One of the biggest reasons you’re not bringing in the money you want is because you’re not pricing your services correctly. Too often, entrepreneurs sell themselves short and set prices too low because they want to make a sale.
When you underprice, you’re doing a disservice to yourself and your clients. You’re not making enough money so you start to feel resentment toward the clients you’re supposed to be serving. That’s no way to run a business.
I recommend you take a step back and evaluate your pricing at least twice a year. Here’s how.
Work Backward
Start by thinking about how much you want to make—and how many hours you want to work. We’re all capable of that six-figure business, but our rates may fluctuate depending on how many hours we want to put in each day or week.
Decide what you want to earn in a year, then divide that by 12 months. Then decide how many hours you want to work in a month (weekly hours x 4). Take your monthly goal dollars and divide them by your monthly goal hours. That’s how much you’ll have to charge per hour to make your monthly income goal, if you’re booked.
Gather Your Overhead
Of course, you can “make” six figures in your business but that doesn’t mean you’re taking home $100k. Know the cost of doing business, which includes your fees for internet, phone, team member salaries, taxes, online tools such as scheduling software, etc. You should also know what your personal expenses look like—what’s the total of all your bills each month?
Track Your Time
I track my time, no matter what project I’m working on. I always want to see how long it takes me to finish a project, and if I’m quoting a reasonable project (not hourly) fee. If I end up underbidding a project, I know the next time around to quote more. If you’re paid by the project instead of hourly, be sure to do the math at the end to find out what your hourly rate was. If it varies widely from your goal hourly rate, make adjustments to the next project.
Consider Time Investment
A product or service that takes 10 man hours to produce should cost much more than one that takes 2 man hours to produce. Keep in mind how much time you’ve invested into something. Multiply the number of hours it took to produce by the per-hour fee you determined to help you find a price point that’s fair for you. Also consider your ability to resell or reproduce that product or service.
One of the greatest perks of being a business owner is that we control our income. But pricing can be one of the biggest stressors. Take the time to review your prices and make sure your fees are fair for both you and your clients.
