have to pay to take the call from the customer and schedule the visit. You have to pay for the drive out and the return drive. You have to pay for the service truck and all the tools. You have to pay to generate an invoice, send the invoice, receive the payment and deposit the received funds. You also have to keep records of all of those steps. You also have to pay for the invoices you never get paid for. In many “one man shops” a realistic number of billable hours per week may only be 10.”
Jeff goes on to say, “Don’t be afraid to charge enough. If you are coming from a 9 to 5 job where you were making say $15/hr, you may think that you are doing quite well or even being greedy if you ask for $25. However, a fair price may be well over $100/hr.”
Carolyn Robey-Warren, Owner of RWI Home Improvement, echoes these same sentiments when presented with the same question.
“Sometimes you have to fake it till you make it. Sometimes you have to market yourself from the onset as the elite company in your field. Look at what Apple does before they bring out a new phone. They get internet hype over their product. They get people standing in line. That’s all due to their genius in marketing. And any new business can market themselves in that same way. If you start off low balling with your price, you wind up with the clientele that either won’t respect you, or will take total advantage of you. Appearing to be desperate does nothing for new company. Confidence is the key. I’m not saying to price gouge anybody. But keep your prices right up there with like businesses. If you don’t value your time in your field, how do you expect your clients to? What you can do, is run a monthly special. That should generate new clients. But keep your pricing in line with your competitors outside of your specials.”
“You must consider whether you want to charge by the hour or by the job. I do most of my work by the job with the mindset of approximately how many hours something will take me and doing it at an estimated minimum of dollars per hour. Now there are other tasks that take 2 minutes and I charge $300 for. If I were to charge by the hour for that skill I would only make $1.66 minimum. Which would you prefer $1.66 or $300?”
Of course your method for determining individual pricing will vary, but remember your services and particular skill set are invaluable to others. When it comes to being able to charge for your technical or otherwise specialized talents, you have to remember the problem you are solving for someone else. You are truly making their day by taking care of this item for them, and with that in mind, you realize that people really will pay for relief.
Best in Business,
Jennifer Dalton is Assistant Project Manager at The Social Media Project, a full time mommy, Army wife, fitness fanatic and coffee lover with a passion for blogging and all things social media.