Setting a price on your services can be difficult, because you are the business. You’re selling your experience, talent, and expertise—and these qualities are difficult to put a price tag on.
To determine a fee that is appropriate for your customers, we suggest you utilize a combination of the following strategies:
Survey Says . . .
Survey your potential customers to find out what they’d be willing to pay for your services. While you’re at it, ask them exactly what they expect for their money. This can be accomplished through focus groups, telephone interviews, written surveys via mail, public polling, and other methods. You may be surprised how honest people are about what they would be willing to spend. Remember, pricing is only one factor that drives buying decisions—most customers are looking for value. Otherwise, we’d all buy generic soda pop, drive Yugos, and buy all of our home furnishings and clothing at thrift stores.
You’d Better Shop Around
Shop around to find out what others in your field are charging for their services and whether or not they are getting any business. Find out what your customers are currently paying or what they expect to pay for services comparable to yours.
Time is Money
When providing a service, your ability to generate income is directly tied to how many hours you can work. Unfortunately, there are only a limited number of hours in a week—and even fewer hours in a week that you can dedicate to directly serving your clients. This is especially true if you’re running a solo business. You’ll need to budget time for marketing, running your business, and managing your personal life. You’ll also have to account for holidays, weekends, vacation, and sick leave. No matter how hard you work, there is still a limit to how many massages you can give or seminars you can teach in one workweek.
No one can work 2,000 “billable hours” in a year (based on a 40-hour workweek, 50 weeks per year, with 2 weeks off for holidays, sick leave and vacation). Realistically, you’ll probably only be able to “bill” for 1,000 to 1,500 hours in a year.
To determine an hourly rate for your services, start by setting a salary goal. Your salary goal should reflect what you were or would be paid by an employer to perform similar work. Add the cost of benefits, such as health insurance, that you are now responsible for. Add your overhead and expenses. Add a reasonable profit margin. Divide that total by approximately 1,000 billable hours.
Hourly Rate = (Salary Goal + Benefits + Overhead + Expenses + Profit Margin) divided by Approx. 1,000 Billable Hours
Keep in mind that not all customers will be amenable to paying an hourly rate. Once you determine your hourly billing rate, you can use this rate to develop a variety of fee structures including daily rates and per-project fees.