Setting your prices is possibly the scariest bit of being self employed. It is important that you get this bit right, set your prices too high and it might put off potential clients, set them too low and you are greatly reducing the amount of money you can make (this may effect how well you can pay your bills).
What is my minimum hourly rate?
The first step in considering your pricing strategy is to look at how much you need to earn in order to live a lifestyle you would be happy with. To do this I advise that you keep a record of all your personal outgoing’s this will give you the minimum amount you need to live. This allows you to set a minimum earning target, then if you add in the luxuries you would like to it will give you a desired earnings target. This is the figure you will be aiming for each month.
If we then do the following as a rough guide:
Decide how much you would like to earn a year. e.g £35,000
Decide how many sessions your willing to deliver a week for the desired earnings target. e.g. 20 per week or 960 per year (48 weeks, so you get 4 weeks off).
If we then work out our minimum hourly rate to achieve this £35,000 / 960 = £36.45 per hour. You would then need to add to this the costs that your business incurres in the delivery of your service.
What am I and my brand worth?
By this point in the process you will have started to have some ideas of what you envision your brand to be. Are you aiming at the more ‘normal’ client base or are you looking to be more of a premium product, aimed at a more exclusive client base. It is very important to do some research into what your competitors both locally and nationally are charging for services of a similar quality standard to your own. This initial research should give you a rough idea of what your price range should be.
Setting your prices (scary)!
So now is the time to make that scary decision to set a price range for your products, to do this effectively you need to take into account, these include:-
- Your minimum hourly rate
- Your costs
- Your competitors pricing (based on like for like level of service)
Remember that it is always easier to lower prices than increase them, but ideally you will set your price point at a level that will allow you to make a decent profit and also gain and maintain a decent market share.
- Identify your minimum earnings target and your desired earnings target.
- Set your prices for you services, products and packages.
- Check these against services in your area on a like for like offering basis and see if your within the market norms.