This was a question posed on a listserv I recently joined. It’s naturally one of the first questions you have when you want to start working for yourself.
If you are new(er) in this business, looking to start a business in our industry, or maybe even not new, but wanting to improve your business, I hope my post will help you.
One thing people commonly default to when they’re new is they want other people to tell them what to charge.
They will frequently ask, “What should I charge/what do you charge?” or “What is the going rate that I should be charging?”
So the first thing you need to understand is that kind of conversation is highly illegal.
It’s against U.S. Antitrust laws (e.g., pricefixing) for people in an industry to collude (which occurs simply by having the conversation) when it comes to setting standard rates. That’s because our entire system of commerce in the U.S. is based on fair and healthy competition.
This is why you won’t see actual rates bantied about and will get periodic messages from the forums and listservs you belong to reminding members they are not permitted to engage in that kind of discussion.
And this is to your great benefit, even if you don’t understand why at first, because it allows you to create value, connect with your right clients and be able to command healthy, professional fees you can actually thrive and profit from.
Bottom-line: It’s up to every business owner to set her own rates and others are not allowed to tell you (or even hint at) what you should charge. This is just a fact of business life.
However, I know you feel kind of lost on this at first, not knowing where to even begin to figure this out so here are some insights to help you:
Setting your fee involves a combination of things to look at:
- How much does the business need to earn to pay for overhead and expenses and be self-sustaining?
- What do you want/need to earn personally over and above that?
- Does the fee you charge allow you to be profitable? That is, not just sustainable, but bring in an excess with which you can save and have extra left over after business expenses and your salary? Because hand-to-mouth earning is just surviving, not thriving and being profitable. Profit is what allows you to create savings, take vacations, buy a home, a car, pay for education, invest in business growth and improvement, etc.
- Does the fee honor your worth? Is it in keeping with the value and expertise you bring to the table and everything clients gain and benefit from as a result of working with you?
- Does your pricing position you properly? I’ll bet you hadn’t even realized that your pricing is actually a part of an effective marketing strategy. If your fee is too low this sends a negative signal to prospects and clients that your quality and skill may be subpar and draws the wrong/unideal clients to you. Charging the same as everyone else can be just as detrimental as it says there’s nothing special or different about you. A great fee is one that not everyone can afford (which helps weed out the cheapskates, deadbeats and other unideal clients) and is just high enough that it sends the message that you are better and more skilled, expert and worthwhile than the average bear. Discerning clients aren’t looking for cheap; they’re looking for skill and competence and high quality and your fee is a clue that tells them whether you’re that kind of provider. 😉
Be sure you also download the free ACA Income & Pricing Calculator which will help you get clear and concious about your income needs and desires and find your pricing baseline.
If I may also get your thought juices going on this topic as well, hourly billing (i.e., selling hours) is actually keeping a lot of people from earning well.
It turns everything into a transaction, puts your interests and those of the client at odds with each other and takes the focus away from the relationship and the value.
Instead, I am a proponent of Value-Based Pricing, which is a methodology I adapted for those of us who are in the business of administrative support.
If this has you curious, I have a quick video that explains the problems with selling hours and how it may be hurting your business and the clients you serve: How Billing by the Hour Is KILLING Your Business
Pricing is one of the most important aspects of business and marketing, and something I write about frequently. In fact, I have a whole Pricing category on my blog devoted to it that will be of high interest to you and keep you informed and educated on the topic.
Hope that helps!