For the new entrepreneur, freelancer, or independent professional I often found that arriving at a price is the biggest hurdle in starting the business up.
How much do I need, how much do I deserve, and how much can I get are the three big questions tumbling through their brains as they first seek to market themselves and grow their businesses.
Well, with the help of an excellent new resource I have discovered The Wealthy Freelancer, and my all-time favorite Found Money, let's come up with some answers for you.
Start By Pricing Low? My experience is that the new entrepreneur is often terrified of pricing themselves out of the market and seeks to gain market share by undercutting the competition's prices.
This seems like a safe strategy, with less experience you should charge less, right? Well, maybe, but do keep in mind the dangers of underpricing: It basically says to potential clients, "Hey, we don't do as good of work and so, to make it up to you, we are charging less.
" It sets a bad precedent for future work with that client, who will forever consider you the "discount provider.
" In the words of a client I was pursuing, "we decided to go with Super Big and Famous Firm X because, although they charge twice as much, we know they won't nickel and dime us every time we have a question or want something from them.
" Charge by the Hour? Most entrepreneurs and independent professionals start off charging by the hour.
After all, most of us start our our careers as employees and we are accustomed to thinking of our time as having a price.
"Time is money," as they say and we want to make a certain amount of money per hour.
Charge Them What You're Really Worth! Steve Slaunwhite of "The Wealthy Freelancer" makes a great case for a matter true to my heart, ending outdated thinking of charging by the hour and start charging by the result.
Clients don't want your time, they want a a job done! They come to you because they have a need that needs met and are indifferent to your actual input of time.
The client looks at hourly billing as a "blank check" for you and worries about the meter ticking.
It sets an artificial ceiling on your earning power.
As you earn greater efficiencies and produce better work, your income cannot expand accordingly.
However, even though you, as a savvy professional, as charging your clients by the job you still need to track your hours spent on each project.
Your time is a finite resource and you need to manage it carefully.
Tracking the time you spend helps you to price future jobs and shows what lines of work are most profitable.
Finally, it should help you find efficiencies and show what areas need you need to spend less time on.
Two tools recommended by "The Wealthy Freelancer" are TraxTime and FreshBooks.
Determining What Price to Charge Most new entrepreneurs stumble into pricing the wrong way.
They start off marketing and then get to pricing only when when they are asked about it, figuring that they will take what the client offers.
Well, often the client doesn't really know what the "correct price" is and they are certainly not going to lead off with their best price.
Besides, nothing says amateur like not even having a ballpark figure of what you intend to charge! So your first step, according to Steve Slaunwhite of "The Wealthy Freelancer," is to create fee schedule for the services you offer.
The schedule should set out a range of prices for each service or product and gives you a beginning price.
"But if I don't have much experience, how much should I charge?" I can hear you ask.
Well, in the Internet age, you should be looking up the fee schedules of your competitors and using that as a basis for how much to charge.
Adjust the price accordingly as you get experience and get a better idea of what your unique customers are willing to pay.
Don't accept low-ball prices; if you really want the work compromise with them but get something in return, more time, money up front, a reduction in the output.
, a commitment for multiple purchases.
Remember that every job sets a precedent for all future work with that customer.
If you set yourself up as the bargain basement option then that is what you will always be to that client.
Fire Loser Customers! My longtime readers know what a huge fan I am of Steve Wilkinghoff and his book, Found Money.
One of the highlights of Steve's book is his "Customer Profitability Map.
" The basic premise is this, evaluate your customers by two criteria, profitability and pleasure of doing business with.
Plot them out on a grid and take the quarter that are both least pleasant to do business with and least profitable and fire them! The quarter that are both the most pleasurable to do business with and most profitable try to cross-sell and up-sell.
At the very least, keep in close contact with them and follow what they are up to.
Meet with pleasurable but less-profitable clients and determine if there is work that could help them become more profitable.
Be wary of more profitable but less pleasurable clients.
They may be worth the hassle but keep an eye out for hidden costs and potential drains on your time and efforts.
Finally, if they should ever fall into the less profitable category, fire their asses! If you have been in business for any amount of time, you surely have found out that getting the right price out there is part art and part science.
Either way, you get better with experience and study.
I don't get even a thank you for recommending both "The Wealthy Freelancer" and "Found Money" but they really are two of the best resources on business for any new entrepreneur.
In fact, my biggest complaint with the "Wealthy Freelancer" is the title, I don't consider myself a freelancer but I think that it is full of fantastic information that is directly applicable to any entrepreneur in a knowledge based, service, or consulting industry.
While most of the famous books on entrepreneurism paint pretty pictures but are vague when it comes to actually getting stuff done these two deliver essential and applicable information with pithy wit and bucket loads of gory detail.
