Economic theory says that the price of something will tend toward a point where the quantity demanded is equal to the quantity supplied. But if you are a sole trader offering a service how do you determine how much to charge? This is something I’m often asked and whilst there is no ‘right’ answer, there are some useful questions that will help you establish parametres for your price, or fee structure.
Before I share the questions to help you determine how much you should charge, we have to acknowledge that most of us have emotional issues around money that clouds our thinking. The root cause of these challenges is the perception of our lack of worthiness. If I’m struggling with my own belief in the value of what I do, the service I’m offering, or my perception of my expertise, nothing will magnify these doubts more than having to place a monetary value on my work. This tends to lead to frustration because deep down you know that no one will value you more than how you value yourself. So, it’s is a murky area with many variables at play.
In the dictionary the word ‘ability’ precedes the word ‘visibility,’ but in business, visibility comes first. It doesn’t matter how skilled or able you are, unless people know who you are and where to find you, you will never get the opportunity to shine, or to grow your business.
If you are starting out, you may reduce your price or even do some pro bono work to hone your craft and raise your profile, but you will eventually reach a stage when you have to acknowledge the value of what you are delivering and the fact that you are not a registered charity.
Raising visibility, consistency of delivery, professionalism, quality of service or product and self-confidence all feed your credibility (and your brand.) The greater your credibility or expertise the greater your demand, so the higher the price you can charge.
So, here are the questions that I’ve honed over the years that guide me when it comes to determining how much I should charge.
Is it a charity/ not for profit, or a company/ organisation with a budget or funding? Is it a member of the public paying from their own pocket?
What might they be willing to pay? What is the norm in the industry? Remember price too cheaply and seeds of doubt are sown as regards the quality of your work.
Let’s take for example running a workshop or delivering a presentation. You’ll want to know the duration and location of the talk and the numbers attending. How much would the talk be worth per person? For example, 100 people into €500 is €5 per person. (Might be a bit cheap?) Sometimes it is easier to have a minimum price in your head per person, so 100 people by €10 would be €1000.
Don’t overlook your own costs such as travel and parking expenses. There might also be pre-work and follow-up work that should be factored in.
It can also be useful to have a minimum hourly rate in mind for your services (just like a solicitor or an accountant.)
Will more business follow? What leads could be generated?
There is the school of thought (quite American) that you should feel a pang of discomfort when stating your fee. Having said that there is also the case for getting in front of an audience so you can continue to hone your craft and content.
For me, I operate a range. There’s a minimum figure I don’t go below, because it would be a disservice to me, my work and my brand. The upper end is often based on how brave I’m feeling. You will always have the option of discounting your fee, but remember if you don’t ask, the answer is always no.
There is one final question I ask myself that is an adaptation of a favourite coaching question – Charging what price would make me feel most proud about myself? Under-valuing ourselves will always feel like self-betrayal and this question is the antidote to that.Under-valuing ourselves will always feel like self-betrayal. Click To Tweet
An often-overlooked variable in the pricing matrix is credit or payment terms. Employees are paid at the end of the month, so that’s my guide when it comes to my credit terms! For bigger pieces of work, there is at least partial payment upfront. In business, as in life, we teach people how to treat us.
If you are passionate about what you do, whether it is writing, organising weddings, editing, giving massages, arranging events, coaching, or doing accounts, speak passionately about it. Remember, people don’t just buy services; they buy you.
We often associate ‘sales’ with over-promising, pushiness and manipulation. No one wants that. What we do want, and what we respond favourable to are quality conversations. You don’t have to be a slick sales person to promote your business, you just have to have positive, meaningful conversations about what it is you do and the benefits you create for others. Price is only part of this wider conversation.
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