Business Plans Kit For Dummies
Explore BookStart with addressing how you should charge, then move on to determining an appropriate rate.
Charging by the hour vs. the project
Most self-employed service providers charge in one of the following ways:-
By the hour: You establish an hourly rate, keep track of your time, and bill clients for hours spent on their behalf. This is the standard pricing approach for service businesses handling small-project jobs.
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By the project: You and your client agree in advance on a fixed price for a defined amount of work. This is the standard pricing approach for service businesses handling large-project jobs.
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A combined approach: A building contractor, for example, may bid on a set of plans and establish a fee for the project. But he may also stipulate that additional client-requested work over and above that covered by the estimate is to be paid at an established hourly rate.
Establishing an hourly rate
If you provide a service of some sort, begin by establishing an hourly rate. Even if you end up charging by the project or product, when you know your hourly rate, you can estimate the number of hours a job will take and multiply that number by your hourly rate to arrive at your project or product cost.One way to establish an hourly rate is to find out what other people doing similar work charge. In some cases, you can discover this information simply by talking to other independent contractors or by looking at their websites or marketing materials. You can also check with professional organizations to get an idea of what people charge in different parts of the country. Rates do vary.For example, freelance editors may be able to charge $35 an hour in St. Louis or Cedar Rapids and $50 or more in pricey places like New York or California. To be competitive, set your rates within a similar price range. If you’re just starting out, you may want to begin at the lower end of the scale. If you have a long list of credentials and have earned rave reviews from clients, you can shoot for the upper end. Another way to arrive at your pricing is to consider the following:- How much customers will be willing to pay for your product or service
- How many hours a year you think you can spend on billable activities
- How many hours a year you need to devote to running your business
- How much it costs you to run your business
- Whether your projected revenue minus expenses equals an adequate profit