How much should I charge for my services?

 

A question I get asked A LOT is “How much I should I charge for my services?”.The honest answer is “it depends”. There isn’t only one right way to price your services and everything else is wrong. The fact is there are multiple factors to consider when deciding how much to charge for your services. I know not getting an answer is frustrating so keep on reading to find out what you should consider when trying to work out what you should charge for your services.  

 

This page includes affiliate links, which means that if you choose to make a purchase, I may earn a commission. This commission comes at no additional cost to you. The content of CharelleGriffith.com is for informational and educational purposes and should not be construed as financial advice.

 

HOW MUCH SHOULD I CHARGE FOR MY SERVICES?

 

Choose the way you’d like to charge for your services

The first thing you need to consider is the way you are going to charge for your services. There are 3 main ways that online service providers charge for their services: hour/day rates, package rates and retainers

 

Hour/Day Rate

This is where you’ll have a rate for what you charge for a specific amount of time. You might have a standard hourly rate and/or daily rate. Then depending on the number of hours of days someone hires you for you may offer a discount. For example, you could be a Social Media Manager (SMM) that charges £30 per hour, but if a client books 10 hours they are charged £250.

 

Package Rate

This is where you package your services together and a client is charged a fixed rate for the package, regardless of the amount of time it takes you. For example, you could be a web designer who charges £3,000 for a website.

 

 

Retainer

This is where a client pays a fixed fee to have access to you over a specific period of time. It is very common to have a monthly retainer. In this instance, they usually aren’t paying you for a fixed number of hours (so it is different to the hour/day rate situation) but to have access to your services throughout the length of that retainer. For example, you could be an accountant that works with the same clients for years and has the client on a £100 per month retainer although you might not hear from them every month.

 

Know what your pricing strategy is

Knowing the way you want to charge your services is one thing but you’ll also need to know what your pricing strategy is. The most common pricing strategies used by online services providers are cost-plus pricing, competition-based pricing and premium pricing.

 

Cost-plus pricing

This pricing strategy focuses on ensuring that your services are profitable. If you decided to use a cost-plus pricing strategy you’ll need to calculate the costs of delivering a service and then add a markup or profit margin. As the business owner, you can decide what percentage markup you’d like to add. To ensure this pricing strategy is successful, and you have a profitable business, you’ll need to ensure that you are properly accounting for all the costs (including the cost of you delivering the service).

 

Competition-based pricing

A cost-plus pricing strategy is very internally focused whereas a competition-based pricing strategy is externally focused. You look at your business competitors and review their pricing. Then you set your pricing to be “competitive”. The purpose of this strategy is to be similar to your competitors so potential clients are then making a choice based on differences in the brands rather than differences in the pricing. Having considerably higher prices than your competitors can be risky, especially in the early days of your business. That being said, blindly setting your prices based on your competitors can also be dangerous. You aren’t aware of the true financial situation of your competitors. If you set rates similar to them without checking your other business finances it could result in your selling a service at a loss.

 

Premium pricing strategy

A premium pricing strategy is where you purposefully set your prices at a considerably higher rate the majority in your market. A premium pricing strategy is usually used by businesses that also have a premium brand position. This is a pricing strategy commonly used amongst luxury brands.

 

Cost-plus pricing, competition-based pricing and premium pricing are the most common pricing strategies used by online services providers, but there are more pricing strategies you can use. You can find out more about pricing strategies for small businesses here.

 

OVERWHELMED WITH ALL THE OPTIONS AND WANT HELP TO ENSURE YOU HAVE THE RIGHT PRICING STRATEGY FOR YOUR BUSINESS?  I offer Pricing Power Hours where I will help you to quickly and confidently set, or reset, your coaching prices. You’ll leave confident that all the number crunching has been done correctly and you’ve set your prices to ensure financial success for your business and kept your bigger mission in mind. To find out more and book a Pricing Power Hour click here.

Do some number crunching

Once you’ve decided how you’d like to charge for your services and the pricing strategy you’d like to use it is time to do some number crunching. Whilst there isn’t just one right way to charge for your services there are definitely ways that you can price your services wrong. That’s why it is super important that you carefully do the number crunching and ensure that the amount you charge for your services will enable you to build a profitable business, that pays you properly (unless you have a specific reason why in the short-term you are willing to make a loss for another long-term goal).

