So How Do You Determine Your Pricing?

October 27th, 2013 by Sheryl Kosovski Filed Under: Articles Tags: , , ,
Pricing worksheet

Click on the photo above to download the pricing worksheet.

Most of my clients are lost when it comes to pricing their work. Almost all of them are seriously under charging their clients. Many people comparison price when they determine what they will charge. That means they do their research. They either go online or find other ways to see what their competitors are charging and then charge about the same or less. The only problem is their competitors probably did the same thing when they started. So no one has looked at what it really costs to do the work you do.

The next problem to arise is that we often think we don’t have as much experience as the people we are comparing ourselves to, so we charge slightly less than they do, thinking we don’t deserve as much because we don’t have the resume or education they do. We are almost always our harshest critic.  Unfortunately this slight price reduction often creates a pricing war to the bottom. Each new person entering the field charges a little less and that often means the experienced people in the field then have to justify why their pricing is so much more.  If they are not clear about their value they will often give in and come down in their price. In a way we then are training our customers to ask for a deal. Part of our job as a business owner is to teach our clients why what we do is worth what we charge and to educate them about the creative process and the details of the particular field we are in so they see the importance of what we do.

The first step in determining your pricing is to keep track of the time your projects take. (If you don’t sell products you can skip this step.) Attach a peice of paper to each product you make and every time you work on it note down the time you started to work and when you finished. When the piece is complete add up the time. I can’t tell you how important this step is. We all think we know how long it takes to make something but I can tell you from experience that whenever I estimated a job with out checking the time, I estimated seriously less time than it actually took.  In fact it often takes twice as long as we think. So if you are basing your pricing on how much time you think it takes to make that garment or vase you are probably guessing far too low.

Next we need to determine what it costs to run your business. This includes the cost of the space you use and the time you spend on all the pieces of your business that you can’t directly bill the client for. Examples are time for marketing, ordering supplies, talking on the phone, meeting with clients, driving to and from a meeting, doing research to get ideas for the project and so much more. These important tasks are often 50% or more of the time you spend working on your business. If you don’t include these activities in the cost of your products or services you will never be able to make the money you deserve.

We also need to take our businesses seriously. This means we need to add into our pricing money to grow our business and to take care of ourselves and our employees.  You want to add in money for vacation pay, health insurance, retirement benefits, to continue your education so you can keep being the best in your field and money to buy new computers, tools and machines you may need as you grow. Planning this income into your pricing will allow you to continue loving what you do for years and years.  If you leave this piece out, at some point you may find yourself wishing you worked for someone else so you can have financial security. Why not make sure you offer it to yourself  by planning for your financial success right from the beginning?

Click here to download the pricing worksheet.

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