9 Need to Know Tips to Price Your Services
Services come in many different shapes, sizes, values, wants and needs. When it comes to pricing it can be a sticky situation for some, especially if you aren’t too sure or familiar with the competitive markets in your area. We have come up with nine tips to help you navigate your road to pricing services for your business.
Pricing your services boils down to costs and value. So let’s get into some math (don’t worry, not too much), what cost and value means, and we’ll get you on track to price yourself at what you’re worth.
1.Calculate Your Business Costs
These costs are the business expenses you incur to run your business. Things like office space, labor, employees, software, equipment, taxes and supplies. Factor all those monthly costs and this is the base to start with for your project or hourly rates. But! This is just the beginning.
2. What Value Do You Bring to the Table?
As we laid out, the base of your pricing is just to cover your expenses that keep the lights on. But, you probably enjoy paying rent and going to a movie now and then. This is where you being you adds value, and increases your rates to turn a profit. So, what does value mean? This includes investments you’ve made in yourself, experience, quality of work, and other things that prove to clients that you can get the job done. Things like education, continuing education, investments in new software skills, your 10 years of professional experience, that job you landed with Microsoft, all come into play. These are all a reflection of your value that you bring to a project. You may charge 2x, 3x, or 10x more per hour than someone right out of design school, but your work may be of higher quality, and your turn-around time may be shorter. These are all values that your experience and expertise bring to the table.
3. Do Your Market Research
Use tools like PayScale or Glassdoor to see what rates people are charging in your area or for your occupation. This will give you a good idea of what competitive rates look like for you. But, make sure that you are keeping in mind that some of these rates may be from people who are employed. This means they aren’t paying self-employment taxes and the other business costs we laid out above. It never hurts to ask other artists or businesses what they charge for their services. And I would warn against looking at freelance sites, as some artists aren’t located in the U.S. and have very low costs compared to what we face here in the states. Price gouging is a very real thing, and it can be very detrimental to small businesses and their bottom lines.
4. Now It’s Time to Talk Pricing Models
There are several different ways artists price their services.
Project fees are a set-price for a predetermined amount of work. The scope of the project should be laid out within a contract which states the milestones of the project through completion, and caps the amount of revision cycles allowed before additional fees are incurred. (For more info on contracts, please view our Contracts blog)
Hourly rates are the model that most people are probably familiar with. This can be the least risky for artists, as they charge for the amount of hours worked regardless of the project outcome. But, if you charge too low for your hourly rate, you may be missing out on revenue if you are a very productive and streamlined artist. Please, be cautious with this model and make sure to price yourself to make a profit.
Day rates are where artists allow clients to reserve them for a specific amount of hours at a flat rate. Work time is reserved for that client alone, and the terms of the day rate are determined by the artist. This happens often in film productions and photography. This can be incentivized to offer a “lower hourly rate”, to bring in more revenue.
5. Calculating Project Fees
Project Fees will fluctuate per job as the needs and time needed changes. For example, if you are doing a 15 second animated commercial for a business, set your starting rate at $1500. And that is just the starting rate, depending on the time frame the potential client has, or the amount of work they send you to do, or what style they want you to create in, will really depict what your rate should be. Another example; if you are a photographer, price your packages with what it includes. Now I’m a firm believer that if you are only getting digital packages, then the pricing should be lower then if you request to receive prints and a digital package. Again this goes with supply and demand, the cost of photo ink, and photo paper, and the amount of prints you order. And don’t forget, as a client, you are paying for the price of the photographer to potentially travel to your wedding destination, for a whole day of photos, editing the photos, and then printing and getting them shipped out. Remember, they have other clients that they are working with too! Photographers, be transparent with what your package includes. Explain entirely so that there is zero confusion with your client. Mini shoots, one hour shoots, the sky's the limit! Know what you are worth! Again, DO NOT forget about your expenses when you are pricing projects. You need to factor in office rent, equipment, payroll expenses, taxes, etc.
6. Calculating Hourly Rates
If you are new to the freelance industry, or have only done freelance, then having hourly rates posted could be a blessing in disguise. Some clients will see your project rates, and fly out your door, or skip over you, but if you have hourly rates posted, then you may not seem so daunting to work with. Having both hourly and project rates can show them where your value lies. And if a job only takes you an hour, then they aren’t out a lot of money, and you’ve still made a decent amount of money for time spent. But, make sure to price hourly at what you’re worth. This is especially true if you are an experienced and streamlined worker. To give you an idea of Market Rates for Graphic Designers, the average Graphic Designer charges $75-$150 per hour to start. And for those who have been in the field longer and have much more knowledge, they will charge $150-$300 per hour. Knowing what you are worth is a game changer.
Now, let’s talk about some additional helpful tips to keep in mind for pricing and presenting your services.
7. Bottoms Up Pricing
This is when you show your rate prices low to high, this can help a potential client decide if your rates can fit within their budget. I’m sure plenty of us have done this on amazon when we are searching for a new winter coat, or lawn mower blade. If you are a start up, getting some traction and money coming in the door is a huge positive, but don’t undersell yourself. Showing your cheapest product first up to your most expensive and explain what each service comes with will help in the final decision. This can also be called tiered pricing.
8. Competitive Pricing
If you are opening a new art studio, and are going to be offering wine and paint hour once a month, you’ll want to do research about what other studios and artists are charging for their classes, and where they are hosting them. Whether you’ll need to apply for an alcohol license, or host at a local brewery or wine bar. Most classes typically start at $35+ and that includes a glass of wine, and the supplies for the class. And usually there are size restrictions, so make sure you are charging what will help you cover venue costs, supply costs and what will help you come out ahead still without breaking someone's pocket book, and keep you on the competitive edge of art classes. Stay competitive, but also don’t put your competition out of business, we all have bills to pay!
9.Watch the Market
If the market rates in your area and the cost of living is going up, then it’s probably time to adjust your pricing. But, do not make huge drastic changes all at once. Your existing customers may turn away if your rate went from $1500 to $2000 overnight.You may get a lot of questions or lose customers. It’s also important to explain to customers why there’s an increase in rates, and what they’re getting for it! “We’re now offering new services, are hiring so we can expand our services”, etc. For example, if you just purchased a more powerful computer so that you can work in 4d animation, you’ll want to raise your pricing from $65/hour to $75 per hour to help cover the expense of the new software. It is also a new service you can offer to your clients, and will in the long run be a beneficial addition to your company. So when you are marking up your rates, be fair, but not to the point that you will start losing clients left and right.
Pricing services can be complex, and takes research, but in the end it is all worth it. Make sure to always show your potential and current clients the value you have in each item and package deal. If you raise your prices, and a customer asks why make sure you have a valid answer, whether you are hiring, getting new equipment, accounting for cost of living etc. Customers appreciate transparency from business owners. And for employees, it makes for a great long term relationship.
If you have any pricing advice, please share with us, we are all in this together and can always learn new valuable skills and information to better ourselves and our businesses.