new business pricing

4 Ways to determine what you should be charging for your business

4 ways to determine what you should be charging for your business

Knowing what to charge, especially when you are starting out, can feel overwhelming. I know. I’ve been there.

When I first started out as a Fundraising Auctioneer, I was fresh out of auctioneering school (yes, it exists) and I wanted to get started right away. I had one problem (just kidding, I had like a million): I had no idea how to set my fee. So I did the logical first step. I emailed a local fundraising auctioneer and asked him what I should charge for my services. His response was more or less, “figure it out.” So you know, he was super helpful. I knew I had to be paid for my work. Everyone told me that if I wanted to earn respect, I needed to be paid for what I was doing. And as a 20 year old auctioneer who had a dream of working rooms full of millionaires, I needed all the respect I could get.

The other problem I kept coming across, was that with such little experience (read: zero experience), no one was willing to take a risk and pay me. I remember getting off the phone after trying to pitch a potential client and being so disappointed and mad, I threw my phone across the room and started weeping. My roommates all just quietly left, unsure of how to handle my crazy.

I think back to these early days and remember how frustrating it seemed and how much I wanted to grow my businesses, but couldn’t even quite get started. Now I don’t have to pitch clients because they all come to me and on top of that they are happy to pay my fee which is 20% higher than my male competitors.

I know right now, it feels frustrating and you may be wondering if you’ll ever figure it out, and I’m here to tell you YOU WILL! Stick with it, because someday you’ll be at the top earning those top rates that you’ve dreamed of!

How to know what you should be charging for your new business

  1. Find out what other people in your field are charging

As you know from my experience, it’s not always that easy. However, that is a great place to start. If you have a mentor or someone in your geographical area doing the same thing you want to do, just reach out to them and ask them what they charge.

Don’t pretend to be a potential client, just let them know you are new and are trying to navigate building your business. Some people, like the one I mentioned, will be jerks and not want to help you for fear of you becoming a competitor (joke’s on them, you’ll become a competitor with or without their help).

If you can get some guidance from someone in your field or a mentor, make sure you ask follow up questions like, “Has this always been your fee?” or “Can you think of other ways people charge for this type of business?”

For many types of businesses, you may be able to find competitor’s pricing online. I know a lot of photographers or designers list their rates right on their website. Start by looking at several of their sites to get an idea of their pricing structures. Higher level consulting people probably won’t list those on their websites, but if you can find a way to build relationships with those people, you will find that you can probably find ways to work together.

2. Recognize your worth

Unfortunately I don’t necessarily mean this in a “hey girl, you’re worth it” sort of way. I mean get really honest about what you are worth. Are you brand spanking new to the skills you are offering in your business? I was. I had never been an auctioneer before. I knew nothing about nonprofit fundraising. I just wanted to do it. Even if I had known what the industry standard was at the time, I wasn’t offering the same value as other people in my industry, because I was new. Turns out, I had to spend a year or so volunteering my time as an auctioneer to gain experience. I did this until onetime I received a referral from an auction I had done for free and the potential client asked me what I charged to which I just threw out a number which definitely was stated as a question, “$500?”

Now, on the flip side, maybe you have a decade of experience with another company doing the same thing you are offering in your business. In that case, you may be able to charge higher than some of the other people in your industry because you bring so much experience on a corporate level and have been where you clients have been. If you offer a lot of value and experience, you get to charge more.

How to charge your clients for your business or services? I remember how intimidating it was, but try these 4 strategies to help determine pricing for your new business. 1. Find out what other people in your field are charging 2. Recognize your worth 3. Trial and Error 4. Decide what would make it worth your time and investment | Sarah Jean Knox creates resources for stay at home moms who want to earn money from home
How to charge your clients for your business or services? I remember how intimidating it was, but try these 4 strategies to help determine pricing for your new business. 1. Find out what other people in your field are charging 2. Recognize your worth 3. Trial and Error 4. Decide what would make it worth your time and investment | Sarah Jean Knox creates resources for stay at home moms who want to earn money from home

3. Trial and Error

To be honest, at the beginning, pricing may be a lot of trial and error. Just what you want to hear, right? If you have a general ballpark of what is standard in your industry, and you know where you stand as far as the quality of work you provide, you’ll at least have a starting point.

