I cringe when I hear someone say, “just double your hourly rate”.
Don’t do that.
DON’T DOUBLE IT!
When it comes to setting prices, just doubling an hourly rate could do you more harm than good.
I mean really, what could be more arbitrary?
Where did you get the hourly rate in the first place?
Is it an hourly rate you just picked out of the sky? Or is it the rate that you earned when you used to do the same work for an employer?
Stop being random
Either way… it’s still all bad because it really doesn’t matter. The number is still arbitrary. It has nothing to do with you, your business or the value that you provide to your clients.
So, I’m going to let you in on little secret. Everybody likes secrets, right?
I’m going to tell you what to do instead… and it has nothing to do with cruising www.salary.com or www.freelance-guru-expert-for-hire.com (I made the second one up).
What to do, What to do
What I advise you do is pick a different starting point. Instead of starting with the dollar amount per hour…start with the value provided per session or per product.
I, personally, would love it if every business owner got away from using the hour & the clock as a measure of their value, but that’s another discussion… see: Stop Clock Watching & Timesheet Tracking.
Alas, I digress, back to the matter at hand…what to do instead. Focus on VALUE! Focus on YOUR CUSTOMER!
I know value is a tough creature to describe and a tough thing to assess. Especially when you are starting out.
That’s why so many people take the easy way out (read: lazy way out) and just tell you, new business owner, to just take an arbitrary number and double it, then sit and wait for the cash to start pouring in.
But it doesn’t work that way and you already know that right?
Focusing on the end customer and value is hard work but you have to try. It’s an exercise that will pay off for you in the end and set you apart from the rest.
You know that customer avatar (aka that target market person) everyone in every marketing class you’ve even taken talks about? You know them? Start with them? They are your customers. They are your buyers.
What are their likes, what are their dislikes. What else do they buy. Where do they buy. Not sure? Do something crazy. ASK THEM!
Do a quick survey and ask them. Ask them what they like and what they want from you. Setting up a survey isn’t hard.
Believe me, I speak from experience on this one. I asked a simple TWO question survey and it led me to change the direction of my business…simply because what I thought my customers wanted from me wasn’t what they wanted from me at all.
So there you have it.
Stop being arbitrary… do the work and figure out what your customers want and price accordingly.
No more arbitrary numbers. Put some thought into this people!
So how do YOU price your products and services? Are you an arbitrary doubler or a thoughtful pricer?
Have a question? Not sure how to go from arbitrary to thoughtful? Leave your question and/or comments in the comments section.
I’d love to hear how you do it.
Check out The Blueprint Bootcamp: http://www.thecommoncents.com/the-blueprint-bootcamp/
Nice article! quite influencing !
Touches the soul and inspiring!
Hi Joyce, great article! I think the important part of “pricing” an engagement is to define the specific tasks that are to be performed and provide a cost estimate for these tasks. As accountants, we know what needs to be completed for a company to be compliant and successful. The question is not just about what needs to be done, but who is going to do it, at what cost. Offsetting this are the consequences and costs of the tasks not being completed. Once the list is finalized, there may be some discounting on how the services can be bundled and provided more efficiently. It is very important to track the decision on the tasks to be performed and by whom. In our workflow solution, we keep track of all tasks that are required and indicate who is responsible (client versus us). We send reminders of client tasks, and often they ask us to take care of it, for an additional fee of course. Hope this helps.
A lot goes into pricing… It just grinds my gears (lol) when I hear someone give the “double your billable hour” rate.