How Much Should I Charge?
One of the most common struggles for any start-up business is answering the question how much should I charge. In my experience this is one of the best questions for a business owner to struggle through. The benefit to answering the “how much should I charge” question is that once you have answered it, you have understood your business and industry inside and out. This doesn’t happen overnight. In fact, it probably will take between one and three years.
Spend your time working through your rates. Track your project costs and compare them. You will be surprised at the things you learn about your business as you evaluate your prices.
Are you charging too little or too much? Charge too little and you set an expectation that your clients will hold you to. Or worse they will assume your product or service to be lacking in some way. Charge too much and you will never get any clients to begin with.
To help you out, here is a list of factors that will influence the price you charge your clients. Come back to this list many times during your first few years of business.
- Industry Standards – what is the range that others charge?
- Competition – what is your competition doing and how are you different?
- Costs (both indirect and direct) – how much does it cost to do what you do?
- Business Goals – how much will it cost achieve your goals?
- Level of Expertise – how much experience do you have?
- Efficiency – is your process more efficient?
- Supply Vs. Demand – what are the overall supply vs. demand conditions for your niche?
- Economic Factors – does the economy in your region support what you are doing?
- Investment – did you make an initial investment to get yourself started?
A useful tool if you are a freelancer is this rate calculator from Freelance Switch.
