How much are you worth? How much do you think someone would pay for your services?
These are questions many new business owners ask themselves if they are selling services as opposed to products. For people who haven't offered them before, setting prices can be a challenge.
You don't want to charge too much or it may keep customers away. You don't want to charge too little, otherwise you could leave money on the table. Another downside to not charging enough is that potential clients might question the value of your services based on the old adage that you get what you pay for.
While setting prices is not a science, here are some tips that will provide a better idea of how to create a win-win scenario: prices that generate enough revenue to make a livelihood, while meeting the budgets of potential clients.
The most straightforward approach to ask other people offering the same types of services how much they charge. While it can be a touchy subject, given many people are reluctant to talk about personal finances, there are lots of people happy to talk about their hourly rates or, at least, provide ballpark figures.
Another technique someone suggested when I started my consulting business is to figure out how much money you want to make a year. With that number in mind, the next step is to assume you will bill 15 to 20 hours a week. The other 20 to 25 hours will be spent marketing, selling or not working. Then you can calculate your hourly rate to meet your salary expectations.
For example, if you wanted to make $75,000 a year, it means charging about $75 an hour, 20 hours X $75 an hour = $75,000.
Of course, nothing is written in stone, including hourly rates. If the economic climate changes, your rates may need to be adjusted accordingly. There may also be attractive projects that could compel your to lower your rates to get an agreement. And if business isn't flowing, lowering your prices may be one way to attract more attention.
There are obviously a lot of variables when it comes to setting prices, including supply and demand, but the important thing is to establish a rate. That makes it possible to make adjustments when necessary to get business in the door and keep customers happy.
Special to The Globe and Mail
Mark Evans is a principal with ME Consulting , a content and social media strategic and tactical consultancy that creates and delivers 'stories' for companies looking to capture the attention of customers, bloggers, the media, business partners, employees and investors. Mark has worked with three start-ups - Blanketware, b5Media and PlanetEye - so he understands how they operate and what they need to do to be successful. He was a technology reporter for more than a decade with The Globe and Mail, Bloomberg News and the Financial Post. Mark is also one of the co-organizers of the mesh, meshUniversity and meshmarketing conferences.