How do I price my services?

0:00 In this episode, we're going to dive into the art and science of setting prices. We'll discuss why standing firm on your rates is critical, why and how to offer discounts strategically, and how to incorporate your expenses, all of them. Like, when people first start out, they're just thinking, "Oh, my hourly." They're not thinking about other components, such as camera rentals if you're a photographer, such as software if you're a developer, and AI if you're using that, etc. So we're going to discuss all of that today.

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2:07 behalf and with a great media team in a non-profit sector, I transitioned out and followed the voice of the Holy Spirit, and one of the hardest things for me to do was to set my pricing. In fact, I did. I created a whole pricing sheet. I recommend that you do so already. Just list all your products and services. If it's by hour, if it's by daily, list them, what they are, so that you can price consistently.

3:11 going to put forth that effort, there's no reason that you shouldn't be able to charge comparable to industry rates, and we'll talk a little bit more about that, because you're not just going to look at industry standards, you're also going to do some other things.

4:14 talked through him some of my experiences, uh, recently with some clients and things, and he told me that you're either a lion or a gazelle. You're either going to be strong, confident, know your value, and conquer the work, or you're going to be conquered and devoured by your clients. Period. Now, that sounds terrible, but that's because everyone's in this business to make money, and everyone's in business for themselves. Most people are in business for themselves. I am not. I'm in business provided through the Holy Spirit, so I'm the business for him, and so I have to make decisions that aren't just me but are to set the groundwork for the international corporation I'm building. Total different subject, we won't go there now, but the Holy Spirit has led me in making proper decisions and things. And that confidence that clients need to resonate with you establishes your value and establishes

5:21 who you are to them. So clients are more likely to respect and accept your rates when you present them assertively. Not angrily, not frustratedly, but you present them confidently. You know, square your shoulders, that kind of thing. And you discuss things like you know what you're talking about. If you don't know what you're talking about, hey, everyone's gonna know in the room. Everyone's gonna understand it. Everyone's gonna see it. They're gonna see right through it. Happens all the time. But if you know your field and you know what you're doing, then go ahead, speak confidently, be bold, uh, and step into that room, either with Holy Spirit boldness, God-given boldness, or just internal boldness to know your value, so you walk into the room and you can add value.

6:26 and you're honest about it. You may find that you built a relationship and a rapport when you're able to advise and you're able to connect, and maybe you get future projects in the future, business. Proper service industry business is relationship building, and business to business is also relationship building. So if you're software service, same thing, relationship building. Am I a stable, am I a good product, am I something that's going to help the bottom line? That's the important thing for a business: are you helping or hurting the bottom line?

7:28 you're going to find yourself either in a deficit because you didn't correct for your prices for the moment and for the need of the client. Okay? And so it's very, very important first to understand that freelancing is not just something you do for people. It's a professional service, and it deserves, second thing, fair compensation.

8:35 investment to a person, if an, it's an investment to property, it has to... Now, sometimes property, especially in this day and age, you're looking at three times, but it could be a substantial three times. You know, you buy something, you flip it, and you turn it from a hundred to five hundred, then okay, you flip that only four times, but you flipped it. And so the three percent is three times is okay. Ten times is the rule of thumb for all investments, period.

9:37 I have to find a way to turn it. I have to find a way to make that business make at least some sort of profit, and if the business venture fails, they at minimum try to recoup three times their investment. So 10 times the investment is minimum good standing for business success. Three times the investment, I believe, based off of information and based off how the industry works, is good recovery metrics. You never want to be in the negative. You always want to find a path of recovery, and sometimes that is stripping a business for parts and all those kinds of things. Sounds terrible, but you have to remember, when people invest their money, they're expecting a return.

10:41 respect them, because they're investing money into you and they're expecting at minimum, here we go, 10 times the return on the investment. If you have an employer, remember, you're either making them money or you're saving them time, which in turn makes the money, and they're expecting at minimum three times return. And that's just for a normal, mediocre, blah employee that may be fired in a year or two. But 10 times employee, okay, I'm gonna keep them around. And you may have high earners, like if you're in the sales and commissions and those kinds of things, high earners, okay, you keep them around. People that save you a whole lot of time, okay, you keep them around.

11:45 emotional-based experience, uh, experiential decisions, emotional-based. But you as a business owner can try to make emotional-based decisions, but that's not going to be successful. Look at those numbers. Numbers guide you. Pray, if you're led by the Holy Spirit and you're Pentecostal and you believe in Jesus Christ, that he died on the cross and was raised from the dead and he sent the Holy Spirit to help you, okay, great. Use the Holy Spirit and you'll find that you'll have to make decisions that are very connecting to the numbers, or you make a Holy Spirit decision that's currently not connected to numbers that excels your numbers later, because remember, he's the Alpha and the Omega, knows the beginning from the end.

