If you’ve ever started a business, you’ll know how difficult it is to figure out how much to charge for your services. In some ways, your services are similar to what’s out there on the market already, but for a variety of reasons, they’re not identical. And because they’re not identical, it’s difficult to know exactly what to charge. New entrepreneurs often think that they have to go in lower than the existing competition.
They think this for a variety of reasons including believing that they have to undercut their competitors to gain market share, as well as thinking that their services aren’t as valuable because their company is new.
Occasionally, startups end up charging more than the market can support because they believe that their services are somehow “special” and that customers will be willing to pay whatever price they ask. Thus, getting the price right on your product is important. So what should you do?
Flat Fees Or Hourly Rates?
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The type of service you offer will dictate the types of payments you’ll take. If for instance, you run a tutoring company, it’s standard practice to charge by the hour, since tutors get reimbursed according to an hourly rate. Other types of businesses, like hair salons and photographers, usually have flat fees that vary by service. For instance, a photographer might have a fixed fee for a wedding package.
How you get paid, according to North American Bancard, will determine how quickly you get the money you’re owed. So it’s important to consider which method is best for your cash flow situation before you start trading. For some work, you can be expected to get paid immediately. But for types, especially for big projects, payments can be delayed by weeks, if not months.
Calculate Your Salary Goal And Hourly Cost
Pricing is difficult to get right for a number of reasons. But one of the main reasons is the fact that you have to translate it into a yearly wage. One good question to ask yourself is how much you’d like to earn in any given year. Let’s say that your goal is to make $60,000 a year. Given that the average person works for about 2000 hours per year at 40 hours a week, you need to be making $30 an hour from your work to achieve your salary goal.
It’s worth noting, however, that if you’re in the freelance business, you can often spend up to 50 percent of your time looking for new clients. With that in mind, if you want to earn $60,000 a year, you really should be charging $60 an hour.
Don’t Forget Your Costs
Once you’ve figured out how much you need to earn per hour, taking into consideration the time you’ll spend looking for new clients, you’re almost ready to come up with a price. The only remaining thing that’s left to do is to calculate your costs. Your costs are all of those payments that you have to make to deliver a service to the client. These could include travel expenses, costs for parts and equipment, or the costs of running a website.