How much should I charge?
It’s important to get pricing right from the outset, so first you need to do a bit of research. Benchmark what other people out there are charging for the same services. Maybe those at the top of their game charge £2,000 a day, and those at the bottom end charge £300. What value should you put on your time and services? However anxious you are about finding and keeping clients, resist the urge to price yourself at the absolute bottom, as you’ll be doing yourself a disservice. One canny approach is to get your first couple of clients in at the lowest rate you find acceptable, and then as soon as you have a good three clients under your belt, send a letter out to all your clients saying e.g., ‘Our prices have increased from £400 to £500 a day, but as you’re our favourite client, we are only going to be increasing our prices for you to £450, in recognition of how much we love you”. This is usually a very palatable pill for people to swallow, and should keep them happily on board. You can actually do this as many times as you need within reason, in order to get yourself up to the rate you actually want to be on. If your clients like you they will stay with you.
And if they say no?
If one of your clients refuses to pay the new rate, decide if you can let them go. If you’re really strong and believe in yourself let them know that the new rate stands. The odds are quite strong that they’ll come back to you. But if you’re in a precarious cash-flow situation you could say, ‘Well because we love you so much we won’t increase your rate for six months. After that we will have to increase it, or help you find a replacement’. Because however much you need the work it will get to the point where you’re actually losing money by keeping people like that on your books. So you need to be firm. And chances are, they’ll come back to you once they realise it’s worth paying a little more for your services.
Over-servicing: a very bad idea
Whether you charge people by the day or hour or project, if you do more for them than what you’re charging for from the outset, you’re setting yourself up for disaster. And yet nearly everyone does it! The problem with this is, once you start getting more clients you will no longer have the time to over-service your existing clients, and from their perspective your services just got worse. And that’s not good. It doesn’t matter to them if they were getting it cheaply before, they’ve come to expect that level of service, and in a way you’re damaging your relationship with them. So you have two choices: a) Don’t over-service, or b) if you do, be sure you let your clients know you’re doing it, so they don’t just come to expect it. Even if it’s a letter sent every month with their bill, e.g.: ‘Here’s your bill for the agreed £2,000, please note we did a further day’s work this month that we’re not charging you for’. Even more powerful is to put a price on it – say ‘We did an extra day this month and the value of this is, as you know, £400, and we’ve done it for you because we believe in your product/you etc.”. Putting a price on it means that if you do start charging them more, or servicing them less, they will half expect it, and you’re meanwhile still making them feel valued.
Planning a realistic income
When working out what rates to charge you need to be careful to factor in days you can’t charge for. You may think ‘Well I reckon I’m worth £200 a day, and if I multiply that by five days it means every week I can bill out £1,000, and over a year earn £52,000 – but this is totally unrealistic. You will never be able to sell five days a week over the course of a year. Apart from holidays and sick time, there’s also all the time you need to spend working on your actual business. And that means sales, marketing, accounting and so on, all of which is both essential and time-consuming. What’s more realistic is to take your day rate, multiply it by two and a half, i.e., half of your working week, then multiply that by, say, 45 weeks out of the year. Your 52k income turns into £22,500, but it’s based on a work schedule that’s totally achievable. Can’t live on that? Then you need to adjust your day rate upwards so you’re earning a realistic annual income.