12:52 greatest exploit, greatest cheat code on the planet. But going back to evaluating ROI. So a lot of people who start up want to give discounts, okay? I currently follow two discount, well, three discount rules. I have, um, a particular client that returned to me when I started a business and asked for my help, and I give them a substantial discount, okay? And generally speaking, they're the only ones that qualified for that discount, because I know a little bit about their financial situation. I also hope very emotionally connected to them, but I have been advised by every single executive advisor not to do that, but the Holy Spirit kind of led me and said it's okay for me to do that, and, you know, that's what I'm doing now.

13:54 organization, and B, it helps them fit in the budget a little bit more. Okay, so you do sometimes. Industry fluctuations do determine pricing, and it's very important to be prepared to make those changes, but offering discounts strategically, such as for long-term contracts, for referrals that have return on investment, and it's clear, however, if they do value you and the investment is clear, like you're not having four or five conversations in a room and how to regain some of that investment.

14:58 minimum. Uh, I know it's, I know it's tough. Uh, generally speaking, you get into the service industry because you have a service and you have a skill, and then you want to monetize that skill. But most people in the service industry start in the service industry because they feel like they're doing a service to someone that they need it. Now, you have to remember to flip that. You're in business to make money. If you're not making money, you're not in business, you're in charity, and you're not in charity, you're a workman's worth his wage.

15:59 communication, whether it's cell phone, whether it's email, that kind of thing. They can text, they can call, and I will respond to them within four hours, typically. That's my average response rate. It's actually 30 minutes, but I respond almost immediately when you send it, or within the four hour time frame, and I do that because that shows you I value that. It's an instant value. You have a problem, okay, great, how can I help? Okay, here's what you do, here's my recommendation, try it, boom. To them, free advice, free return on value, and they've built that relationship. And if that call helps, that text message helps, solves their problem, they're feeling much better about that multiple thousand dollar invoice, and they get weekly, monthly, quarterly, however you build them or however the projects work.

17:00 this: "This discount just one time only, because you're a new client and we want to value you." If you don't define the duration of a discount, most clients are going to expect that discount all the time. If you don't, you're not going to prevent something called scope creep, and scope creep is a very, very important thing. And we talk a little bit about contracts, we're going to step into that and dive just a little bit into that. Evaluate your return on investment. Always ensure that there are discounts offered, leads to a tangible benefit, like increased exposure, future work, and I do for non-profit, souls being saved. So I evaluate ministering Christian non-profits, and I evaluate all non-profits to ensure that their work is valuable, that their work is helpful, and that their work is successful before they get that non-profit discount. And of course, you collect some accounting things, and that to me is a tangible benefit. It's a spiritual tangible benefit, but to me, it's a tangible benefit.

18:02 taking notes, feel very bad for you. Just rewind. And segment three, when a freelancer or new service operator starts, they're like, "I'm going to pick this price because people are going to accept it." For instance, I'm launching a public service real soon, it's gonna be great, and other competitors are charging, you know, free or 9.99 or 35.77 or something like that, or 35.99, or whatever it is. And I did some research, okay, these, this is the price range that works great. Then on this Excel spreadsheet, here are all the costs. Luckily, this particular service has limited costs outside of development costs. So if I take the development costs and kind of chuck them away, which you should know Apple doesn't. Apple incorporates to make sure that they're going to get a return on their investment for development and research within a year to 10 years, depending on the product lineup, and they make sure that they get that back, which is why their prices are so high. Most people just say

19:06 that price feels good, that price sounds good, that price I can live with. They like, you know, maybe if you're a freelancer, you do your budget calculations like, "Oh, I can live off of five, six thousand a month, and I just need to make sure I meet that minimum." And what they do is they live off of that minimum, and they don't realize that that's minimum is actually putting them in the negative, okay? And a lot of people who do salary calculations do it the same way. I've interviewed plenty of people, I was one of them, that would say, okay, as long as I get this salary and it meets all of my minimums, great, I'm good. You find out that you're not, and you find out you're in the red.

