Working out how to charge what you are worth is a challenge many small business owners and freelancers face on a daily basis and is an essential part of your business planning. Whilst it’s tempting to leap ahead and focus on price or a salary figure as the starting point, what’s more important initially are the foundations upon which the dollar value you finally settle on are based.
To be paid what you’re worth you need three C’s:
- First and foremost, are you happy charging for the service/product you offer?
- Can you deliver on your promises, genuinely add value and should you be financially rewarded for doing so?
If not, then no amount of price-setting will help. Having confidence in your ability to deliver is critical. Once you’re confident charging, the next step is being confident in the amount you charge.
Play around with different dollar amounts and work out which ‘sits’ most comfortably with you. Too little and you’ll feel undervalued. Too high and you’ll feel like a fraud. Test out what feels right for you whilst ensuring you include large quantities of both the second and third Cs – Credibility and Currency.
What you say about yourself, and what other people say about you, will add hugely to your credibility.
- Do you have the credentials required?
- Are clients, colleagues and others willing to put their reputation on the line and lend you their support by way of testimonials and references?
- Do you have specialist skills or expertise, or are you considered the ‘go-to’ person in your field?
Providing evidence of your abilities that are relevant and meaningful to those you’re aiming to influence will enhance your personal sense of credibility and self-confidence and make it easier for others to make informed decisions about you.
Being able to articulate why you, and why now, is extremely powerful.
- Work out what your customers return on investment (ROI) is likely to be if they engage you and then clearly articulate it
- Facts and figures, supported by actual examples of your previous work will help you stand out from the crowd and boost your confidence in your willingness and ability to charge
- Amongst the body of evidence supporting your credibility make sure you include current, relevant material and references that demonstrate you’re in touch with what’s wanted and needed now, not years ago
- Getting paid what you’re worth is more about confidence, credibility and currency than actual dollars and cents
- When you’re able to clearly articulate why you deserve what you’re worth you’ll be in the strongest position possible to negotiate effectively.
HOW MUCH TO CHARGE?
You can charge for your services in a variety of ways, such as a fixed amount for an entire project, an hourly fee, or a sales commission. No matter how you bill clients, you first need to figure out how much to charge — even if you charge a fixed fee for the whole project.
You can’t determine how much your fixed fee should be unless you know roughly how many hours the job will take and what you need to earn per hour to make it worth your while.
No idea what you can or should charge?
If you’re in this boat, try using a two-step approach to determine your hourly rate:
- Calculate what your rate should be, based on all your expenses to complete the job
- Investigate the marketplace to see if you should adjust your rate up or down to fit within competitors price ranges (you don’t need to be the cheapest, people know your worth and don’t always trust those who are too cheap!)
Calculate Your Hourly Rate
Price per Service
- Add up your labour and overhead costs
- Add the profit you want to earn, then
- Divide the total by your hours worked.
This is the minimum you must charge to pay your expenses, pay yourself a salary, and earn a profit.
Depending on market conditions, you may be able to charge more for your services, or you might have to reduce your rate a little to be considered if it is a very competitive space.
OR Determine your Ideal Annual Salary
- Pick a figure for your required annual salary (what you want/need to earn)
- Compute annual overheads
– Include all of the costs you incur to do business. For example: business registrations, website costs, phone plans, office equipment, travel expenses, business insurance etc
- Determine billable hours
– How many hours will you work and get paid for during the year.
– Allow for at least 25% to 35% of your time on tasks that you can’t bill to clients, such as bookkeeping, marketing, admin and upgrading your skills
– Deduct the number of weeks holiday per year you will take
Hourly Rate Charge
– Total of (Ideal Salary + Overheads) DIVIDED by the number of actual hours you can work = hourly charge rate
Investigate the Marketplace
- Determine whether your calculated hourly rate is realistic
- Investigate your industry and competition
– Contact a professional organization or trade association for your field
– Ask competitors, or check their rates on websites
- Talk to potential clients and customers – for example, attend trade shows and business conventions.
- You may discover that your ideal hourly rate is way off the market rate in either direction – it’s OK to be different so long as you know your true worth!
However, if you’re highly skilled and performing work of unusually high quality, don’t be afraid to ask for more than others. Many potential clients believe that they get what they pay for and are willing to pay more for quality!
So are you charging what you worth?
If you need any help with your business strategic planning, or have the need to outsource some tasks to allow you to focus on what brings in the money for your business – Your Business Helper is here to support you, call now 0414210979