Whether you call yourself a freelancer, contractor, virtual assistant or consultant, knowing how to charge for your services can be a daunting concept. Price yourself too low and you end up working for peanuts, price yourself too high and people ask why.
It’s the one thing as a small business owner that can send you completely batty. Sleepless nights wondering if you are priced correctly and whether you are competitive in your market. Stressed to the max every time you have to quote on a job.
Surely there has to be a happy medium? But, how do you get there? In all honesty, I’ve found it’s a bit of trial and error coupled with assessing your own clientele and market. Once you have an idea of your market though, it becomes a whole lot easier.
In saying that, there is a bit of a secret that I have discovered that makes it easier for you and your client.
When I started my VA business, I was working for what I now know to be quite a low hourly rate for what I was doing. At the time I was more than happy to work for that as I was learning the trade and didn’t really know any better. Now, I look back and think I was totally underselling myself. That and I was never really invoicing for every hour I worked. So, when you work it out, that hourly rate actually went down even more.
When you work on an hourly rate, you are putting a price on your time rather than your work. A price on how quickly you think you can get something done. What happens if you take longer than you thought? Or what if your client has one expectation, but reality is completely different? Enter the guilt. You feel bad that a task took you longer, even if it was through no fault of your own. So you only charge for how long you think the client expected it to take, not how long it actually took.
Putting a time limit on a task also leaves it open for question? You send a quote to someone for 8 hours work at an hourly rate of $50 p/h. The price on the job is $400. The quote is then, rightly or wrongly, judged for the time it is expected to take and your hourly rate, not the job.
Hourly rate vs project rate?
What if you classified your tasks into a “project”?
You get asked to quote for a website. You say, that will be $1200 and I will include xyz into the package. Automatically, the client knows what they will be getting and how much. This alleviates the client wondering if you will be adding more hours onto the job and gives you a dollar amount for the project. The price you put on the project is what you are happy to do the job for, every time.
All of a sudden, the hours and hourly rate goes out the window. For both you and your client. Your client is paying for a complete service and they know what they are going to get. You are being paid what you feel is fair for you to complete that task. You are not clock watching, your focus becomes the project and not the hours.
If you said, that website will take me 20 hours to do at my hourly rate, it then draws the question, why does it take 20 hours. Anyone who has built a website knows all too well, this 20 hours usually turns into much more. But all of a sudden, you have put a time expectation and limit on it.
Of course, there will be projects where you spend longer than others. Pineapples happen. But your frustration will be lessened as you won’t be looking at your hourly rate dwindling. You won’t be frustrated at yourself that you only quoted 4 hours instead of 6. You are happy in the knowledge that you are being paid fairly for your work, not your time.
Putting a price on your work rather than your time is a way of resetting your mindset.
Putting a price on your work rather than your time is a way of resetting your mindset. People find it hard to put a price on themselves. It almost seems arrogant. I know I find it hard to say I am worth $xx per hour and I am worth more than the lady down the road. I have found it much easier and fairer to say, that project or task will cost $xxx. Done and dusted.
For example, a blog generally takes me anywhere from 1 – 2 hours depending on the topic and length. With that, some blogs take longer and some might be shorter if it is a topic I can write about in my sleep. Pricing my blogs as a package, I am putting a value on the job or product itself rather than a time frame.
People like to know that a price is set and there are no Demtel “but wait there’s more” ads coming their way. By setting a price per task, you are telling your customer that is how much that blog or website or logo will cost you.
The other thing you are considering when pricing yourself per task is the overall outcome for your client. An hourly rate or quoted hours doesn’t account for the “package”. By that I mean the time you have saved your client where they are using that time more productively. Or the advice and intellectual property you have given them over the time spent liaising with them.
A “package” price is saying, this logo will cost you $500 and you will receive font files, a branding board and 3 revisions. Automatically, the client knows what they are getting and appreciates your work. They can budget and you can get to work on delivering them their desired outcome.
So, how do you put a price on your projects?
That is where your market research and your own happy place come in. You will need to determine how long roughly a project will take you and then determine what you are happy to charge. The beauty of setting a rate in this form, is you can include the extras that you give as part of your service. The extras that an hourly rate or time allocation just don’t cover.
When setting your rates, regardless of which method you choose to take, be considerate of your market. Don’t undercut just so you can get all the business. In service, it doesn’t actually work that way. People will question why you are so cheap and second guess your product or service.
One last point that I will add in here, and possibly the most pertinent. When you charge an hourly rate, you are actually limiting your income ability. You only have so many working hours in a day. By working per hour your income is limited to the 8 hours a day you may have at your disposal. Pricing by your work rather than hours allows you to increase your product as demand increases. This ensures you are being paid relative to your work, not your time, giving you room for price increases and pay rises.