Many small business owners and solopreneurs (especially those in professional services) have trouble figuring out how much to charge their clients. It’s brain – and nerve – wracking, particularly when you’re starting out in business.
Pricing mistakes can trip up the most talented and skilled small biz professionals as they risk…
There’s far more that needs to go into the pricing equation than many folks realize.
If you’re a small business owner or self-employed professional, are you factoring all of the below into your rates?
If you don’t think about these things as you set your rates, you could shortchange your business.
And the pricing quandary doesn’t stop there. Deciding what pricing approach to use when billing clients also makes many small biz peeps break out into a cold sweat.
All clients and projects are unique, which means a one-size-fits-all pricing approach doesn’t work.
Three options for pricing.
When pricing services for individual clients and different types of projects, consider which one of the following three options fits the situation best.
Flat project fee – Charge a flat rate that includes all things you’ll do in relation to the project. This particular approach works best when you have a firm grasp on the scope of the work involved in a project and can accurately estimate the amount of time and effort it will require.
Hourly rate – Track your time and bill your client an hourly rate for all the hours you’ve spent on the project. This works well when you’re uncertain about how much work or time a project will demand. When you bill hourly, it’s important to track your time for not only “the work,” but also for time spent collaborating (email, phone, meetings), researching, etc.
Hybrid approach – This approach combines the flat project rate and by-the-hour methods. Here’s how it works:
As you prepare proposals using the hybrid method, you’ll also want to state how and at what point in time you’ll inform your client if your time on the project is exceeding the hours included in the project rate.
Peace-of-mind pricing be with you.
A final note of advice: Regardless of which approach you use, take your time formulating quotes and estimates to customers.
Rushing through the process for eager prospects will lead to either underestimating or overestimating what a project entails.
Underestimating will either leave you short (project rate) or anger clients when they receive a pricier invoice than anticipated (hourly rate or hybrid pricing).
Overestimating could prevent you from landing the project in the first place.
By taking your time, taking ALL of your time and costs into consideration, and using the best billing approach for each client/project situation, you can avoid the potential pitfalls of pricing.