How much do I need, how much do I deserve, and how much can I get are the three big questions tumbling through their brains as they first seek to market themselves and grow their businesses.
Well, with the help of an excellent new resource I have discovered The Wealthy Freelancer, and my all-time favorite Found Money, let's come up with some answers for you.
Start By Pricing Low? My experience is that the new entrepreneur is often terrified of pricing themselves out of the market and seeks to gain market share by undercutting the competition's prices.
This seems like a safe strategy, with less experience you should charge less, right? Well, maybe, but do keep in mind the dangers of underpricing: It basically says to potential clients, "Hey, we don't do as good of work and so, to make it up to you, we are charging less.
" It sets a bad precedent for future work with that client, who will forever consider you the "discount provider.
" In the words of a client I was pursuing, "we decided to go with Super Big and Famous Firm X because, although they charge twice as much, we know they won't nickel and dime us every time we have a question or want something from them.
" Charge by the Hour? Most entrepreneurs and independent professionals start off charging by the hour.
After all, most of us start our our careers as employees and we are accustomed to thinking of our time as having a price.
"Time is money," as they say and we want to make a certain amount of money per hour.
Charge Them What You're Really Worth! Steve Slaunwhite of "The Wealthy Freelancer" makes a great case for a matter true to my heart, ending outdated thinking of charging by the hour and start charging by the result.
Clients don't want your time, they want a a job done! They come to you because they have a need that needs met and are indifferent to your actual input of time.
The client looks at hourly billing as a "blank check" for you and worries about the meter ticking.
It sets an artificial ceiling on your earning power.
As you earn greater efficiencies and produce better work, your income cannot expand accordingly.
However, even though you, as a savvy professional, as charging your clients by the job you still need to track your hours spent on each project.
Your time is a finite resource and you need to manage it carefully.
Tracking the time you spend helps you to price future jobs and shows what lines of work are most profitable.
Finally, it should help you find efficiencies and show what areas need you need to spend less time on.
Two tools recommended by "The Wealthy Freelancer" are TraxTime and FreshBooks.
Determining What Price to Charge Most new entrepreneurs stumble into pricing the wrong way.
They start off marketing and then get to pricing only when when they are asked about it, figuring that they will take what the client offers.
Well, often the client doesn't really know what the "correct price" is and they are certainly not going to lead off with their best price.
Besides, nothing says amateur like not even having a ballpark figure of what you intend to charge! So your first step, according to Steve Slaunwhite of "The Wealthy Freelancer," is to create fee schedule for the services you offer.
The schedule should set out a range of prices for each service or product and gives you a beginning price.
"But if I don't have much experience, how much should I charge?" I can hear you ask.
Well, in the Internet age, you should be looking up the fee schedules of your competitors and using that as a basis for how much to charge.
Adjust the price accordingly as you get experience and get a better idea of what your unique customers are willing to pay.
Don't accept low-ball prices; if you really want the work compromise with them but get something in return, more time, money up front, a reduction in the output.
, a commitment for multiple purchases.
Remember that every job sets a precedent for all future work with that customer.
If you set yourself up as the bargain basement option then that is what you will always be to that client.
Fire Loser Customers! My longtime readers know what a huge fan I am of Steve Wilkinghoff and his book, Found Money.
One of the highlights of Steve's book is his "Customer Profitability Map.
" The basic premise is this, evaluate your customers by two criteria, profitability and pleasure of doing business with.
Plot them out on a grid and take the quarter that are both least pleasant to do business with and least profitable and fire them! The quarter that are both the most pleasurable to do business with and most profitable try to cross-sell and up-sell.
At the very least, keep in close contact with them and follow what they are up to.
Meet with pleasurable but less-profitable clients and determine if there is work that could help them become more profitable.
Be wary of more profitable but less pleasurable clients.
They may be worth the hassle but keep an eye out for hidden costs and potential drains on your time and efforts.
Finally, if they should ever fall into the less profitable category, fire their asses! If you have been in business for any amount of time, you surely have found out that getting the right price out there is part art and part science.
Either way, you get better with experience and study.
I don't get even a thank you for recommending both "The Wealthy Freelancer" and "Found Money" but they really are two of the best resources on business for any new entrepreneur.
In fact, my biggest complaint with the "Wealthy Freelancer" is the title, I don't consider myself a freelancer but I think that it is full of fantastic information that is directly applicable to any entrepreneur in a knowledge based, service, or consulting industry.
While most of the famous books on entrepreneurism paint pretty pictures but are vague when it comes to actually getting stuff done these two deliver essential and applicable information with pithy wit and bucket loads of gory detail.
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