How to Set Prices for Your Freelance Business
You have decided to go into business for yourself or with a partner. You know which services you want to offer. So how do you know how much to charge for your services?
You want to maximize your sales opportunities and at the same time you do not want to sell yourself short. Before creating your prices do your research and examine similar successful companies. After determining your prices make sure they will work for you. How many sales will you need to break even? What is your target weekly revenue? Will that be easily achievable? We will take a look at some ways to find the best prices to offer your clients and make sure they help you achieve your goals. Also remember: if your are not going to be setting up a physical location you will have less pressure on your prices; if you will be working out of your home using a website and phone line you will have less overhead and you can therefore charge less. Charging less will almost always bring in new customers.
Finding your competition
Do you know of other companies offering the same services that you offer? Do you know of companies like this that are local? If you said yes to either of the two questions above you have a great place to start. If you said no to either or both questions than you have some searching to do before you can start comparing. But if you do have local competitors, Google for your services and your location. Compile a list of companies and research each one.
Run down your list and make sure each of these companies is similar to yours or at least similar to what you want your company to resemble. For example if my computer company whose name is XYZ Computing is looking to open a business that will perform computer repairs in Brooklyn New York I would search for “Computer repair brooklyn ny.” See the example below for my results.
Find out what services your competitors offer for how much
Once you’ve got your list of competitors, browse over to each of their websites and look at pricing. You can also call locations and request pricing if it’s not listed on the website – just behave as if you were a potential client. (Trust me, they would do the same to you!) Compile a list of prices for each business. Take note of their location as well. Businesses in more expensive areas have more expensive rent and other overhead. Take this into account.
With this information spelled out, you will have a clearer picture of what is being offered and how much other people are charging. For example, in Sheepshead Bay, Brooklyn the going rate for virus removal is $100 flat rate. In some more expensive locations people are charging $75-$100 per hour for the same repairs.
If you would need to compete with John’s Computer Repair shop and several others that are all charging similar prices you would need to charge a little bit less to compete. By offering an$80 introductory flat rate offer you’d be likely to bring in new business.
Rate your expertise and quality of work
Do you have more experience than your competitors? If you have 20 years of experience and your competitors only have five then you have every right to charge more than them. If your turn around time for a repair is five hours and the shop across the street is advertising a one week turnaround, again, you have every right to charge more than them.
After all, if you are the best person for the job, you will want to advertise that. Include your experience and turnaround times on your flyers or other advertisements. Personally, I would rather go to someone that will guarantee they will finish the work successfully in a shorter amount of time for slightly more money.
Do not double your competitors’ prices solely based on your experience, though, as you will find yourself short on customers. People want quality work quickly but they also want to pay the best price. If you want to grow your business quickly and attract repeat customers be sure to offer competitive pricing.
Offer discounts but do not cut your prices
Image from Quinnanya’s Flickr Stream.
One thing I have learned that I will share with you is that it is much better to offer coupons or discounts than to cut your hourly or flat rates. By cutting your hourly or flat rates you are telling your customer or potential customer that you are worth less than you are charging. Instead by offering coupons or a 20% first time customer discount you are giving your customers a discount but still letting them know that you are actually worth the rates that you are charging.
Build value in yourself; show the customers that you do great work with them in mind. Have quick turnaround times and offer amazing customer service. For example, if you’re a computer repair shop, throw in free home delivery if your client cannot make it to your shop in time to pick up their computer. Little things like this go a long way. Customers that you go out of your way to help will recommend you to others, and recommendations from customers to their friends and family are the best advertising you can ask for.
When you are in the process of deciding what you should charge your potential customers, you need to start by doing your due diligence. Research any other local establishments that have similar products or services as you will offer. Compile a list of services that your both offer and the prices associated with them. Use this baseline to create your own prices.
You will need to take in to account your own expertise when compared to the other companies. If you are bringing more years of experience to the table you can charge somewhat more for your services. On the flipside, if you are new to the game your prices should be brought down accordingly.
Never slash your prices for a customer. This will take value away from you and your services. Instead offer coupons or discounts on your products or services. This will let you still give better pricing without jeopardizing your actual prices.
In the long run use your great people skills and customer service to build a loyal following. This will bring you new clientele and praise from the people you go out of your way to help.
How do you determine prices for a new business? Do you have any techniques that have worked for you in the past? We would love to hear from you in the comments.