The Art of Pricing Your Work as a Solo Professional
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Setting a price for your work is the hardest task for the solo professional. Here is step-by-step guidance on how to know your numbers and set your fee for your services as a solo professional.
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The Art of Pricing Your Work as a Solo Professional
- 1. The Art of Pricing Your Work The Art of Pricing Your Work
- 2. Jackie B. Peterson BetterSmarterRicher.com Your solo business journey starts here.
- 3. How do you price your products or services? What you have to know: • Your costs • Your competition • Your break even • Your expenses (business and home) • Your future plan: Profit to grow and invest
- 4. Pricing Pricing must be high enough to: • Cover costs • Cover expenses: overhead and taxes • Create profit • Pay off loans • Pay owner • Allow some reserves for growth
- 5. Pricing Range • The low range is just enough to break even • The high range pushes the envelope-the customer may refuse to pay or finds an alternative • If the customer complains about the price AND your price is reasonable, you have not clearly articulated your value strategy!
- 6. Pricing Message How we price says a lot about us. • If we price at the very low end…….. • If we price at the very high end…… • Why is it that so many small businesses are reluctant to charge enough for their product or services?
- 7. Pricing Competition How to find out about the competition • Web site • Price lists • Visits to their locations • Call and ask • Ask customers • Pay attention in the market place
- 8. Pricing Wisdom Small business absolutely cannot afford to be the low cost provider.
- 9. Pricing • Pricing is part of your brand • Pricing positions you relative to your competition • Pricing positions your product and your company in the marketplace • Pricing is where actual cost and perceived value come together
- 11. Elements of a Price • Direct costs of product • Overhead or Costs of running your business • Non starvation costs • Your commitment to your household • Taxes • Planned profit (also debt service and reserves) • Customer perceived value
- 12. Calculate the Price Add up all the elements of a price • Get an annual total • Divide by 12 for a monthly total • How much money do you need each month? • Divide by how many units you can sell in a month • Result: minimum price per unit
- 13. Calculate Your Price My direct costs My overhead: Non starvation add on: (i.e. health insurance, retirement, college fund, vacations) Share of household*: Taxes: Planned profits: Total All Costs* * give me your card and I will send you work sheets
- 14. Check Your Price • What are others selling for? • Is your calculated price much higher? • Can you justify it with quality or differentiation? • Is your calculated price much lower? • Explore • Check the competition
- 15. How Can I Increase My Price? • Better Experience • Minimize Risk • Create New Client Opportunities • Upselling • Save the Customer Money • Branding • Help Customer Achieve Goals • Problem Solve Increase perceived value
- 16. How Can I Increase My Price? • Improve your quality • Know that quality often means customer service • Don’t settle for “good enough” • Don’t aim to be the low cost provider • Price for value then work like crazy to support that value (increased skill, education, benefits)
- 17. How Can I Increase My Price • Never sell by the hour • Create packages of products and/or services • Offer a payment plan • Take Credit cards • Look at your pricing regularly (at least once a year) • Never go lower than $50 per hr.
- 18. How Can I Increase My Price? • Customers buy value! • Vustomer buy benefits, not features • Always be ready to talk about what they get when they buy from you • When they ask price, answer with value • Ask questions, listen to what they want and need
- 19. Selling Time • If your business is a consultancy, training, or some other offering that is time only, you will not have a gross profit margin like those selling a product. • Instead, make an assumption about billable hours. • There are 173 hours per month (40 hours per week x 4.33 weeks)
- 20. Selling Time is Different • Assume that of those 173 hours, you will only have between 40-65% as billable time (69-103 hours) • You must earn all your money and cover your expenses in those 69 hours • You cannot survive freelance billing less than $50 per hour at a minimum
- 21. Managing Costs • Clear product specifications • Excellent design • Shopping well (combine orders, look for new suppliers, buy in larger quantities, watch for storage or perishability issues) • Reduce Waste • Increase labor efficiency • Be ready for the work to be done
- 22. Managing Expenses • Budget • Compare budget to actual • Delegate responsibility to others and hold them accountable • Contracts-get it signed • Keep your financial records current • Control waste • Comparison shop
- 23. Let’s Do a Problem A graphic designer: Annual costs: $30,000 (does not include a salary) (including rent, phone, travel, auto, marketing, insurance, office administration, office supplies, legal, bookkeeping, etc.) Target Income: $40,000 (taxes will be $8,000. Plus $10,000 to reinvest in the company cont. ed, trade show, advertising campaign, new computer) What should be the minimum billing rate?
- 24. If You Do Not Charge Enough • No money to hire “waterbug” outsources help • No money to renew and replenish yourself • No money to take a vacation • No money to invest in retirement • Besides: People Think You are Not Any Good!!!!
- 25. If You Do Not Charge Enough People will refer you: “Hire Mary, you can really get a deal!” The referral you want: “Hire Mary, she is spendy, but it is worth every penny.” Do not be the low cost provider!
- 26. Quote a Price/Close the Sale • Know the price: Know your own bottom line • Practice dealing with any objections • Practice what you will say • Feel confident • Decide how much you want this project
- 27. Other Strategies • If it does not sell, raise the price • Package things together • Offer smaller bites • Ask your customers for feedback and input • Consider the “soft” elements such as: Customer service, delivery times, selection or variation, time of year, lead time
- 28. Other Strategies • Always follow up • Ask Closing Questions: • Are you ready to get started? • Would you like to schedule an appointment? • Shall I draw up a contract? • Shall I finalize the details? • Do we have a deal? • What is the best time to deliver?
- 29. Other Strategies • Learn to talk with a pen in your hand • Always say “Thank You” • Make sure all documents are signed • Only offer to reduce your price as a last resort… and then only as a one-time discount You can always go down but never go up.
- 30. Learn more about Jackie’s programs and products at BetterSmarterRicher.com Your solo business journey starts here.