Being an entrepreneur requires a very diverse and calculated set of skills. First we conceptualize, then we create, followed by marketing, and if everything pans out we arrive at a sale, to put things simply of course. What very few people anticipate is how difficult it can be to put a price on an item once it’s ready to be sold.
What if I’m charging too much? What if I’m charging too little?
In either scenario, you probably aren’t making what you deserve. Only you, the creator, can know the amount of time, heart and resources that went into a project. Learning how to price your items fairly and effectively will serve to increase the frequency of your sales.
Here are some well tested ways in which you can develop a system for your price tags.
Calculate the cost of materials + 10%
This goes for work you already have in stock, and especially for that in which has yet to be created. When you’re approached by a potential client, the number one step is recovering the cost everything that went into the piece before you added time, skills and expertise. If we didn’t make back the cost of materials we’d be in a serious deficit.
Adding 10% is a good way to account for all the time that went into acquiring the materials in the first place. Things like transport, gas, etc.
Become a master at tracking your time
One of the most common mistakes private contractors will make when starting a new project is thinking that it will be easy to remember how much time was spent going into the finished product. Whether you’ll be spending hours, or months on a paid job it can be very easy to under or over-charge a client. Depending on your personality, you may feel an innate urge to under charge for fear of surprising your client with a large bill. I’ve certainly been there, but one day I truly started valuing my time and expertise and that fear went away.
Tracking your time accurately will start to mold how you go about projects, and ultimately how much you’ll end up earning in the long run. For if you’re diligent with your time card, and feel like you’re still spending too much time, you’ll naturally work faster to get to the optimal price for the labor you’re charging.
Some great applications for storing your hours include:
Freckle– Track your time, send invoices and view colorful graphs broken down into how much time went where on a project.
Paymo– Project management, time tracking and online invoicing.
Determine what your time is worth
In the world of business people are always going to try and find the best quality at the lowest price. Your number one consideration should be how much quality you bring to the table, and from there try and find a number that is competitive in your respective profession.
Part of what your time is worth is what kind of tools, supplies and skills you bring to the table. If you own the only lawn mower in your neighborhood and the competition is working with scissors, chances are you’re going to be able to charge more solely on the premise you’re cut out to do the better job.
Over time you’ll get comfortable charging a certain rate and the ones who approach you for your service will be able to see you’re value and won’t question the price.
Quote your price before starting the project
Part of advertising yourself as a professional means when someone approaches you inquiring about cost, you’ll be able to price a quote based upon the items made in the request. To many this is known as the bid.
This will give your client an opportunity to review and break down everything you’ll be charging them so there isn’t any questioning of your integrity once the work is done. This is also a good opportunity to draw up a contract between both parties as an extra measure of insurance that you’ll receive what you were hired to do.
More often than not you’ll need additional clauses that leave room for revisions and changes to the original bid. This will cost you more time and resources so the client will have to pay additionally for any alterations.
Last minute considerations in cost
We live in a very different time of exchanging goods and services, primarily due to the way in which eCommerce has opened the door to selling items around the globe. Don’t be afraid to mark up your products online a little more when the third party you’re hosting through has already added their own mark up. And make sure to consider things like shipping, money you spent on advertising, and the overall demand people have for your specific brand.
Now that you understand a little more as to what your work is worth, it should be easy to start pricing for the future.
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