Raise your hand if setting prices is one of the things that makes you hesitate when running your business 🙋♀️ It’s normal, whether you’re new in the industry or even when you’ve built a ton of client projects over the years.
Taking the time to know how to set your prices can be tricky. Why? Because you don’t want to price your service too low (where you risk undercharging) but at the same time, pricing too high might make your potential client take a step back.
If you’re tired of undercharging for your unique services, or you’re scared that the figure you have in mind might scare off a prospect, here are some pricing strategies for service-based entrepreneurs to consider.
1.Determine the number of hours you want to work
Don’t buy into the “you have to hustle 60 hours a week if you want to get rich!” mindset. While it can be effective, you’ll be pushing yourself way too hard to a burnout. Instead, take into consideration the number of work hours that fit your flow as a service-based entrepreneur.
Maybe the actual hours you can only sit down and focus is five hours. Maybe you’re a busy mom who can do focused work for three hours max per day.
Once you’ve determined how many hours you’re willing to dedicate to your business, assign a figure for those hours.
Your ideal monthly revenue is $4,000 but you can only work for four hours a day and 4 times a week.
$4,000 divided by 4 = $1,000 per week
$1,000 divided by 4 days = $250 per day
$250 divided by 4 hours = Your hourly rate should be around $62.5
However, I don’t encourage hourly pricing (more on that later in the article!). That’s why you also have to make sure that when you package your services and send the proposal/invoice, the value still ends up as $62.5 when divided according to the number of hours you dedicated to the project.
So let’s say that a design project will more or less take you 10 hours. The package price should at least be $620.50 if you are to reach your annual income goal without burning yourself out.
Also, take into consideration the hours for revision, invoicing, and communications with the client.
2. Time track your money-making hours
Since we only have 24 hours a day, these hours are quite limited and should be well-spent. Are you dedicating more hours to increasing revenue? Or are other tasks like administrative work and personal errands taking up the bulk of your day?
By tracking where your hours go, you’ll be able to determine the amount of money you should be compensated for that time.
Let’s say your target income as a copywriter for the week is $1,000. But life got in the way and the actual hours you’ve sat down to write was only 10 hours. Your current prices should then be making you a minimum of $100 per hour.
If that’s not the case, at least you are now aware of what is taking up the bulk of your time. This can give you some insight into the kinds of activities you should lessen or delegate if you want to boost your money-making hours.
To give you a starting point, you might want to try Clockify. It’s a time tracking app and it helped me uncover where most of my time was going to. This helped me pivot and restructure my hours for a more productive day.
Like with emails, I realized I was dedicating way more hours on it. When I outsourced that task, I now only reply to emails 2 times a week for 2 hours max. This gives me more hours for things that truly matter to me.
3. Package your services together
More hours doesn’t necessarily mean more money. In fact, it can even be the opposite, especially when you have hourly rates in place. What if you’re offering design services at $20 an hour and designing a week’s worth of social content only takes you 2 hours.
You might be great at what you do, that it means turnaround time might also be fast. Do you think your work is only worth $40?
The thing is that clients don’t often care about the number of hours you dedicate to the project. What they care about is the quality, the results it will generate, as well as how you communicate with them.
That’s why packaging services with a price that is fair to your skills and value is the best route to take. It turns the prospect’s attention to the value of the offer and opens doors to a more sustainable income. Highlight the solutions and results you know you’ll be able to bring in with your work rather than putting the spotlight on the number of hours.
If determining an hourly price is a must, know what your ideal annual income should be first (see tip #1!) then take out the last three zeros. That figure is the hourly rate you should set. If you want your coaching services to earn you $120,000, then your hourly rate should be $120.
4. Take into account what you have to offer (and I mean, EVERYTHING)
One thing I learned from a book written by Ramit Sethi is that there are things that can help boost your rates and that it’s a major factor to consider in setting prices.
This includes the tools you use, your degrees and certificates, and the range of skills you have on hand.
Are you paying a hefty price tag for your software and applications? Count that in. Have a master’s degree where you were able to generate huge results for a company in your final project? Count that in. Upleveling and self-learning every single day with paid courses? Count that in.
Why? Because all these are things your client will also benefit from. They’re investing in your experiences and skills. What you have to offer will help them get ahead in the industry too!
One exercise to help you is to write all degrees, certificates, paid tools and courses relevant to what the client needs on paper. It helps you see your value so that you can really know your unique selling proposition.
Before taking these action steps, know that setting prices for services you offer can also rely heavily on your mindset. Even if you feel your industry may be saturated, there are people out there looking for what you exactly offer.
If you’re confident in the value you give and the skills you bring to the table, what’s stopping you from setting the ideal price you have in mind?