It's the age-old and slightly awkward question that seems to always plague creative entrepreneurs: how much should I charge? Figuring out your pricing can be really confusing, but it's certainly one of the most important things to consider when running a business! I mean ... you need to make money in order to have a successful business right?
There isn't a flat answer that will fit every entrepreneur because there are lots of factors to consider when coming up with how much you should charge. (Factors like where you live, what you're offering, the type of people you're offering them to, etc.) So I decided to share how I came up with the pricing for my own services! So here's some non-scary questions that you should answer to help in coming up with a smart pricing strategy for your own business (and if you already have pricing in place, for you to consider for your current offerings!) So grab a pen and paper and let's get to answering!
1. How much do you want to make per year?
Run some numbers, baby. Dream big, but be realistic especially if you are just starting out! If you are a complete newbie, make a guesstimate. You have to start some where to get the ball rolling! A good place to start is to figure out how much money you need to make per month in order to survive and pay all the bills plus a little extra to save. That's a good base goal to start off with right?! Then you can always add larger money goals from there! So go on, write down how much money you NEED to make per month to cover all your basic expenses.
2. Are you offering products?
Will you be offering just tangible goodies? Services? Both? If you'll be offering products, make a list of all the products that you will be charging moo-lah for. In order to be successful, you'll need what you charge for your product to both cover any creation expenses on your end AND make a profit. If your product is one that requires a decent amount of time to create on your end each time it's purchased, write down how much. And if pricing your product is still making your head swirl, look at what others in your area or niche are doing for pricing similar products to use as a jumping off point in figuring out yours! So go on, write out your list of super amazing products.
3. Are you offering a service?
If so, figure out your hourly rate! How much do you want to make per hour? To help you figure out how much to charge per hour, figure out how many hours you'll actually be putting into that service! Take a moment to write down every single step that goes into providing that service from start to finish.
For example, in order to help me figure out my hourly rate for shooting weddings, I wrote down every single step (along with how much time goes into each step), that it takes for me to complete a wedding photography service from start to finish. From e-mail communication to travel to wedding day timeline planning to editing to blogging to uploading images into the client's online gallery. So while the wedding package the client is investing in might be "9 hours of wedding day coverage," I found that it actually takes me about 20 hours to complete the service. Don't forget to include taxes in your pricing, which is almost 1/3! (I know, super depressing.)
4. What costs are associated with creating your product or service?
Now that you've written down how much time you're spending, it's time to write down any costs associated with creating that service or product, woo hoo! Write down every single penny. Types of costs you should factor in could include:
- Business production costs like your website designer, your accountant, etc. For example, does the product or service that you're creating require the creation of a new website? And if so, will you be paying someone to create that for you? Or will you be going all DIY crazy by purchasing the website yourself?
- Ongoing business costs like hosting, marketing, etc. For example, what are things that you spend money on every month to keep your biz up and running? (Like coffee to fuel yourself!!!! Just kidding, hehe.)
- Costs for tangible goods like production costs and inventory of all your goodies. So for example, for each wedding I book I spend about $150 to provide the most basic service. (I spend money on the client's gallery, a client gift, gas etc.)
5. Charge enough to cover your time and expenses.
Okay, now that you've recorded ALL the time that will go into providing the service or product as well as listed out ALL your associated expenses, it's time to write down a price that just feeeeeels good. Make sure that it covers both your time AND expenses while also factoring in taxes. (Do I need to remind you that taxes are roughly 1/3? Sorry I shouldn't have brought that up again ... depressing. Hahahaha.)
6. Create an annual schedule.
After you come up with the basic pricing for your products and/or services, try coming up with an annual schedule of sorts to help you get a better "big picture" idea of how much you need to sell and when! Think about how many products or services you need to realistically sell in a set timeframe (like weekly or monthly) to meet the financial goals that you set in step one. Does it look doable? Do you need to adjust your pricing? Break it all down, baby!
For example, winter is the "slow season" for wedding photographers. (What? Nobody wants to get married when it's -17 out?!) So I know when mapping out my annual schedule that I need to find other ways to create income during the slower months.
Did you complete all these steps for at least one service or product? If so ...
Well now, wasn't that fun?
At least ... relatively painless right?
I hope this helps you along the slightly confusing and some times frustrating "what should I charge?" dilemma! If you have any questions (or things to share in general,) feel free to comment below!
And now it's time for a COFFEE BREAK!
Also ... my hands are cold.