How to price your service

The UK and much of the Western World is a service economy which means that whereas the production of products was the dominant industry in days gone by, nowadays, most people make their living (and earn their fortunes) from the provision of services.

Pricing a service is quite a challenging thing to do due to the intangible nature of the thing being provided.

Here is the WeLoveBusiness.co.uk guide to pricing your services

Charge hourly

It can be difficult to price a project because no matter how similar it is to the last one, sometimes unforeseen circumstances just add to the workload. Whatever the reason, charging by the hour has the advantage of ensuring you get paid for this.

Breaking the price down to a client in hourly terms either makes you look very expensive or very cheap so be careful about doing this. It also means that if you are anticipating growing your business beyond just you then at some point you are going to have to raise your prices or take a hit on your bottom line as you add additional costs.

Charge on a project basis

Taking account of your ideal hourly rate is a good idea when it comes to pricing your service if for example you are trying to create a service menu or package of services. This can be helpful if you are planning on charging your clients on a project by project basis.

For example, if you are a graphic designer and a client wants a logo, you know it takes you X number of hours (taking account of revisions etc) and you want to earn £X per hour then you know roughly how much to charge a client.

The problem with project work is that if a client is particularly challenging or there are unforeseen complications then it can cause the time spent on a project to overrun which ultimately eats into your profitability.

Charge a retainer

This is becoming a more common pricing method and it works in the favour of both client and your business. You have a guaranteed income every month for which you deliver a specified level of service each month.

This allows the client to spread the cost of the project or get on-going support and it allows you to add clients and build relationships without the constant fear of having to chase new business in order to build on last month’s orders.

You are effectively stepping off a treadmill of needing brand new clients every month to being able to better service the clients your currently have. This model of charging also works well for clients who have an on-going need as very often they get a better price.

Charge on success

At first glance, this pricing model can seem a little scary because you are offering to only get paid if you achieve the desired outcome for the client. In reality it can sometimes be a highly profitable model because clients see it as a zero risk option (so are happier to sign up to your services) and you can work your magic before charging a heavily loaded success fee to account for the risk you took by taking to the project on thus earning your business more than if you had charged upfront.

The caveat to this is that you can only really charge based on success if the majority or all factors influencing the success of a project are in your control.