I think it’s something that you need to figure out for yourself what makes sense some people figure out an estimate of hours and then mark that up and use that as their pricing other people price based on a percentage of annual revenues it can be all sorts of ways, I actually use both methods depending on what I’m doing for a client.
I have actually set up some very extensive Excel spreadsheets and spend hours customizing a spreadsheet and then found that you know I just want I was just trying to keep it simple and so lately.
I’ve been using a percentage of revenues and kind of checking against my Excel spreadsheet to make sure I’m in the ballpark one of the reasons why pricing is so challenging for people is because there’s a lot of emotion and risk associated with it so there’s the emotion of perhaps fear that you’re not going to charge enough or the fear that maybe you’ll charge too much and then you won’t get the client and that’s certainly something that I deal with all the time I still I would say probably pricing is my least favorite thing about being a business owner but I have learned that I needed to overcome the fears and insecurities.
I have around pricing and just to price with confidence understanding that I don’t have everything perfect one of the things that I started doing early on in my business is number one is to give clients a fixed price so I felt like if I was buying a service, I wanted to know what it would cost and I will tell you.
That actually I have charged clients a fixed price and in some cases that has been much more than what I would have charged if I charge them by the hour and that clients will gladly pay a fixed price before they will agree to pay you by the hour and the reason is because there, they don’t have control they don’t know how much you’re going to charge and they’re not necessarily sure on the outcome that you’re agreeing.
I would encourage you to move toward fixed pricing and again it’s a journey and you have to figure out figure it out slowly and get to a point where you get more confidence in your pricing how do you estimate then how much to charge and especially like I don’t know how long it’s going to take well that that’s something then as you’re doing work then you need to start tracking your time and getting you some reasonable estimates so when it was me doing all the work myself I would just keep track of my time and then get a good gauge for how long things took now that I have employees they have a fairly good idea for how long it takes them so if I ask that for example how long does it take you to reconcile a bank account.
If it’s a clean reconciliation and they’ll tell me well it’s probably fifteen minutes but if it’s not clean it might be up to an hour so then you get some estimates of how long it takes to do certain things another thing to consider is the buffet and oh gee so when you look at a buffet restaurant and you think about the fact that everybody pays the same amount but some people might eat a very small portion whereas other people will need a really big portion so then if you’re worried about what will I charge enough of one client and maybe I’m charging too much of another client you have to look at its overall all right is you averaging what you’re wanting to makes and perhaps with one client it might take a while to get everything cleaned up and going in the beginning and you put in more time agreed to a certain service and they didn’t complain about how much I charged then the next time.
I do that similar service for the next client so not for a new client I’m going to increase the price and I continue to increase prices until I get pushback and the reason, I’ve done that is because you know how do you know what somebody’s willing to pay you don’t know until you race prices and then as I said you get some resistance to your pricing.