Financial Consultant, Trainer and Speaker on Psychology of Money, Financial Counseling for Couples

If you are in business for yourself you know first hand the inner struggle that can result when you initially set your fee structure or when you change your fee structure (which needs to be done yearly). Charging what you think your product or service is worth is both a personal decision and a decision about what the market will bear.

 

"What should I charge?" "How much will my target market pay?" These are the questions every entrepreneur needs to be asking on an annual basis. Each year, you evolve and when you evolve, your business evolves. Your evolution increases the value of your services. Each year you become more of an expert and your fees need to reflect your "added value" to your client base.

 

(1) Figure Out How Much You Need to Make a Living  

Calculate the amount of money your business needs to generate annually to cover your business and personal expenses. Calculate the amount of money it takes to live on every month, savings required for short and long term goals as well as those periodic expenses. Periodic expenses equate to non-reoccurring monthly expenses. Examples of periodic expenses are: car registration and maintenance, insurance premiums, health care deductibles, vacations, holiday spending, home projects, sports camps, seasonal clothing, property taxes and a new computer.

 

Let's say you determine you need $100,000 annually. Then ask yourself how much you need to charge per billable hour to generate $100,000 annually. Consider there are 2,080 work hours in a year, based on a 40-hour workweek. Consider how much vacation time you want to give yourself. Let's say you give yourself 4 weeks of vacation time equating to 320 hours. Deduct another 40 hours for personal or sick time. Deduct about 30 percent of time for marketing and administrative time. This leaves you around 1,000 billable hours in a year. This information tells you to reach your income goal you need to charge $100 per hour. 

 

One research study showed that entrepreneurs who initially set their fees on the high side were more successful than those who set lower fees. By setting fees on the high side to begin with, you set the intention of being serious about your business and give it a firmer foundation. It's also much easier to discount your fees on a case-by-case basis should you desire to do so rather than raise your fees.

 

Focus on what qualities you bring to your clients and business rather than focusing on 

what you lack. If what you lack keeps needling at you, take action and resolve the lack.

Begin where you are. You are enough!

 

Don't allow perfectionism to interfere with your fee structure. When I first started my business over 7 years ago I remember saying to my business coach, "I need to get my Ph.D. before I can charge those rates." She said back to me, "Denise, the issue here is that you don't feel you are enough already." She was correct. I took her wisdom to heart and set a fee structure that supported me.

 

Know your market value. It's important to know what others are paying for services or products similar to what your business offers. Adjust your rates accordingly. Evaluate the market yearly. Under earners usually tend to keep their rates at the low end of the range and fail to give themselves a raise every year.

 

Let go of assumptions about what your clients will or will not pay. Don't use the economy or your clients as reasons for not taking action to raise your rates. Many of my entrepreneur clients tell me,  "My clients can't afford that fee." The truth is you don't know what your clients can or cannot afford. You have no idea what your clients spend their money on. This thinking is merely your projection onto your client. It's really you saying, "I don't feel my product/services are worth that amount." "I don't think clients will pay for what I have to offer." Sometimes we are afraid to ASK for what we want and need.

 

The truth is, if you value your fee structure, your clients will to. When you are comfortable deep inside with the fee structure you are charging, you radiate that outwardly in the energy you carry with your clients. They will pick up on your non-verbals. If you receive push back on your rate from clients, do an internal check-in with yourself and see if you are carrying the energy of doubt about your rate. 

 

When setting your fee if you are selling a product, take into consideration the cost of materials, your time spent, and labor, mailing and shipping costs. Most sources suggest to charge enough to create a minimum of a 50% profit margin.

 

Ask the question..."What fee structure would support my highest good?" See what answer you receive and compare it with the number you calculate telling you how much you need to make a living. Listen to your intuition, there is lots of wisdom that can come from this way of knowing.