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Business: Markets

How to Set Your Fees

When you think about setting your fees there are two main aspects to consider.

One aspect is "how" to charge. The other is "how much" to charge.

First, let"s look at how to charge.

How to Charge

In a recent column well-known SEO expert Jill Whalen explained how her firm structures their pricing. In her situation she noted these levels:

Review and reporting by telephone only (basic service).
Review, report by telephone and in writing (intermediate service).
Initial website audit report, followed by recommendations on how to improve the entire site (premium service).
Retainer paid monthly (for new websites that need to evolve, or be built, over time).

In my work as a consultant and trainer I have also offered varying levels of service packages. At times I have used:

Telephone consultations (fixed fee)
In-person consultations, with written report (hourly fee)
Office-based review of marketing strategy or documents (hourly fee)
Fixed monthly retainer
Fixed fee for in-house training programs (half-day or full-day)
Per person fee for registration in public training programs

Each of these levels represents a service, and a price point for that type of service.

When evaluating your services, consider how you can create clear choices for your clients. Be careful to create distinct services so your client can easily see what is different between the service packages.

Sometimes you can add products, reports, documents, or advice as part of your services package. This can help with differentiating your services from each other, and from competitors.

Another part of "how" to charge is "when to bill".

Your decision on this is really based on what works for your business.

In her article, Jill Whalen said they charge in advance for all services, as they have been burned too many times - even with agreements in place, and with larger businesses as clients. She notes that some of her competitors charge 50% up front and 50% on completion.

My services are billed in various ways. Regular established consulting clients are billed in arrears. Training projects are often billed 50% upon booking and 50% upon delivery. Some one-off services are charged in advance.

How Much to Charge

This is usually a more difficult question to answer, and can have many service providers in a tizz.

Realistically, within each industry there is normally a range of norms that apply to the level of fees (or pricing for projects or products).

You can investigate this range by asking around within your industry and finding out what the differences are. Speak with other providers, check websites of your competitors, read industry reports, and ask people who are decision makers in your target audience.

Simply basing your price on what your competitors are offering - without checking it thoroughly - is not a good idea. Maybe you could be more successful by charging less, maybe by charging more.

Your ability to charge higher than average fees depends upon:
Your years of experience
Your range of experience
Your target audience (usually you cant charge small businesses the same rates paid by Top 500 firms)
Your degree of specialty (clients expect to pay more for a specialist)
Your recognition in the industry (do you have a proven track record)
Your style of presentation (can you communicate the value you offer in a way that convinces prospects to become a client)

You can use one of four basic methods to calculate how much your fees should be.

1. A fixed fee based on an hourly rate and any other expenses.
2. A variable fee based on hourly rate.
3. How much the client can afford (your guesstimate).
4. A fee based on the value of what you do for the client.

The last option is also referred to as value-based pricing. In essence, the concept is that if your service will help your client generate an extra, say, $15,000 in profit, your fee could be based on a portion of that value, not just on the number of hours you took to complete the work (which may add up to only $2,000). This is something you would need to negotiate with your client, based on a full understanding of their situation.

In summary, setting your fees may take into account many different factors - such as your experience, the degree of trust people have in you, the value delivered, and target market served.

The impact of each individual factor may change over time. Reviewing your fees on a regular basis is good business practice.


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