Being new in business brings many challenges. One of the first hurdles you’ll have to overcome, particularly when charging for your labour, skills and experience, is determining your fees.
This can be a very daunting task, especially for new business owners, as it is important to be able to make a profit from your work, but it is also important not to scare away potential clients with a fee that is too high.
Therefore, it is critical to take your time when determining your fee. If you begin your business with a fee that is out of line in either direction, it can be difficult to recover.
Here are some steps you can take to help come up with the right fee from the beginning.
1. Research your competition. It is essential to know the going rate in your area for services like yours. Knowing what other businesses charge for the same work will give you a starting point for your own pricing strategy.
2. Take into account any differences in the services you provide compared with your competition. If you offer value added services, these should be taken into account, and may allow you to charge more than your competition.
At the same time, if you do not plan to perform a service that your competition provides, or if your skill level is not as developed, you may need to charge a lower fee. This can be one of the trickiest parts of creating your pricing.
We tend to undervalue our own work. That’s why it is so important to know what your competition is doing and how much they’re charging. If you cannot be objective about how your work compares to theirs, ask a friend or prior client to help you judge.
3. Forget about what others are charging. Yes, I understand this may contradict the previous points. It’s important to have a general idea of what people pay others for the services you provide, however their business is not your business.
Now it’s time to decide how you can package your services and skills in a way that provides extraordinary value and to price your services appropriately. You don’t want to be the same as your competition, offering the same services for the same rates.
How can you stand out from your competition?
What can you offer that nobody else can, or how can you offer your services differently?
4. Have a pricing strategy. Creating a strategy around your pricing will help you to keep it understandable, even when prices must be changed. Some things to consider when creating your pricing strategy include:
• Will you charge by the hour or by the project?
• Do you plan to compete on price? Or will your strategy be to offer better service or higher quality at a slightly higher price?
• Do you plan to offer discounts? Will you give lower prices for volume orders? Will you have sales? Will you offer loyalty discounts?
As you answer these questions, a pricing plan will generally bring itself to life. By including a strategy, you can ensure that you have a framework that will serve your business well, even as the prices themselves change.
When you can set a fair and competitive pricing strategy as your business gets started, this work will serve you well no matter how large your business grows in the future.
A good framework will allow you to make tweaks as needed, without losing the overall pricing scheme. Once you’ve settled on your pricing, you should feel good that you are charging a fair rate, but that you are also being paid what you deserve for the work you do.
In short, it’s important to create a win/win situation. You are being paid fairly for the work you do however your customers are getting excellent value in exchange for the money they pay.
Donna-Marie is an award-winning Entrepreneur, Author and Content Marketing Specialist. Through her business, Jacaranda Business Support Services, she has been helping other small businesses to grow since 1998, with a knack for teaching systems that allow business owners to increase profits while working less.