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Are Your Rates Right? Step-by-step Guide To Setting Your Prices
One of the most difficult things to establish when you’re setting up any kind of service business is how much to charge for your time. Get this right and you should have plenty of customers and a business that pays you well. Get this wrong and your new business may never get off the ground. If your prices are too high, your customers will go elsewhere - but, if your prices are too low you could end up working all hours for months on end simply to break even. Or worse still, to lose money! One of the most frequent mistakes made by new businesses of all types is to think that people are only motivated by price in the buying decision. Consequently, a common initial approach is to find out what others in the same line of work are charging and undercut them… don’t fall into this trap. Give the matter a bit more thought, after all, this is to be your livelihood and it’s essential that you’re paid a proper and decent amount for your time and expertise with the proviso that both you and your customers feel you are giving value for money. The following method may not be the simplest in the world, but it is probably one of the most dependable. Use these guidelines to establish what your true market value is for the service you are offering. What would an employer pay for your time? Firstly, research what you would earn
if you were working for a local employer in a similar
field. If you’re a freelance bookkeeper check out
large companies with their own accounts departments.
If you’re a car mechanic, check out local vehicle
repair companies and if you’re a private tutor, check
out schools and colleges or adult education centers
and training companies. $51,000 divided by 48 weeks is $1062.50
per week. Unlike an employee, you will have
to cover your business running costs. You will have
to establish a figure for your own business expenses
according to the service you are offering. Fortunately
in my business these are comparatively low as I don’t
need premises or expensive equipment. My biggest expense
is my car. Your business may be different so make
sure you take everything into account here, right
down to envelopes and paperclips. Assume at this stage that you have
40 hours available to work each week - this is in
line with most full-time employees. Consider how many
hours out of these 40 you will need to spend on non-earning
activities such as traveling between appointments,
carrying out administration or promotional activities.
Let’s assume, for the sake of our example, this is
10 hours per week (25% of working hours). Subtract
this number from your total working hours to reach
a figure of 30 chargeable hours.
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