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Creative Business Owners: Don’t Forget About Your Pricing

Creative Business Owners: Don’t Forget About Your Pricing

by Sonja Hegman Andras (originally published on sonjahegman.com)

Image credit: flickr.com

Image credit: flickr.com

Starting a business is tough for many reasons. Long hours, little “me” time, and hustling your ass off can exhaust you, but perhaps the hardest (and most important) thing, is pricing your goods or services to ensure you get paid what you’re worth.

When you’re starting out in business, it’s easy to low-ball your pricing. This is especially difficult for creatives because we become accustomed to others paying us pennies. No matter how hard we try, we sometimes can’t rid ourselves of the “starving artist” mentality. It’s quite sad and it’s the No. 1 reason you must do your homework. Like any good or service, there will be those on the high-end and low-end in your field. If you’re going for Ford Focus quality, you’ll find it. If you want a Ferrari, you’ll find that too.

I’ve freelanced for a long time. For the last five years, I’ve been consciously building an editorial consulting business that might be worthy of a buyout one day. But it wasn’t until last week that I heard this sentence, “Your prices are too low.” This came from a new client. Truly, there is a first for everything. As soon as she said it, I realized I haven’t raised my base pricing since setting it five years ago. It reminded me that I am still, in fact, an entrepreneurial virgin myself.

It’s easy to stay where it’s comfortable. Most of my current clients I’ve had for years and, each year, I’ve incrementally raised my prices with them. Why did I neglect to do it on the most basic level? I don’t know, but I have an idea and it dates back to when I first started content marketing.

One of my first inquiries was from a lawyer in New York City who wanted me to run his website and blog. Needless to say, it was going to be a lot of work; he wanted multiple blog posts per week, maintenance of his social media accounts and creation of an editorial calendar from scratch. I quoted him something like $5,000 per month. He laughed at me.

“Are you kidding? That’s ridiculous. Writing and social media aren’t worth that much per month,” he said.

“They are if you want someone who knows what they’re doing,” I said.

His counter offer: $500 per month. He might as well have punched me in the stomach. Even a newbie like me knew that’s not how you counter offer. But after several would-be clients gave me the same reaction to said pricing, I caved and lowered my prices across the board. A girl’s gotta eat, right? Still, I’ve never raised them. I suppose it’s because I’ve never used my very base rate. I’m fortunate to have clients now who see my value and pay me what that value is worth. Here’s how I’ve decided to remedy the situation: Since I’ve incrementally increased my rate each year with my current clients, their current rate will be my new base rate. Easy. But, if you’re starting out and have no idea where to even begin, here are some tips to get you at a decent price point:

Ask someone in your field for advice.

This is not as scary as you might think. Most people will give you a range. Be sure to ask someone you know personally. Don’t go through Twitter looking for people in your field and randomly e-mail them. Those people will probably not be receptive. Last week, a writing friend of mine e-mailed asking for this very advice. I gave him a price range along with questions to ask himself: How many blog posts would he write per month? Would he write press releases? Any other writing? These are all things that must be considered.

Decide on an hourly rate, per project rate, or monthly retainer.

If you’ll be working with people on an ongoing basis, a monthly retainer might be the way to go. This is my billing of choice. I rarely charge an hourly rate, but it’s important that you have one in case the need arises. I’ve noticed more job postings wanting hourly rates vs. per project or retainer pricing. I figured this out my hourly rate by dividing my retainer rate by 20 hours per week. Why 20? Because I’ll never work 40 hours per week for a single client and I have to pay my own taxes. Don’t forget about taxes! You might think $25/hour is a good rate, but when you factor in taxes, it’s not great.

If you have a team, price your services like you’re paying for a team.

If you’re working on a project, or have a client, that requires so much work that you need a team, you must price that way. Using the $25/hour example from above, let’s say you have yourself plus a team member working on a project and you’re paying the team member $20/hour. Even if you’re horrible at math, you can see that you’ll only be making $5 an hour for yourself. You didn’t start working for yourself to make less than minimum wage, so price accordingly.

Pricing might be the most nerve-wracking thing for new business owners. It’s great to do the work you love, but if you’re still killing yourself for pennies because you didn’t know where to start, it’s time to get your pricing up to speed. Just remember that you might have to start lower until you have projects under your belt, but that’s why it’s important to get a high/low range so you know you’re in the right range. Once you lay the foundation, everything else will fall into place.