How much to charge?

New business owners often find it hard to set prices – and it isn’t always easy for others to change their prices over time, either.

I think the key criteria are:

• cover your costs – and remember that costs cover running a website, paying insurance premiums, postage, your time and business equipment as well as the materials you use
• be competitive – that doesn’t mean be the cheapest or discount everything, but don’t put your prices so high that no one will pay them
• make a profit – or what is the point of being in business?

Overall value will have a huge impact on what you can charge, and many factors come into that.

Offering a service rather than selling products has different factors to consider, and a belief in yourself and your services is important to setting prices that reflect your worth. As you set or reset your prices, some things to consider are:

• will customers expect an hourly rate or a project rate? If you use an hourly rate, make sure you allow for your speed (if you are faster than your competition, a higher hourly rate can still provide customer value, but if you are new, you may be slower and your prices reflect that.) If you set project rates, you will need to learn how long things should take AND factor in additional time for client interactions and unforeseen extras
• what do your competitors charge? This is just a guideline for what customers are paying and will compare you against – don’t set your prices by this alone as it may not meet your price needs, can anger your competitors (if you charge just less than them) and doesn’t account for differences in what you offer
• do you have experience or skills that are uncommon? You can charge more for this. For example, having written a number of annual reports, I can do them faster and know what to look for so can charge more per hour than a novice writer.
• is your service presented in an unusual way? For instance, if you email the work instead of hand delivering it you may be able to charge less, and I may charge differently for providing content if I add it to the client’s blog or website rather than in an email
• do you include some value-add items? If so, make sure they are covered in your prices.
• how much time do you have? If you only work a few hours a week, you may need to charge more to make sufficient money. Some people advice you to work out how much income you need and divide it by your working hours to get an hourly rate, and that may work for you although I think it is rather simplistic.
• how long have you been in business? The more experienced you are, the more you can charge – within reason of course! That’s because experience generally makes you faster and better at what you do so people are paying for a premium service from an experienced person*
• is your business reliant on lots of customers or a solid base of repeat customers? Finding more customers all the time is costly and time consuming so you may need to charge more to cover this

* I have to add that time of doing something is no guarantee of someone being good at it, but it should help! To be worthy of the experienced label and price tag, you should actively try to improve your skills through learning as well as doing.