As a small business owner, one of the hardest situations you’ll deal with initially is determining how to price your services and/or products. Pricing yourself too low can lead people to draw conclusions that you’re too fresh in the game (read: inexperienced) while pricing yourself too high can cause potential clients to find what they need from someone else.
When I first started freelancing, I fell into the former trap — I priced things way too low…and boy, did it come back to kick my butt.
Let’s take a walk through the biggest mistakes I made, okay?
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ASSUMING. I assumed that everyone knew how to do what I did, so I obviously couldn’t charge a lot.
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IMPROPERLY VALUING MY KNOWLEDGE. Because I didn’t know how to put a dollar value to the knowledge I’d built up over the years, I just slapped a number on the services and went with it.
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NOT ACTUALLY KNOWING MY TARGET AUDIENCE. While I knew what I wanted to do, I didn’t know my target audience the way I should’ve. I was in a hurry to get my business up and off the ground, so I was willing to take on anyone who would give me the chance to begin forming my portfolio.
Throwing all of those mistakes together, I ended up with a pricing scheme that just didn’t fit the amount of work I was doing. Lots of working hours + not enough payment makes for a very burned out Joey. Anyone feel me here?
And while I could’ve continued on this path of being priced too low and struggling to make it all work, I realized the better thing to do was to restructure and properly price out my services.
“So how do you do that,” you may be wondering? Well, I’ve got some tips for ya!
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DO YOUR RESEARCH. Before you can figure out your pricing, you need to learn more about other companies that do what you do. What do they charge? What services/products do they provide for that price? Are they good at their work? Once you’ve done your homework, you’ll have a range within which you can set your pricing!
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KNOW YOUR COST + PROFIT MARGINS. To price yourself fairly, you need to know your monthly, quarterly, and yearly costs. Now add in the profit margin you want to earn. As a small business, your main goal should be to earn a profit and if you aren’t charging enough, you won’t be meeting that goal.
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DETERMINE IF YOU’RE PRICING PER PROJECT OR PER HOUR. When I started, I was immediately drawn to pricing myself per hour. But I quickly learned (and my wonderful husband helped me realize) that by pinning myself down to the hour, I was excluding a whole set of additional clients. In the end, I decided to bill per project and it has been a much smarter move for me! Not only am I able to help my clients whenever they need it, I don’t have to constantly bill them extra to cover the additional hours of work.
Now that you know your pricing, how do you get paid?
Good question. There are so many options when it comes to billing for your services and getting paid. There are so many options, in fact, that it can feel a little overwhelming. The first thing I would do is establish a business bank account. From there, you’ll likely want to pick a payment gateway that works for you and your business.
Something that was hugely important to me was being able to bill for my services (and products: my books) in a way that makes it super easy to for someone to pay me. The last thing you want to do is make it difficult for people to give you money. You may want to opt for something like easy invoice generation by payanywhere — this way you can take payments from wherever whenever.
If you’ve been struggling with setting pricing for your company, just remember that many of us have been there before! So, take a deep breath, start at square one, and remember you can always change your pricing to ensure it’s working for you the best it can!
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