One of the worst moments in the life of a business owner are the silent moments between when you quote your rates to a potential client and then his response. It is true that though hardly a second goes by, but it can all feel like an eternity.
“Will he hire me eventually?”
“Did I go out too high?”
And when he finally says “YOU’RE HIRED!” new doubts start creeping over you…
“Should I have gone much higher?”
“Did I lowball the price enough to get a client?”
You know the feeling. You got the good job, the project and the new client and it almost always turns out to be more work than you what thought when you signed up for the task. Always be sure that you know your worth and then communicate it to the client up front.
1. Know your worth
If you charge your clients on an hourly basis, how would you know what to charge them? Did you just pick a number out of the air? What was your rationale for the charge?
For those who choose to bill them hourly, I recommend the following approach for determining what you charge:
a) Always determine what you want your salary to be. How much amount will you take out from the company?
b) Add to that any subcontractor expense which you may have. This is what is called your ‘labour total’.
c) List out and tally all your expenses: be it for advertising, promotion, rent, the self-employment tax or supplies. This is what is called your “non-labour expense total”.
d) Add your labour total amount to your non-labour expense total.
e) Add to it any profit goal you might have for your business.
f) The bullets (d) plus (e) equals your Total Required Revenue.
g) Then divide your “Total Required Revenue” by the number of total billable hours for the year. Always remember that you will not be billing as 40 hours/week. The result amount will be the one you need to charge per hour for making your salary goal.
If you bill on an hourly basis, take the time to complete the above exercise effectively and, if necessary, then increase your rates accordingly.
2. No haggling at all
It can be pretty hard when you have few clients or in need of more money, but whatever you do, make sure you do not haggle with your clients/prospective clients over the pricing.
You can haggle at a good flea market. You can haggle for a good price of a house. You can negotiate (a.k.a. “haggle”) for a particular corporate job salary. As a good self-employed individual, you must not haggle at all over your pricing. If you do it immediately, it would lower your perceived worth with the person and will set you up to a relationship of nit-picking over anything and everything.
3. Do provide a “solution” and not a “service.”
Make sure your clients understand the benefits they would receive from hiring you. You are not providing them with a service; you are providing them a suitable solution.
The difference is that people value solutions more than services. Whenever discussing a price with a potential client, always focus on the benefits, the “solutions” that they will receive as a result of hiring you.
Will they have more free time? Will their business see an increase in profits/clients? Know the benefits and speak directly to them!
4. Always be prepared to say “Goodbye”
Not all and everyone is going to accept your terms. Do deal with that. They weren’t initially meant to be your clients anyway and would have at the end took up the time which you might be using for a better qualified client. Always save your time and energy for those who do recognize your worth – you’ll both be happier and much more productive.
Pricing your services efficiently is one of the most emotional things you’ll do as a potential business owner. Make sure to take time to review a project at hand before just blurting out the price – doing so will save you with a lot of time and frustration down the road.