One of the most difficult things for small business owners, freelancers, and consultants to do is find the appropriate rate to charge for their services. You don’t want to charge a rate so low that you’re discounting your true value, yet you don’t want to price yourself out of the market by asking for too much. It is a fine line to toe, and can be especially challenging for women who fight to earn a comparable wage to their male counterparts. There are, however, some effective strategies you can use to help assess your value in the marketplace and feel comfortable charging a suitable rate for it.
The Risks of Charging a Rate That Is Too Low
Freelancers may be tempted to charge a lower hourly rate than competitors to attract business, which could end up being a big mistake. Your hourly rate connotes your value. If you charge the cheapest rate in town, it could give the perception that you’re low quality. There is room in the marketplace for discount products and for premium products, but many customers would gladly pay $50,000 for a BMW if they felt they were getting one of the best cars on the road. If you can demonstrate that you offer a superior service and have the customer satisfaction to back it up, don’t be afraid to charge an appropriately higher rate for your time.
Women Need to Think Like Men
Despite some improvements in pay equality, women still earn less than men for comparable work. Part of that is due to existing stereotypes in the workplace, but part of it is because women tend to be more hesitant to charge a rate that represents their full value.
Many people who work in the freelancing industry, both men and women, often underprice their services because they don’t want to risk offending their customers. Most clients are more than willing to pay for quality over any other factor. Remove emotion from the equation, and focus on the results you want instead of what you think others are willing to give. It may feel uncomfortable at first, but once you start billing a rate you deserve and chasing down overdue payments, your level of empowerment rises.
Price It Out
Remove any personal attachment to the work so you price your time commensurate with other comparable businesses regardless of gender. This starts with crunching the numbers to figure out how much it takes to run your business and how much you want to earn from it.
As a starting point, determine what others in your area are charging. Assess what it costs to run your business, and establish a minimum rate you should be charging just to break even. Include costs such as rent, supplies, accounting and invoicing software, insurance, and utilities. Once you’ve got that, add in a profit margin. A 20% margin is usually a good starting point, but you can tweak it based on what competitors charge, the level of your service and experience, and demand.