Your clients will let you know if you are charging too much or too little. Unfortunately, they will do this by not hiring you or by hiring you but not trusting you.

If you charge too little, you may get hired for the job, but clients will likely second guess everything you do. Price is how customers perceive value. So if they got a good deal, they often feel like their quality will be lacking, even though it is untrue.

Another sign of charging too little is not getting hired. This happened to me a couple years ago. I had been in business for about 8 years and had been raising my rates slowly by a couple hundred dollars each year (I receive a one-time fee for my auctioneering services, not hourly), and then after attending the Storybrand Workshop with Donald MIller, he encouraged us to place our rates right on our website. No auctioneers do this. They are afraid it will scare clients away. However, I was committed to trusting the advice Donald shared at his workshop and I posted my rates on my website. Not only did I publish them for everyone to see, I raised my fee by $1,000 (that was a 67% increase). I remember the feeling in the gut of my stomach as I made the page live. I thought for sure it would scare my clients away. It did the opposite. By increasing my rates by 67% I started to attract larger and higher profile clients. All of a sudden I became one of the leading auctioneers in our area. My higher rate, paired with my experience obviously, earned me respect and made larger organizations pay attention and want to hire me.

In the same way charging too little can keep you from getting clients, so can charging too much. After the success of raising my rates by 67%, I figured the next year I should raise them again but just by 20%. I kept fielding new potential client calls, but they kept going “in another direction.” Just that 20% increase priced me out of the market. I’m great at what I do, which is why clients were willing to pay my rate which is higher than my competitors, but once I raised it too high they couldn’t take that leap of faith. Needless to say, I found my sweet spot and I will probably keep it here for a while.

So give it a try and I challenge you, once you start having a steady flow of clients, try raising your rates for new clients and see what that does for your business. It might surprise you.

4. Decide what would make it worth your time and investment

When I first started charging as a Fundraising Auctioneer, I thought I was rolling in the dough. It was my side hustle and I was making $500 for a couple hours work on a Friday night. That sounds pretty sweet, right? It was until I started to calculate the cost.

  • It wasn’t just 5 hours of work at a generous $100/hr. On top of the 5 hours at the event, I put in 5-10 hours of consulting, making that hourly rate go down to $30-50/hr.

  • Then we also had to consider Taxes. Estimate the 30% I had to set aside for taxes, brought my take home to $350 and my hourly rate much less.

  • Also as an auctioneer, I have to dress in cocktail or formal wear, so I was also spending several hundred dollars on dresses each year (rent the runway didn’t exist back then).

  • Then I had to decide how many days a year I could do auctions. If I could do an auction every single day of the week, $500/event would lead to a good salary. However, most fundraising auctions are done on weekends in the spring and the fall. So even if I worked every single Friday and Saturday night for 3 months in the spring and 3 months in the fall, I still would only gross $25,000/year, which would mean it would always just be a side hustle and could never be my fulltime job.

    Keeping all of these things in mind, I had to raise my rates. I started small, raising them by a couple hundred dollars each year, knowing that I as my skills grew, my rates would too. I knew that it was not worth investing in this business if I could only make $500 at every event.

    This is pretty important for people who have businesses creating a physical product business

    Sometimes it’s easy to look at a sale of a product and think, “YAY! I just made $20 on my Etsy shop!” But you also have to think about all the materials that went into creating that product not to mention the time. If you make custom jewelry and it takes you 2 hours to craft a ring and you want to be a paid $25/hour for your work, you need to sell your rings at $50+ cost of materials.

    NOTE FOR FREELANCERS: Keep this in mind when charging on a retainer. Sometimes charging a retainer (one fee for a set amount of time no matter how much work you do) is amazing because not much comes up and you know how much you’ll be paid for that client, but other times clients can take advantage of your retainer, so make sure you set clear expectations at the beginning.

You don’t have to get your fee right the first time

If you are in this to grow a successful business, know you are doing this for the long haul. You may not get the fee you want the first time. But I promise you will get there. Start with these steps and keep going. If a potential client turns you down, it’s okay if it wasn’t a good fit. There will be many clients who think you are the perfect fit! You’ve got this.

Have questions regarding rates for your specific business? Pop them in the comments and we’ll see if our community can help!