How to Define Your Professional Services Rates?

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More and more professionals use WebSelf to create their websites. Whether you are a psychologist or a sports coach, an online presence is essential to increase your credibility and answer your potential clients’ questions. A question remains popular: how much should I charge? Find our tips on how to define the rates of your professional services.

Before we start, we need to mention a mistake to avoid. When entrepreneurs start a new business, they often offer low prices to get their first customers. We do not recommend it. Besides harming the general market, increasing your prices with time will be more difficult. Consequently, take the time to define a rate that is in accordance with the actual market. 

Questions to ask yourself to define your rates

Let us start with the beginning. Here are four questions to ask yourself to help set the rates for your professional services.

What is the targeted annual salary?

First, what annual salary do you want? If you do not know what to answer, ask yourself how much you need to live comfortably. Take into account all your expenses (housing, travels, taxes, electricity, food, insurance), then note down a first realistic number. Of course, someone who lives in the center of New York will likely have more expenses than an entrepreneur who lives in Vermont.

How many hours do you want to work per week?

Then, if you decided to become your own boss, it is likely because you wanted a better quality of life. Since you have the chance to choose your clients and schedule, it has an impact on your rates. Indeed, how many hours do you wish to work per week? Do you want to work part-time or full-time? And how many vacation weeks would you like to have?

Did you think about the administrative tasks?

Another mistake many new entrepreneurs make is minimizing the time they need for administrative tasks. Since most of the time they are in charge of the commercialization of the business, sending invoices, or making appointments with your clients, you must keep in mind these work hours when you define your rates. At least 10% of your work time will be used for administrative tasks.

What is the average price in your field?

Since you are likely not the only professional in your field in the area, it could be relevant to learn more about the rates of others in order to define yours accordingly. Sometimes, you only need to search on Google for information about other professionals, whether by looking at their websites or by consulting statistics and studies.

Once you have answered all these questions, you can have an overview of your needs. Here is a mathematic formula that can help you get an idea of the hourly rate you need in your case:

(Targeted annual salary + Business expenses) / (Number of work hours per week x Number of weeks of work per year) = The minimum hourly rate

To make everything more concrete, let us say that you are targeting a $70 000 annual salary, and you have $4000 worth of business expenses. When you divide this by 35 hours per week and multiply it by 46 weeks of work, it gives a basic hourly rate of $45.96.

Choosing the right type of pricing

Moreover, the rates are only one of the things to define when you launch your business; you also need to consider the pricing type. According to your field of activities, some pricing types can be more advantageous than others. Let us see this more closely.

A rate per word

If you are a writer or translator, offering a rate per word could be relevant. The number of words influences your prices when you need to write or translate a text. Please note that for more challenging texts or projects that require more research, it is recommended to choose another type of pricing.

An hourly rate

Several new entrepreneurs choose automatically to offer an hourly rate since it is the type of pricing they had when they were employees. As we mentioned above, it is easy to calculate an hourly target rate, but according to some experts, it would be better to sell your expertise than your time. 

A rate per project

Some professionals prefer to offer a rate per project when it needs more time or is complicated. They can calculate an approximate number of hours and plan all the required materials to provide a price accordingly. Here is a tip: when a client contacts you for a big project, do not forget to ask for a down payment!

A package rate

If you are a professional providing many services, you could offer packages. It can be relevant if your services are complementary. For example, if you are a photographer, you could provide a package for an event that includes travel, tryouts, photos, and touch-ups. The most important thing to remember is to understand your clients’ needs well to offer them all the necessary services.

In conclusion, we hope we have helped you find what you need to define your professional service rates. Start by asking yourself your ideal annual salary and then determine the number of hours and weeks you want to work. Finally, choose the best type of pricing that fits your needs best. If you just have launched your business and are still looking for your first clients, here are 8 tips to help you increase your professional credibility. Good luck!