If you ask any business owner what one of the hardest parts of starting was, you're going to get the same answer: determining what they'll charge. When you're a service-based business, rather than a product-based one, there are so many different elements you need to keep in mind when figuring out your bottom line.
Of course, once you figure out your bottom line, you need still need to make a profit!
In this episode, I want to explain what the difference between a service-based and product-based business is. Most of the women that I work with offer a service, which is amazing, and offers so much flexibility in pricing.
There are five different ways you can price your services: by the hour, by the project, experience-based, competitor-based, and value-based. And however you choose to price your services is up to you, but there are a few things you need to keep in mind.
First things first, you need to determine what the baseline you need to bring in each month is. To do this, you need to calculate how much you're paying out each month to run your business. You also need to consider how many hours you want to work each week.
Then I'm taking you through the calculations you need to do so that you're including all the other outlying costs for your business: tax, subcontracting, wages, and more. I'm also explaining why you need to know your initial business costs will be so that you can factor these into your overall hourly rate.
When you're determining your fixed project rate, you need to know all of these figures as well. But there are some benefits to charging a project rate over hourly. Maybe most notably that you can charge your rate while getting quicker at the work you're doing.
Have you thought about how you want to price your service-based business? Do you know your overhead costs? How much do your competitors charge?
In This Episode:
- What's the difference between a service-based and product-based business
- Why flexibility in setting your prices is both a good and bad thing
- What five different ways to charge as a service-based business are
- How you determine your baseline by looking at overhead costs
- How to calculate your hourly rate
- Why you need to know how much your initial business output will be
- What the benefits of a fixed project rate are
"But if you get your pricing strategy wrong, in either business, you may never recover from the error." ([3:14])
"As a business owner, you get to choose what your profit margin is. And for a services business, a typical, healthy profit margin is generally between 10-30% of your rate." ([13:43])
"You are a professional and your time is so valuable. As a service provider, all you have is your time, because you're not selling products. Price your services based on the value you provide." ([17:14])
Are you a female millennial entrepreneur who wants to start or scale your service-based business but not sure where to start? Go to http://www.drcortneybaker.com/10-secrets to get your free copy of the 10 Secrets Female Millennial Entrepreneurs must know before launching their service-based business. Get your free copy now!
About Dr. Cortney Baker… She is an award-winning entrepreneur, researcher, author, speaker, and an advocate for gender equality. As a leadership expert and mother of three, she is passionate about inspiring and empowering women to lead with greatness.
Dr. Baker is the author of the best-selling books: The Ten Do's and Don'ts for Business Leadership: Lessons to Lead Effectively and Unlimited: Conquering the Myth of the Glass Ceiling. She is passionate about helping ambitious female millennial entrepreneurs go from side-hustle to CEOs!
Feedback? Questions? Comments? For more information or to reserve Dr. Cortney Baker to speak at an upcoming event, please contact her at: [email protected] or 1-469-708-8840.