A question that we see all the time in Facebook groups and online communities is, “How much should I charge for my services?”.
The answer is really different for everyone, as there are a lot of different factors that determine your prices. That being said, there are certain things that every business owner should do to figure out how much they should charge. This post will go over what we did to determine our pricing.
Step 1: Figure Out Your Monthly Expenses
In order to know how much to charge, you need to figure out how much money you need. This is a really important step and one that should be taken seriously. Meaning, you really need to document everything you spend money on each month. There are the standard bills, like rent/mortgage, car payment, and cell phone bill, but don’t forget to add in those other “small” expenses as well. The trips to Starbucks and snacks you buy without really thinking about it add up.
To determine our monthly expenses, we created a spreadsheet and documented every single thing we spent money on for 3 months. No matter how big or small, we kept track of it, and after 3 months, we had a good idea of what our bills were. This exercise was also eye-opening, as we realized how much money we could save by cutting back on some of those things we didn’t really need.
Of course, you’ll want to factor in things like savings and emergency funds just in case life happens. You don’t want to be completely wiped out if you need to make a house repair or you suffer an accident that leaves you out of work for a few months. Be sure to factor in these things as well.
Step 2: Determine How Many Clients You Want Each Month
The second step is to determine how many clients you can take on each month. Again, this number is going to be different for everyone because everyone’s life is a little different. Being just the two of us, we knew realistically that we could only take on 3-4 clients per month to provide a high level of service. If you have a larger staff, you’ll likely be able to take on more clients, but if it’s just you running your business alone, you’ll have to take on less. Think about how many hours you want to work and the level of service you’ll be providing, then come up with the number of clients that makes sense for what you have budgeted.
Step 3: Divide Your Monthly Expenses By The Number Of Clients
The next step is to divide your monthly expenses by the number of clients. This will determine how much you should charge! Easy, right?
Step 4: Reevaluate Your Expenses
It’s important to reevaluate your expenses every so often to see if you are still on track. As your business grows you may have more expenses that need to be added into the budget or you might be saving up for something in your personal life, such as a house or new car. Your monthly expenses will go up or down depending on your lifestyle and how your business is doing. It’s good to check in and make sure your numbers are still realistic for where you are at.
Don’t Get Intimidated By Pricing
Pricing your services doesn’t have to be intimidating or confusing. It’s as simple as breaking it down into these 4 steps. We hope this post helped you figure out how much you should be charging for your services.