Are You Charging Enough for Your Services?

Short answer: probably not.

Establishing your pricing structure can be an agonizing process for business owners. Finding that sweet spot between not undercharging and not overcharging for your services requires both a calculation of finances and finesse. Here’s what we mean by that.

We typically start out with a goal in mind (say, to make $100k a year) and figure out how many projects we’ll need to get there. We’ll go over the time we take per project and make sure it’s in line with that target, then send it out.

Then, we’ll switch to looking at what it costs us to take on a project successfully, then we’ll tack on 15-20% as our profit.

Neither is an ideal way of doing it.

Instead, focus on the value you provide.

A Calculation of Value Provided

If you compute all of your overhead expenses, including expenses like insurance, retirement benefits and taxes and tack on a profit margin you’ll get a price you can offer and it should help you keep the lights on.

But if you’re a videographer, and you know the video you’re creating for a real estate brokerage is going to help them land dozens of million-dollar listings (where they make 3% of the sale price), your price has to correlate – if it’s worth $25,000 for them, they will think you can’t do the job for $5,000 (even if that number fits in with your expenses + profit margin formula).

Your price has to match their expectation – and this is true for selling anything – from apps to wine, from legal services to marketing.  

Pricing for Other Reasons Than Value

There are exceptions of course. At the same time, you have to look at your team’s bandwidth. Sometimes it makes operational sense to take a job for a lower amount because your team has the time this month and it will keep them busy. Or, if you’ll have to hire to take on a project, the price has to be significantly higher than it normally would.

But, your pricing should always center around the value you provide – not the cost of doing the work. Otherwise you’ll miss out on opportunities you should be getting.

Be confident knowing you’ve done your homework and know your worth as you approach new and existing clients about your service rates.