What Should You Charge for Your Services?
BY BIG CAT CREATIVE
What should you be charging for your services?
When I first started my business, it was more of a side hustle. I had a steady income coming in from my corporate job, and I was more focussed on building my portfolio than I was on how much I was getting paid for my work.
Flash forward a few months and my side hustle was becoming my full time gig, eek! What am I supposed to charge now? I guess I can’t just pull figures out of the air like I used to...
Structuring your pricing can be tricky, and I get asked often how I decided on my pricing. I think there’s a few different things to think about.
What’s everyone else charging?
Now, this can be a good thing to look at, but don’t obsess over it. Seeing what similar businesses in your industry are charging is just common sense, especially when you’re just starting out. If someone is offering the exact same thing as you, and charging half of the price, you’re going to have trouble landing clients.
But, if your business is offering more, or something completely different, there’s not much point comparing your prices to someone else's. If you need to charge premium prices to give your clients the experience you want to give them, then make it clear that’s why you are charging more. People will put more money in if they are getting more out.
As you gain more experience and grow your business, this step becomes more redundant. Say you’re now a leader in your industry and have clients coming out the wazoo, you have much more freedom and can focus more on how much you want to make, rather than what others are doing. Most businesses will raise their prices when they have a steady stream of clients.
Do the Math
The problem with basing your pricing solely on what other people are charging, is that you can’t see what’s going on behind the scenes. What bills are they paying? How much of that money is going in their pocket? What are their weekly expenses? Because you can’t see any of this, for all you know, charging the same as someone else could have you making hardly any money.
Everyone’s circumstances are different, everyone has different outgoings, so you need to price yourself according to your circumstances.
That’s why you need to run the numbers, decide on your yearly salary, set your prices and then book clients (in that order!).
Let's run the math
First think about how much you need to make for the year (get a calculator out, seriously)
Tally up ALL of your outgoings:
- Expenses: Rent, bills, mortgage, bills, food, more bills
- Leisure: How much extra money you will need for leisure (parties, dinners, travel, massages… You know). It’s easier to calculate this weekly, then add it to the total.
- Savings: How much do you want to be able to save every month? Add that to the final tally.
The total of all of these is your yearly income goal (after tax).
Then from there, think about how much time you’re planning to work for the year, and how long each of your services take. Are you planning to take a holiday this year?
Note: If you have service packages like me, make sure that you are specific to your clients about exactly what they get from the package, how many revisions they get or how many website pages you are creating etc.
If this is clear, then you can calculate roughly how long a project will take, and how many projects you’re willing to fit in during the year.
Once you have your yearly income goal, and you know how may projects you can fit in during the year, divide your yearly income goal by the amount of projects.
For example, if your yearly income goal is $40,000 and you have decided that you can take on 10 projects this year, you will need to be making $4000 per project.
It’s important to remember to add tax during this step, otherwise your yearly projections will be way off. Depending on what your tax rate is, add it to the total cost of your projects.
For example, if your tax rate is 33%, you’ll need to charge your projects out at $6000 to make the $4000 that will get you to your yearly goal of $40,000.
The final cost of your package will be $6000, and with 10 clients your yearly income will be $40,000, which will cover all of your expenses calculated.
Tally your expenses = yearly income ($40,000)
Estimate your time = how many projects do you have time to do (10)
Divide your yearly income by your projects ($4000)
Add tax = Final project price ($6000)
Once you have calculated all of this, the goal now is to go out and secure yourself 10 clients!
A lot of new business owners struggle with imposter syndrome or thinking they’re frauds because maybe they haven’t studied that particular subject, or it’s just all so new to them. The truth is, if you’re good at what you do, you’re just as qualified as anyone else to be charging for your services. Don't let your feelings of being "unqualified" influence the decision about how much you charge.
In the wise words of Jenna Kutcher, base your pricing on an Equation not an Emotion.
How did you come up with your pricing? Did the equation help you? Let me know in the comments!