Possibly one of the hardest parts of starting and growing a business is deciding on what to charge. Whether it’s a product or services, getting the price right is critical in your ability to sustain the business and yourself. So how much should you charge as a home business?
Your first instinct is going to be to think with an employee mentality. The first things you’ll think of are:
- How much do employers pay per hour for this?
- How do I keep this affordable for clients? and
- What are others charging for this?
This is not how a successful business owner sets rates or prices. Here’s why.
How Much Do Employers Pay?
Using this as a base for setting your own prices is setting yourself up for failure. Employers pay less per hour because they have overhead associated with each employee. Each employee requires an employer to pay taxes, health insurance cost, the cost of computers and other equipment and the overhead of office space. You, on the other hand, are responsible for all of those things for yourself. That means by only charging what an employer would pay, you aren’t covering the additional costs. This means you’re losing money not making it.
How Do I Keep This Affordable?
Your concern when setting your prices should never be based on affordability. As I mentioned in another article, the cold, hard truth is that selling your services as ‘affordable’ cheapens them immediately. And why is that? Because you’re focusing on the money. And when we focus on money, it’s always about finding the cheapest price. Running a business while trying to offer your services or products at dirt cheap prices will destroy you and your business. You’ll be overworked and underpaid.
What Are Others Charging?
Basing your prices on what someone else is charging is a big mistake. One of the most critical parts of building a successful business is understanding how your business is unique from other competitors out there. If you’re basing your rates on what your competitors are charging you are totally ignoring everything that you bring to the table. Everything that is unique about you and your business is being pushed aside and ignored. You have no clue what others may have as far as skills, training, and knowledge. You do however know exactly what you have in your arsenal. Why in the world would you ignore your own abilities and simply charge what someone else does? It makes no sense and it’s incredibly bad for business.
“Pricing is branding.”Richie Norton
Remember, pricing is a part of your brand. If you set your prices with an employee mentality rather than that of the highly skilled owner of a specialized business your results will be less than successful. Low-ball and incorrectly set prices make a bad impression on clients. They won’t expect much and many potential clients and customers won’t consider you at all. As amazing as it may sound, underpricing is one of the most common reasons so many businesses struggle to find clients. Because no one is going to believe you’re providing Tiffany-level services or product at Dollar Tree prices.
So How Much Should You Charge?
The answer to this question is that it should be as individual as your business is. Your prices should be based on your skills, experience, and knowledge. Most importantly, it should be based on the value of what you are offering.