I was having a conversation the other night on money and services with an extended family member – which is always a good thanksgiving topic! Sarah – the family member mentioned – is a public speaker and has started to speak to more and more groups of people. She is excited about where things are going and how well they are going. When I asked her about how far she would like to go, or what end goals does she have in mind, she thought that if she was able to speak every weekend for about $1000 that would satisfy her. So, if that happened she would be making $52k a year (52 weekends * $1000), not a bad sum of money but also not the best for the amount of work. Let’s face it, you can’t work every weekend; there are holidays and family gatherings that can best happen on a weekend. So considering that she will want to spend time with family and see her grandchildren and future grandchildren; at best there would be 40 weekends a year, or $40k.
So the question is, how do you price yourself? How do you know how much to charge to fill up your allotted amount of time? Is $500 to little to price, is 10k too much? It depends obviously on the service provided. First things first, you need to know what you are providing. Sarah obviously has already figured out that portion as she is speaking to groups of people and being paid for it. She is on to the next step, pricing yourself to maximize the opportunity for herself.
Normally I would say to maximize profit; but Sarah is adamant that she doesn’t care too much about the money. However, maximizing profit isn’t just about the money. Profit is typically deemed in money, but there is the psychological factor as well and for someone like Sarah maximizing profit could be maximizing the number of people she is helping and maximizing the quality she is able to help. Do you help one person to change their life and spend your entire life doing it? Or do you help millions of people to make slight but beneficial alterations to their lives? No one can make that decision but the person doing the service.
How do you know how much to charge to fill up your allotted amount of time? What is your allotted amount of time? For Sarah, initially it is probably around 40 weekends a year so it makes sense that she price herself high enough to just barely be able to fill up those 40 weekends a year. If she is pricing herself too low she will have to turn people away because she is too busy, if she is pricing herself to high she will have un-worked weekends and not be maximizing her opportunity.
However, I do want to add one more thing to the above. It isn’t just about filling up those 40 weekends; as Sarah is actively trying to help people she needs to also be able to price herself in such a manner as to be able to help those that her soft heart wants to help. Her soft heart will probably lead her to people who are unable to pay a high fee. So instead of pricing herself to fill up 40 weekends, maybe she should price herself to fill up 30 weekends and leave the other 10 weekends available so she has the time to do “pro bono” or discounted work to help those she really wants to help.
If you are already in the place of Sarah where you have a service and customers who want your service; pricing yourself to maximize your time and service to customers is a good next step. If you don’t have customers, I’d start off cheap or even free to draw people in and get the experience under your belt. If you don’t have a service, well start offering up what you can do for free and see who bites. If you start to get bites for your free service then suddenly you know you have a service that people may just pay you for. A well written take on sharing what you have to start a business is Derek Siver’s article on the Co-Op Business Model.
I also need to add a disclaimer to my advice here. My experience in this is pretty nil, I’ve worked as an employee for small and large companies most of my life but I can talk about this kind of stuff because I read extensively about entrepreneurship and economics. So feel free to take my advice with a grain of salt; but I’m not original in my thinking here. I get it from other places like Derek Siver, Craig Ballantyne’s Internet Indpendence blog and other such sources. If you have the time, and liked the thought processes in this post I’d suggest taking a look at them.
So the last question remains; how do you, the reader, price yourself? I’d be curious to read your comments below on what are your criteria for maximizing your services to customers?
As most of my earnings are currently earned in an employee/employer environment, I have to focus on maximizing my services for just a few customers – my bosses. My allotted time is a given and so it’s more of a: maximizing what I can do for them in a variety of avenues. Doing my work and reducing my workload through procedures, outsourcing or efficiency so I can take on more services for my customers. I like to use that extra time to learn new ways to work; being paid to learn is one of the best things that can happen; but that is a topic for another day.