Determining What Price to Charge for your Services

Determining what price to charge for your services can be difficult, especially when initially starting your business. With home businesses ranging from landscape contractors to massage therapists, writers to caterers, pricing your services are unique to your particular industry. However, there are some common things all small business owners should do before setting their prices.

1) Know your competitors. How does your company stack up against them? What do they charge? Do you have a strong market niche, or specialize in a particular field? This allows you to set your prices higher than others.

2) Evaluate your business plan. How much do you have to charge to break-even? How much do you need to charge if you want to eat dinner too? It's important to know the bare minimum you are willing/able to go.

3) Are there pricing guidelines for your industry? Contact a trade association or ask someone who has been in the business for several years. You will need to do some research before you just give out rates. How you present your pricing will also influence sales. For example, rather than charging $150 an hour, you can charge by the project (keeping your hourly rate in mind of course). Some customers may balk at your hourly rate, but may think the cost for the project is right in line with expectations.

4) Find a mentor. Some trade associations have mentoring programs available to new business owners for guidance. Most people are flattered that you called to ask their advice, and like to be considered a veteran or expert in their field.

5) Let the customer speak first. When bidding on a project, it is always a good idea to try to get the customer to speak first. Oftentimes by simply asking, "What price range did you have in mind?" you can get the customer to open up to what kind of budget they have. As a response you might hear, "Last time we did this we paid about..." This will allow you to build your proposal within their guidelines.

6) Don't give a quote on the spot. Always try to evaluate the project away from the customer. Once you sit down and take a look at it you may see that there will be more work involved than you first anticipated. If you have already given a rough estimate, it is hard to go back and raise the price.

7) Offer different pricing and packages for customers to choose from. This will influence sales by giving the customer a choice. For example, having services that range from the low end up to the high end allows customers to test your business. They may not be willing to purchase the big-ticket services you offer until they are sure of the quality of your services.

I spoke with Michael Joersz, owner of Blueline, Inc., a landscape contracting business. While Blueline, Inc. now has its own facility, located on a six-acre site in North Denver, the business began as a home-based business over 27 years ago. I asked Michael what he thought was most important in determining his pricing; both back when he began his business and now.

Michael said, "Before I do a bid, I need to know what it's going to cost me to do the job, and how much profit I need to make. Even though my bid isn't always the lowest priced, I always take the time to educate my customers on what they are going to get for their money. If another bid comes in significantly less than mine, we may not be comparing apples to apples. Sitting down with the customer and reviewing the bid in detail helps ensure they clearly understand what they are receiving.

There are many factors to evaluate before determining what price to charge for the services you offer. I am a freelance commercial writer, and I spent months talking with other writers, researching other companies on the Internet, and working with several trade associations in my industry before producing my fee schedule.

If your true desire is to position yourself as a "professional" and not just a body that can do the work, do your homework before you begin. Someone once told me that it is always better to start high, and then reduce your price later if you need to. That advice sounded good at first, but when I looked at it further I realized that pulling a high dollar amount out of my ear in the beginning, because I don't know what to charge, doesn't mean much if I can't back it up later. And once a customer is accustomed to negotiating price with you, they will never stop.

Copyright (c) 2007 A Marketing Connection

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