Are you starting your own business and wondering how much you can charge to attract clients while still making a profit?
We’ll explore the steps you can take when pricing your services and share some tips on when to increase your fees and how to communicate this to your clients without losing their business.
How do I price my services?
How much you charge your clients depends on various factors like:
- Your experience and skill level – the more you have to offer, the more you can charge
- The industry you’re in – some might set day rates, e.g. a wedding videographer who tends to spend a full day on a job will have a day rate while a plumber who works with multiple clients a day may use an hourly rate when quoting for work
- Your geographical location – some areas of the UK warrant higher costs than others because it’s more expensive to live and work there, for example you can expect to pay higher rates in London
- What your competitors are charging – striking the balance between ensuring you’re getting paid enough but not outpricing yourself against the competition is key
- What your target customer can realistically afford – it’s better to have some clients paying a reasonable price than no clients at all
Choosing a pricing structure
There are several ways you can go about choosing your ideal price structure. Like asking other freelancers in your network for advice, or researching the typical rates in your sector and deciding where you stand amongst them.
If you want to take a more strategic approach to how much you charge your clients, here’s what you need to do:
- 1. Figure out the annual salary you’d like to earn (research what’s typical in your sector to ensure this is a realistic number)
- 2. Calculate your general living costs
- 3. Take into account how much it’s going to cost to run your business
- 4. Look into how much tax you’ll need to pay
- 5. Decide how many days you’d like to work each year and how many hours will constitute your working day
Once you’ve thought about these things, you can begin to figure out what you need to charge per day or per hour in order to cover your costs and make a profit.
You can then use these rates as guidelines if you need to devise a full project fee. Simply calculate how many days or hours you think will go into the project to calculate your fee.
When should I increase my prices?
Thankfully your initial prices aren’t set in stone, and it’s extremely common for new business owners to start off charging lower fees or provide discounts on selected services. So, your clients and customers will likely be expecting a price increase at some point.
It’s good practice to look at your finances on a semi-regular basis to ensure you’re keeping up with the cost of inflation, but that isn’t the only reason you may want to increase your prices.
For instance, your pricing might change as you gain expertise and experience, employ staff due to business growth, or you’ve registered for VAT and need to add it onto your products and services.
There’s a multitude of reasons to raise your prices. If you haven’t done this in a while, you probably need to! Have a chat with your accountant to ensure you’re not accidentally underselling yourself.
Increasing fees without losing clients
Broaching the subject of increased costs with clients is never going to be something you look forward to. It’s always going to be a bit of an uncomfortable exchange but how you handle it will have a huge impact on the outcome.
So, how can you bump your prices up without upsetting your clients or worse, losing their custom?
Be honest and human about it
Business is business at the end of the day, and raising your prices is never anything personal. But it’s important to go about it in the right way.
For example, you could set up a face-to-face meeting or a video call, to explain why you’re increasing your prices. Let them know when the price change will begin, and outline any other options.
We understand this is difficult if you have a large and varied client base, for example, if you’re a beautician. In this case, post your price changes on your social media channels, your website, and send an email out to your client list if you have one.
Give them plenty of notice
Whatever you do, don’t let their next invoice be how your client finds out about your cost increase. That’s a sure way to lose their respect and their custom.
Communicate the price updates to your clients a few months before you plan to implement them so they can factor them into their own financial planning.
You could even offer them additional ways to pay invoices to make the process easier for them and help them feel more in control.
See it from their side
It’s easy to forget about your client’s feelings in the midst of all this. While it’s a stressful time for you, it’s also going to have a knock-on effect on them.
When you ask your client to pay more, you’re also inadvertently asking them to consult their budgets and check they can still afford your product or service. So, it’s important to be patient and sensitive during this process.
We’ve got lots more advice on how to raise your business rates without losing clients if you need it.
Can you still invoice for a project that doesn’t go ahead?
From time to time, you might spend days, weeks or even months on a project that winds up not working out. So, if plans don’t go ahead – say a new product update doesn’t end up being delivered, for example – can you still make your client pay for the work you did up to that point?
It might seem like the answer should be a straightforward ‘Yes!’. But it really depends on the specific circumstances and whether or not you had a contractual agreement in place. It also depends on why the project wasn’t delivered and whether or not you are responsible in any way.
The kind of dynamic you have with your client will also play a part in how this type of scenario unfolds, which is why it pays (sometimes literally) to nurture your customer relationships.
If you do have a contract in place, check the terms of that and stick to those. If you don’t yet have a section in your client contracts about paying for completed work, even if a project doesn’t go ahead, now’s a good time to add one.
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