Member Question: How Do You Set Prices for Your Product?

It depends on if this is products, services or both. Nearly all industries have Standards, such as "restaurant meal cost x 3" or whatever.

One way to help determine this for a Service Company: Start with what you think the annual Salary would be if you worked for another or if you needed to Hire an employee to do this, such as $52,000 for that work. Now figure out Overhead = what else it costs for you to be in business, for the year, including the replacement of any significant equipment (needing a new $30,000 printer every 3 years? Factor that into this consideration). Now, calculate the # of hours you intend to work that is performing (effective and charged) time (even if under a contract fee and not at hourly rates) + an allowed quantity for Marketing and "spinning your wheels" (contingency time for learning, making mistakes, etc).

Divide Dollars by Hours

Here is your Target Rate per hour. Now use the web to see Regional and comparison info in your market and adjust accordingly = a Reality Check.

Keep track of Everything. There is nothing to be learned from Not Tracking "nonbillable time" in a service business. Find out how much you Overwork a project or Underbid a contract and learn from it.

Not much later, revisit everything.

Example: you realize you need More Equipment, so you need to step up your hours and land more contracts to compensate.

Example: You are Very Busy, busier than you wanted to be. You can Raise your rates 5% and see if any "keeper" customers drop out. Those that stay are your target for ongoing work, anyway. Remember: If you accept work with others not willing to pay reasonable rates, they are taking the time you could have spent working for those willing to pay Real Money.