Biggest Mistake People Make When Setting Their Fees
I talked with a client recently who was hesitant to raise her hourly fees. She didn’t want people to think she was greedy. So I ran her through a simple exercise based on her overhead and expenses. The exercise revealed something that surprised her greatly. At her current rate (once all expenses were subtracted), her income was actually BELOW minimum wage. The key to avoiding the minimum wage entrepreneur trap is to start your calculations where you want to finish. Confused? Good! Let me clarify.
How many hours a week do you want to work? Not just see clients, but actually work each week. Make sure you include time for promotions and marketing, administrative and financial tasks, product creation, research – the whole shebang. What annual income do you want to receive? And what is your time actually worth? Most people severely undervalue themselves, as was the case of my client.
Play with the numbers you come up with. If having more time available to create is important to you, then a higher hourly rate will give you that luxury. You may have fewer clients who take advantage of the higher rate, but you will have more time available to you. I charge $500/hour for my expertise, billable in six minute increments. I’d rather have 1 client a day take up 1 hour of my time and pay me $500 for that hour than to have five clients a day, taking up five hours at $100 each. Time is my most precious commodity and it should be yours too.
Too often, we set prices based on what we think the market will bear which is actually a thinly disguised way of saying we set prices based on what we think we are worth. I used to be a ghostwriter for marketing legend Jay Abraham. At the time, Jay charged $10,000 an hour for his time AND you had to come to him because he doesn’t fly. Most people would say no one is worth $10,000 an hour. Jay thought he was, so that’s the price he received for his services. Valuing yourself is the start point for setting a fee that helps you reach your financial goals and keeps your business growing.
Paula Langguth Ryan is a mediation and marketing maven, specializing in financial issues for small businesses. She’s the creator of the Supersonic Prosperity Oriented Copywriting System http://www.paulalangguthryan.com/shop/supersonic-copywriting/ and provides strategic financial consulting services to small business owners. She’s also the author of Bounce Back From Bankruptcy: A Step-By-Step Guide to Getting Back on Your Financial Feet and the forthcoming Break the Debt Cycle – For Good! You can follow her on Twitter at copytamer and get free resources at www.paulalangguthryan.com. If you need help or assist please email us at firstname.lastname@example.org