Since launching my consulting business two years ago, it has been interesting to see a growing number of friends and colleagues also decide to go out on their own.
It's an exciting opportunity but also one fraught with questions and challenges.
At the top of the list for freshly minted business owners is how much they should charge for their services. To be honest, determining the value of your services can be as much of an art as a science.
The variables can include the demand for your products or services, your experience, the amount of competition, and the budgets of potential clients. Another factor is how much money you are looking to make and how much work you're willing to take on.
One of the most valuable pieces of advice I received when trying to determine how much to charge came from a long-time consultant who offered up this formula:
1. Figure out how much you want to make a year.
2. Assume that out of a 40-hour week, you are only going to work 20 hours, and spend 20 hours on business development and sales - or not working.
3. Take into account you may take three or four weeks of vacation - time that you also won't be working.
The calculation will generate the number of hours that you want to be working. This will let you calculate a dollar per hour figure to meet your annual salary target.
Of course, calculations are theoretical while doing business is practical - something that was illustrated recently when a friend, who spent nearly 20 years as a newspaper reporter, asked me the "how much should I charge?" question.
As much as you can make recommendations on specific figures, there are no easy answers. This is particularly pertinent when you start a business, with no clients and no track record other than your experience and enthusiasm.
My advice is that pricing in the early days really comes down to feel, although it does help to have a price per hour as a benchmark.
There are clients willing and able to pay full freight for your experience and expertise; there are clients that can't or won't pay as much; and there are clients that you really want to take on even if it means less compensation than the going rate.
At the end of the day, it comes down to being comfortable with the compensation being offered. In an ideal world, it's a win-win proposition when you're getting paid what you think you're worth and clients believe they are getting good value.
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.