Want to know a simple way to decide what to charge?

by DaniMc
7 replies
This works well for simple jobs like designing a site, logo, or general consulting work.

As things get more complicated, this method falls apart completely. But if you are looking for a simple formula here is what I have used.

Many people charge based on what it costs to fulfill your service. For example, my first job I charged 150% of the cost. I quickly realized this is not enough to keep me motivated. I then jumped to 200% and then 300%. Then I realized that I was leaving a lot of money on the table because I was charging plumbers the same as surgeons.

This also causes you to lose respect with certain clients. You tell a surgeon they will get a great website for $1,000 and they will not look at you the same way as if you said $5,000.

So, I started basing the price on what the customer charges for their services.

Figure out their hourly rate, or the average hourly rate for the industry, then multiply.

Webdesign: x10
Logo: x3
Consulting: Varies - I never bill at the same rate as they do. Rather, I figure the hours it will take, and charge it at 2 - 2.5 their hourly rate. This leaves room for profit, extras, mistakes, and a very high level of service.

So: For Webdesign
An attorney who charges $500/hr gets quoted $5,000.
An attorney who charges $150/hr gets quoted $1,500.

So: For a Logo
An attorney who charges $500/hr gets quoted $1,500.
An attorney who charges $150/hr gets quoted $450.

So: General Marketing work @10 hours estimated time
An attorney who charges $500/hr gets quoted $10,000 - $12,500.
An attorney who charges $150/hr gets quoted $3,000 - $3,750.

Of course, the more expensive quote gets a much higher level of service. Always, always, always OVERestimate the amount of time it will take to do a project.

Remember, this doesn't always work perfectly but is just a good place to start. Once you know what they are charging their clients, you know where their mindset is at for good quality work. Their price gives a clear indicator of how much they think good work is worth.
#charge #decide #simple
  • Profile picture of the author CalinDan
    Wow mate, this is really great. A lot of my students has asked to put a "pricing guide" together. But it always seemed like a hassle, due to the fact that they're scattered all around the globe and currency and cost of living are different from one place to another.

    I think I'll introduce them to the basic plan you're offering. This seems to be working for any part of the world..

    Kind regards,
    -Dan
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  • Profile picture of the author mjbmedia
    so hold up, if you had say 10 of the lower charging attorney, youd be doing the same amount of work for a lot less than if you had just 5 of the higher charging attorney, that doesnt make the greatest if business sense.

    I kind of get where you're coming from , you /they can justify the investment levels , but you could in fact do more work to win clients for a lower charging attorney than youd have to for a higher charging one, and certainly more clients would be required to make more profits eg for the lower attorney to make $15k profit would take more clients than the same profit for the higher attorney = more work for you, yet you're charging less for it!
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    Mike

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    • Profile picture of the author DaniMc
      Originally Posted by CalinDan View Post

      Wow mate, this is really great. A lot of my students has asked to put a "pricing guide" together. But it always seemed like a hassle, due to the fact that they're scattered all around the globe and currency and cost of living are different from one place to another.

      I think I'll introduce them to the basic plan you're offering. This seems to be working for any part of the world..

      Kind regards,
      -Dan
      Thanks. The numbers aren't static. Instead of a 10x multiplier, people could use a 5x. It could also change by the industry.

      The point is to start the CLIENTS perceptions of value to set what price you charge. Pick a multiplier based on how well you can deliver and your confidence levels, then use that as a formula.

      Originally Posted by mjbmedia View Post

      so hold up, if you had say 10 of the lower charging attorney, youd be doing the same amount of work for a lot less than if you had just 5 of the higher charging attorney, that doesnt make the greatest if business sense.

      I kind of get where you're coming from , you /they can justify the investment levels , but you could in fact do more work to win clients for a lower charging attorney than youd have to for a higher charging one, and certainly more clients would be required to make more profits eg for the lower attorney to make $15k profit would take more clients than the same profit for the higher attorney = more work for you, yet you're charging less for it!
      This is very true. So, to charge higher fees, you target higher earning businesses. There is a large difference in mindset for an attorney who did 500k last year and one who did 2mil.

      Same with plumbers. A plumber who did 750k last year is a completely different beast from the one who did above 5mil.

      The interesting part about all of this is that the providers who charge the highest price are also the busiest. They can afford to spend on marketing and they usually dominate the market. THESE are the people you want to go after.

      For some people just starting out, their confidence levels may not be very high. So they go after the clients who earn less, charge less, and are willing to pay less. The point of this post is that pitching the exact same pricing for all levels of client is a mistake, for me anyway. And, rather than using arbitrary numbers to price my services, I find it better to use THEIR numbers to come up with pricing.

      And of course, as I pointed out, the higher priced clients get a much higher level of service. They expect it and they deserve it.
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      • Profile picture of the author mjbmedia
        Originally Posted by Dan McCoy View Post



        This is very true. So, to charge higher fees, you target higher earning businesses. There is a large difference in mindset for an attorney who did 500k last year and one who did 2mil.

        Same with plumbers. A plumber who did 750k last year is a completely different beast from the one who did above 5mil.

        The interesting part about all of this is that the providers who charge the highest price are also the busiest. They can afford to spend on marketing and they usually dominate the market. THESE are the people you want to go after.

        For some people just starting out, their confidence levels may not be very high. So they go after the clients who earn less, charge less, and are willing to pay less. The point of this post is that pitching the exact same pricing for all levels of client is a mistake, for me anyway. And, rather than using arbitrary numbers to price my services, I find it better to use THEIR numbers to come up with pricing.

        And of course, as I pointed out, the higher priced clients get a much higher level of service. They expect it and they deserve it.
        OK, so we are singing from the same hymn sheet, just wasnt totally clear (to me on reading the OP) . Agreed
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        Mike

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  • Profile picture of the author TheBigBee
    Originally Posted by Dan McCoy View Post


    This also causes you to lose respect with certain clients. You tell a surgeon they will get a great website for $1,000 and they will not look at you the same way as if you said $5,000.
    This is sooooo true. For me, this week, (same service) Client A is paying $1,250, while client B is paying $7,500. I would not have gotten Client B, if I had quoted him Client A's price.
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  • Profile picture of the author laurencewins
    Sometimes I will ask a customer what sort of budget they have in mind and that helps me too.Sometimes it tells me they are NOT wanting to pay for my services because it is too low.
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