Whenever we conduct this kind of research, we look for the themes that emerge in the answers and group the comments accordingly.
The themes that arose from this question are as follows:
How much do you want to earn?
- How much do I want to earn? How much can I bill per month? Are these compatible?
- I worked out my costs. Then decided what I would be happy coming home with. Added that to costs. Sorted.
- Decide what you want to earn in a year. Divide it by the number of working weeks in a year. Divide by the number of hours a week you want to work.
- Calculate materials cost, overheads and expenses, then labour rate. Then add your profit mark-up. Finally add tax. Decide on your personal requirements and what to charge on that basis.
- I work out all my costs and the time it takes to finish the commission. Then add a profit to the total cost.
Value provided to customers
This is the textbook marketing approach, so we were surprised to see only a few people mention it.
- Find out what it’s worth to the customer to have their pain solved. That’s the price.
- I use bench-marking with similar types of service, but also price in relation to ability to pay and potential value of the impact of my services
Taking the lead from others
- Market research. What are other people charging for similar items or services?
- Do what the Turks do - see what everyone else is charging then charge a fiver less
- I look at what my competitors are pricing at and take an average. You don't want to over value nor devalue what you have on offer.
- Our prices are broadly set for us. It depends I think on what you think your services are worth vs how much the competition charge.
- The market dictates the price, look at the market position yourself according to your product or service quality and price accordingly.
How experienced are you?
- Research what others are charging in your field, + or - your experience, does this cover your costs and are you making enough profit after 30% tax / NI deducted.
- Decide what you're worth and stick to it. Don't undervalue yourself as you will resent it and be stuck there for ever.
I'm not greedy but after 12 years of trading I feel my prices reflect my service.
You have to recognise how much training and studying, time and money you have put into your business and how much experience you have gained along the way.
When I first started I did a lot of research to find out what others with similar experience where charging. I started much cheaper but soon realised that I had to price for the quality service/product I supplied.
Now I'm getting the right type of client for me, they value my experience are happy to pay for a quality job.
Ad hoc / per-client strategies
- If is service type of business such as joinery or a carpenter: Value+skills+overhead costs = charges/price.
- Mark up pricing strategy + analysis of market
- As a tradesman I sometimes charge an hourly rate, sometimes charge a fixed fee per job.
- I charge by the day. Takes me a day? It's my day rate :) If I agree to write something, research needs a couple of hours? I charge by the hour
- Make sure you cover your costs, look at what your competitors charge and make sure for what you do, you give value for money. Ninja price strategy.
- Assess your costs and overheads too. It's no help charging the same as your competitors if you're not covering your business costs ie insurances, equipment, services, as well as the product/service being supplied.
- Depends on each job. We go out and quote every job now rather than giving a rough price on the phone. As we are more likely to get the job.
Charging a premium price
- Rarity and quality justify higher prices
- Some advice I was once given: if no-one ever complains about your prices, you are too cheap.
- You can either be the cheapest and fight for money as a commodity or become a specialist and be the most expensive!
- I base mine on my experience and quality of care foremost and also what I can include in the price that others may not
- I heard on a podcast a while ago someone say “Whatever your highest fee is for a job, that is now your base rate/minimum.”
Sounds amazing in principle, not the easiest to put into practice but you can meet in the middle once you realise people can actually pay your worth.
- If you have big clients you can charge more.
- Can you offer anything unique to justify charging more than a competitor? Perhaps a warranty or aftercare that will add real value to your product or service at minimum cost to you.
Staying affordable so smaller companies
- I tell my clients I have a Robin Hood pricing policy - the rich subsidise those who cannot afford it. 😀
- I'll never quote a lower price that the market rate, but in some instances will offer a discretionary goodwill discount as part of it, I recognise the client would otherwise struggle to swallow the price - that way clients can't play me off each other on price.
- I sometimes use a 'pay as you feel' approach, dictated by client (not for the faint of heart, or all clients, but so far, always seen me command my highest rates)
Finding the right balance
- If you are a new company just stating out then I would say most start their prices slightly cheaper then the more experience supplier in your field, but I do feel everyone struggles with is, as you don't want to be to low and be known for cheap, but then not to high that you don't get a lot of bookings, I would say I am on par with everyone else with the same experience and time spent in the industry.
- The best research you can do is look at your competitors prices and also speak to customers and potential customers. If you undercut your competitors or overprice too much it will make people suspicious, it's finding the right balance.
- I have been told I charge to low of a day rate, but I seem to be terrible at marketing my self so don't have enough work, so I have to find the balance
- You’ll soon know whether you’re way off (too high - nobody books you, too low - you get flooded with work).
One user provided their formula for working out prices:
- Calculate all your business costs
- Calculate all your personal costs per month (include everything even down to how many Costa Coffees you think you buy in a month)
- Take them combined figures and add 20% of that figure for tax plus another potentially 10% for "profit"
- Decide how many days or hours you want to work a month and divide the above figure by the hours/days
- Finally research your market and see where you lie within it
Keeping track of expenses
Not a pricing strategy in itself, but a few users rightly mentioned it as doing it correctly is a prerequisite for many of the strategies above.
One highlighted the importance of it to their business approach:
"One recommendation I have - keep track of every penny you spend. That way, you know exactly, down to the last detail, how much just being alive costs you.
Even just spending trends over the year can be incredibly useful. I've been doing that for about 6 years now, and it's so helpful. I have a ton of data at my finger tips, and I can actually see in my spending patterns what effect inflation or illness or being very busy has on my spending habits. It's not always as obviously connected as you'd think, either."
And another recommend this handy tool:
"If you’re not already doing it, it can help to time everything you do so you can have record (and proof) of how long things tend to take. Toggl is good and free."
The holistic approach
As the reader might expect, we will finish by saying that the best approach will combine elements of all the above strategies.
Our final comment will sum this up nicely:
I definitely consider a few factors when pricing: how long will it take me, what level of expertise is required, any overheads I need to cover. I also think about planning time - so for example if I'm pricing for giving a presentation then I factor in the time it will take me to plan and prepare and add that to the time out of my day for actually delivering the presentation.
Photo Credit: Linus Nilsson on Unsplash
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