This is one of the hardest tasks in business. Well, at least for me. What is a “good” price point to start. The answer, I’m not sure. What I can do is help you with finding your starting point.
Whether you want to hear this or not, you have to do some research. To make this a bit easier on the eyes, I will be listing questions in bullet points. You are going to see me say this a lot, but make sure to write your answers down. Get a pen & paper, your phone, or whatever you use and answer these questions.
What are others in the same field charging?
How long have they been in?
Look into your current area. What’s the average income level in your area?
Can you really set your pricing at $100/hr starting out?
How much do you need to PROFIT (notice I didn’t say make here) in order to live comfortably month to month?
When I started out as a general admin virtual assistant, I joined the Virtual Assistant Savvies group on Facebook. There was an excellent article written by the owner that would be fitting. It is targeted to Virtual Assistants, but if you are trying to find an hourly rate, I know you will benefit from it as well. You can go here to read it.
For those that like to stay on one page, I got you! I’ll go over important information.
I hope you wrote down the income you need to make month to month because we are about to break it down.
I’ll use mine. I shoot for $2500/month in profit. In order for me to figure out my hourly rate, I need to find my Gross amount for the month. We are going to assume that we put out 30% of our monthly amount to taxes. In order for me to figure out my gross rate, I need to multiply my desired profit by 30%.
In visionary terms: 2500 (desired profit) X .30 (tax percentage)= $750 (actual amount that goes to taxes).
I would have to add $750 to my desired profit to get my gross income. The gross income is what you need to make on a monthly basis.
Visionary: 2500 (desired profit) + 750 (money that goes to taxes) = 3250 (gross income).
Awesome, we have a gross income in mind. Now you need to figure out how many hours you can commit to a week. I shoot for 15-20 hours a week. This includes the time spent working in my own business.
I’m going to use 4 hours as the number of hours used in my business and 20 hours for the week overall to work. Let’s keep digging.
20-4=16 hours used for clients a week. 16 X 4= 64 hours I have to offer a month for clients.
64 hours is the magic number. So let’s get our gross income and divide it by the number of hours I have to give a month.
3250 (gross income)/ 64 (hours a month)= $51 (rounded up). This is where you get your hourly rate.
Once you have the hourly rate, you can come up with packages and different pricing reflected from this. Over time, you can increase your rates.
I hope this helped as a good baseline. I also wanted to leave you with a few more things to keep in mind.
This formula did not include your monthly/yearly expenses. You will need to add those up and make adjustments where you see fit.
While this article was geared toward service-based business owners, those of you that sell products can also benefit.
You still need to add up all your expenses (suppliers, vendors, etc)
You have to figure out what taxes you need to pay (if not passed along to the consumer)
How many items do you have to sell in order to meet your monthly income?
Look up what kind of expenses you can count towards your tax break.
Reminder: You only pay taxes on your profit.
Pay for your expenses first, then put money to the side for taxes.
I am not a tax professional. I still encourage you to speak with one, so you know exactly what to do.
Let me know your thoughts in the comments!