Pricing Services for Your Business
Whether you’re a freelancer or a small business owner, you know that pricing your products/services is a challenge. It’s hard to know even where to begin, but here are some tips to consider when setting a price on your hard work.
Why is pricing services so hard?
If you’re selling a product, it’s pretty simple to decide how much to sell it for. You take the cost of your materials and labor, add the price of shipping if you’re an online merchant, then add a few more dollars to turn a profit y ya. If you’re providing a service, though, it’s difficult to put a dollar amount on your time, energy and expertise.
Imposter syndrome may come to haunt you big time, at least for me it did. When I first started copywriting, I intentionally priced my work less than 50% cheaper than the industry-standard rates. For one, I had no experience so I didn’t feel right charging the $40 an hour starting rate (according to my super-quick Google search). Secondly, I was afraid no one would want to hire me, even at dirt-cheap prices. To me, I was lucky if anyone even gave my work a second glance. Of course I thought I had talent, but that didn’t mean anyone else would.
Whether you’re just starting a side hustle or trying to be self-employed full-time, you have to decide what your work is worth, and be confident about setting your prices and sticking to them. The goal is to be fair (no one likes a money-hungry a**hole), but also make enough to compensate for the time and effort you put into what you do.
How to Price Your Services
I’ve been copywriting for three years now (whoo-hoo!) and have increased my prices three different times (the last two increments were only months apart. I spent actual years charging dirt-cheap prices). What I’ve learned in that time is that if your prices are fair and your work is solid, people will pay whatever you’re asking for. Keep these things in mind when deciding on what to charge:
Calculate Your Costs
In copywriting, there aren’t many costs to consider. Other than a laptop, internet and wifi, I don’t need much to work. Depending on your particular service, you may have to buy materials to do your work. Hairstylists need products and tools, tutors need books and school supplies, caterers need pots/pans and all the fancy cooking utensils. You get the point. If it costs you money, it gets factored into your price.
Here’s the part that gets tricky: the time you spend working is also considered a cost. I know, I know. It’s hard to put a price on an hour of your life, but this next step will help with that.
Research Your Market
Find out what your service goes for in your industry, and then in your area. For me, I researched the average price of copywriting services nationwide, and then did a little digging on prices for marketing firms, copywriting firms, and freelance copywriters like me. (As a side note, you would not believe the range of prices I found! There are seriously people out here charging $600+ for 1,000 words).
Understand Your Audience
Who are you trying to sell these services to? Are you catering to big corporations, small businesses, freelancers? Know who your customers are and what they can reasonably afford and take that into consideration. Personally, I want to help small businesses and other freelancers like myself, so I’m not going to charge the top of the price range. I want to offer quality writing at prices that people like me can afford, so I always keep that in mind.
Decide on Your Profit Margin
Time to do a little math. Your profit margin is the percentage that you up-charge your services to make sure your business makes a profit. The percentage varies by industry but, according to Google, 10% is average. You take the cost of your materials and your time (labor) and multiply them by your profit margin, then add the number you get to your total price. For example, if you’re a hairstylist and you charge $10 an hour, here’s what your math might look like to color and style someone’s hair:
-hair dye $5
-hourly rate $10 (x2…it’s a long process)
-profit margin 10%
$10 + $10 + $5 = $25
$25 x 10% = $2.50
$25 + $2.50 = $27.50
….but wait. If I’m already charging an hourly rate, what do I need a profit margin for?
When I first read about this, I had the same question. Forgive me if you already understand this concept and I’m talking to you like you know nothing, but for those of you who are brand new at this like me, it’s important to understand.
Your hourly rate goes right in your pocket. The profit margin goes into your business’s pocket. So in the hairstylist example, for every hair color and style service, you would make $20 and your business would make $2.50.
If you’re wondering why on Earth you’d want to keep those two figures separate, the answer lies in your vision for your business. Making it profitable (by separating your salary and money earned in your profit margin) you open the door to possibly hiring on salaried help, paying for a website, bankrolling your marketing….you get the picture.
Now for the final step…
Choose an Hourly or Project-Based Price
In the world of freelance, you can charge whatever you want, however you want. That’s the beauty and the curse. As a copywriter, I can charge an hourly rate for my work or I can charge based on the projects my clients request. I’ve done a combination of both, choosing an hourly rate and then setting a minimum number of hours for any project. For example, the industry average for a content marketer is about $40 an hour. If I’m writing a blog post that’s about 600 words, after I factor in research, writing and editing/SEO, it will take me about 3 hours. $40 x3 = $120. Boom, prices for blog posts of 600 words or less are $120.
Set Your Prices & Be Confident
Once you’ve decided on your prices, now you have the even more difficult task of sticking to them. Remember that this is your livelihood. It’s how you will pay your bills, feed your family, pay for that vacation. You don’t have to apologize for your prices and you shouldn’t feel weird about asking people to pay you what you have worked long and hard to decide that you’re worth. No, you don’t offer family & friends discounts, and no, exceptions can not be made. You work hard, your work is valuable, and you deserve to be paid accordingly.
Believe in yourself, in your abilities, and in the fact that once people see what you are capable of, they’ll be more than happy to pay whatever you’re asking for.