 

 

Regardless of the way you want to charge for your pricing and the pricing strategy you decide to use I’d highly recommend that you work out what your minimum hourly rate should be for any service. Knowing this will ensure that you can do a sense check on future pricing. For example, if you decide to go with competitor pricing once you’ve set your pricing based on your competitors you can still ensure that it works financially for your business. Another example would be that if you decide to offer your services in packages knowing your minimum hourly rate will enable you to ensure that your package has been priced at a sufficient amount.

 

To calculate your minimum hourly rate you’ll need to work out the number of hours you can commit to client delivery across a year and the annual costs to run your business (in this instance I’m assuming that you are paying yourself salary through your business).

 

EXAMPLE A: FEMALE EMPOWERMENT COACH 

Works 30 hours per week in her business. 20 of those hours can be committed to client delivery

She takes 6 weeks of holiday per year

20 hours x 46 weeks  = 920 hours across the year

Business Expenses = £68,000 (£50,000 salary + £18,000 other expenses)

£68,000 divided by 920 hours = £73.91

 

This means the absolute minimum they should be charging on an hourly equivalent basis is £74 for ease let’s round it up to £75.

 

That means if the business owner has a package that takes 10 hours to deliver that means they need to charge at least £750. If they do competitor research and see their competitors are charging £600 for that package then it is clear competitor pricing will not work. Each package would be incurring a loss of £150.

 

 

Now just because you know your minimum hourly rate doesn’t mean you have to stick to that by any means. Knowing that is to ensure that you don’t price your services too low. You are free to charge above that rate.

 

 

EXAMPLE B: COPYWRITER

Works 25 hours per week in her business. 20 of those hours can be committed to client delivery

She takes 12 weeks of holiday per year

20 hours x 40 weeks  = 800 hours across the year

Business Expenses = £55,000 (£42,000 salary + £13,000 other expenses)

£55,000 divided by 800 hours = £68.75

Minimum hourly rate = £69

 

The copywriter has decided to go with a cost-plus pricing strategy. She has plans to grow her team in the next year and wants to be building the business’ reserves to help feel more comfortable. She decides she wants a minimum markup of 50% on all her services. So she reviews all of her services to ensure they enable to make the equivalent of £103.50 (£69 x 1.5) per hour.

 

When you are doing your number crunching there are a few important things to remember:

 

Not all the hours you work in your business are billable

One of the biggest mistakes business owners make when working out their minimum hourly rate is treating all of the hours they work in their business as billable hours. You can’t run a business by yourself where every single moment of your working day can be allocated to a specific client to pay for it. You need to ensure you account for that.

 

Ensure you are giving yourself holidays

Another common mistake is calculating based on working 52 weeks of the year. In both the examples above I clearly outlined the holidays the business owner would be taking to help illustrate the point. When you are doing your own calculations you should ensure you set sufficient allowance for you to take time off.

 

Don’t forget about taxes

The structure of your business and the country your business is registered in will impact the taxes you have to pay. Always ensure when you are doing your calculations you ensure you’ve taken into consideration the taxes you’ll have to pay.

 

 

There you have it! You now know the answer to “How much should I charge for my services?”

 

The honest answer is what you charge for your services is truly up to you. However, I hope by considering your minimum hourly rate, the way you want to charge for your services and your pricing strategy you can decide what you should charge for your services going forward.

 

An important thing to remember is what you decide to charge right now doesn’t mean you have to charge that forever. In fact, you should be reviewing your pricing at least once a year. So rather than spending forever trying to work out what you should be charging you should follow the steps in this blog post, set your pricing and then concentrate on signing new clients.

 

In the comments, I would love to hear what your biggest takeaway is.

 

WANT AN INTEGRATED MARKETING STRATEGY TO HELP YOU GROW A THRIVING ONLINE BUSINESS THAT GIVES YOU THE MONEY AND TIME TO LIVE YOUR BEST LIFE?  Getting your pricing right is part of the puzzle of building a thriving and profitable online business. I’m a Chartered Marketer that specialises in supporting solo coaches, consultants and online service providers to improve their marketing so they can shine online, attract their dream clients, and ultimately build a business they love and that helps them build financial wealth. The key to this is having an integrated marketing strategy that you can manage by yourself alongside all of the other hats you have in your business. Just need a marketing strategy? Check out my Strategy Days Want a marketing strategy AND ongoing mentoring, training and accountability?  Book a free, no-obligation, introduction call to discuss your specific needs here.