Dec 11, 2017
How much is your time worth? Do you charge enough for your services? How much is “enough”, and how do you decide? It’s important to think about everything — tangible and intangible — that goes into your work. Not only the time you spend specifically with clients, but also time spent preparing to provide the service. In the second of these two-part articles, I’ll share some ideas for making sure that you aren’t undervaluing your time or effort. In Part One, I explored the often unaccounted-for time spent in a small business, and some pet peeves of mine regarding value.
In my last article, I outlined the many areas where we spend time for our businesses. These include scheduling and financial management, education and training, session preparation, driving, business planning, and marketing. And these are in addition to tangible expenses like taxes, insurance, office rental, supplies, equipment, internet, utilities, holiday cards, local business association dues, etc. So, given the tangibles, and intangibles, how can we possibly decide how to value our work and set a rate that reflects the value we provide to customers?
The first thing you need to consider is what you need to earn to make your business viable. Obviously, since there are many expenses involved with running a business, you need to earn quite a bit over minimum wage to make it worthwhile. If you are self-employed, the taxes alone take about 1/3 of what you make. Then keep in mind annual business expenses (a lot of which can be at least partially written off, but should still be factored in).
Are you the sole breadwinner, or does someone else contribute to your family income? Do you live simply, or do you prefer a more upscale lifestyle? Are you a teenager living at home, or a single parent supporting a child? Figure out what your annual living expenses are so you know the minimum that you need to earn to meet your monthly expenses, and ideally also save for the unexpected ones.
Are you just starting out, or have you had your business for a while? Obviously, the more experience you have, the higher your rates should be. Especially if you are good at what you do. If you have earned awards, fame or other recognition for your work, your rates should reflect that.
This may not be super common, but as a private music instructor, and a performing musician, I‘m often offered live performance opportunities that conflicts with my teaching schedule. When that’s the case, I usually calculate how much income I’m giving up from teaching as compared to how much I’m receiving from the gig. I also factor in whether the gig will provide other less tangible factors like audience size, etc, and make the call based on whether the benefits (financial and other) make it a worthwhile trade-off.
If I’m booked for a four-hour show, it’s not just four hours. There’s also at least an hour of set up and break-down time, and another hour of driving. So a four-hour gig becomes a six-hour gig. If they pay $200, that comes out to $33/hour. Not terrible, but not my regular rate. And if I’m playing that gig with another person? That drops my hourly wage to $16.50. And that’s before taxes. Ouch.
We recently had a roof put on our house. My husband got bids from three or four companies, and ended up going with one that was more expensive than the others. Why? Because this company included work that the other companies didn’t. They appeared to be more thorough in their assessment, and we liked that we wouldn’t be hit with additional costs. When you are taking on clients or work, make sure that you factor in extra costs that may pop up.
What are similar services going for in your area, or nearby towns? It’s good to have a ballpark idea so that your rates are not unreasonable. Compare what you are offering (including your experience, etc.) with others.
When it comes to building your business, it is almost never a good idea to have extremely low prices. Yes, you might get some clients, but you are lowering the bar, and showing that you don’t think your service is worth much.
I co-own a small farm with my husband. Years ago, we used to raise pastured chickens for eggs and meat. We brought the eggs to a local farmers market, and charged a fairly high price for them because of the time and money we put into raising them. There were often a couple of other farmers who raised a handful of chickens as a sideline, and would bring a few dozen eggs to the market to sell in addition to vegetables or other items. Inevitably, they priced their eggs considerably lower than ours. We certainly lost some immediate sales to those farms, but when customers would talk to us about our products, they learned why we charged so much, and we built long-standing relationships with customers who cared about the quality of our product and practices, and came back to us for bigger purchases year after year.
The same applies for the services provided by small businesses. Don’t be afraid to charge what you are worth. This is your business and your life, and if you are providing a good service at a well-reasoned price, and providing good value to your clients, they will pay for your services, recommend you to other people, and support you for the long term.
Val has been teaching since 2001, and loves helping people follow their dreams of learning to play an instrument.
Discover more about Val at valblaha.com.