20:13 you spent five thousand dollars on a great laptop or editing machine and a monitor and all these kinds of things, and you're gonna do the same next year, and here's just the same next year to stay competitive, and you have to do the same next year to stay competitive, or every two to five years you need to factor that cost in your hourly or your daily or your service agreements, okay? If you are a photographer or videographer, you need to include the cost of your camera, the cost of the camera body, the cost of the camera lens, and the cost of consumables: SD cards, hard drives, gaff tape, I don't know, batteries, etc. Usually, typically, if you're renting something or buying something, for renting, you can rent it per day for 10 percent of the original cost, which usually means after about 10 days or 10 rental periods you've purchased the item. Now, of course, you can't purchase item that way, but if

21:14 you're gonna spend more than two, three weeks renting an item, it's probably better for you to go purchase an item. Now, that depends on your philosophy. You need to include that in. So if you're a photographer, it should be: here is my hourly rate, here is renting my, a, my Alpha One Sony, here is renting my G Master lens, here is rent, and include all of them in there. Now, you can adjust your hourly to consume the cost. So let's say you're 150 an hour or 100 dollars an hour or 250 an hour or something. If you're 100 an hour, okay, then I would recommend adding, you know, 25, lens, if the lens is, you know, you know, whatever, uh, if it's a four thousand dollar G Master, okay, 40 bucks, or 400 bucks, okay. If it's a one thousand, two thousand dollar SLR, great, diesel or whatever it is, great, okay,

22:16 100 bucks, 200 bucks, you know, include in each project, that way you can within three to six months pay off, um, if you will, pay off or be able to deposit in a separate bank account to be able to replace that technology if anything happens outside of insurance. So let's say new technology comes out and your competition has access to it, you don't. You now have a fund that's dedicated that you can now use to repurchase a Mac, repurchase a camera, repurchase photography equipment, repurchase audio equipment, etc. Okay, now software: Adobe, that's okay, relatively cheap. ChatGPT, relatively cheap. Google Drive, relatively cheap. Dropbox, Dropbox, relatively cheap. WeTransfer... okay, now you're understanding what I'm talking about. QuickBooks, relatively cheap. Most small businesses have spend about a thousand to two to three thousand

23:25 dollars on subscriptions and services, okay, and this includes processing fees. So you know, so you're, if you don't bake that cost into your hourly, so let's say you need a minimum, maybe you need to make 75 an hour minimum, you'd like to make 100, 110 an hour so you can cover your tax obligations and have surplus, great. So maybe charge 150 for that surplus. Then you need to add software, then you need to add rental, and the idea here is every component of your business that your business is responsible for, you are prepared to work with, operate with, and not take on as a owner. You don't want, as the owner, to put all this investment into your business and not for the business to begin to pay back, and it can't pay back if you're living in the liability hell and these expenses are just going at you like that, back and forth, and just knocking into your hourly, your daily, or your project rights, okay? Keep track of

24:29 your expenses and adjust your pricing accordingly to maintain profitability. Green minimum 25 profitability, okay? After all your expenses, everything, 25 profitability. That helps you, includes after-tax calculations. I hate to say it, a lot of small business owners, I know a lot of business owners, do not factor taxes, and when they get to do their accounting and they push the button and their account comes back and it's like, "Hey, guess what, you owe a whole lot of money this year." I know. Or you make quarterly payments and you still owe. It's like, just factor 33, 38 percent of your total income being taken from some sort of tax. Now, of course, sales tax happens on transactions, so that's different, but property tax, school tax, personal tax, business tax, corporate tax, all those kinds of things, state tax, city tax, all these kinds of things, just factor 33 to about 38, and usually standard, you're usually gold if you use that metric,

25:35 based off of a lot of research that I've done personally on a subject and based off of people's books that I've seen. 33 to 38 percent, you're good as a small business.

26:38 five and worked its way to around 15 or something like that, and he found out that clients valued his ad so much they were willing to pay more than he had serviced and had planned, and that's because he was able to bring in all this bottom line, bring in, save these companies, save these gyms, all those kinds of things, help their bottom line, help them get memberships, those kinds of things. And when he went to, "Hey, I'm exiting this business, I'm so sorry," he found out real quickly that they needed him and changed his pricing structure. He also changed his services too, so that's a little bit more in that story, and I encourage you to Google that and find out.

27:39 someone that's like, you know, who wants you to do it cheaper, and you've already priced it cheaper. You don't want them. And they keep coming back to you, and this is why they keep coming back to you: because they value you. They just either can't afford you or don't want to pay you what you're worth. Now, if you're a good salesperson, you can flip that and you'll be like, "Hey, you value me. These are my costs. This is what I, this is what I charge, and this is what you should do." And you can flip that from, "Hey, this is the cost," like you can go to them, go ahead, give you grace, mercy and peace, go with God, be gone, and say, "But, you know, you're not going to find value there. The value that you find with me is different, which is why you pay me." This changes the whole game, okay?

28:43 let's put in the contract. I say I evaluate my rates quarterly due to industry fluctuations. Honestly, you have to do that. We'll talk about more of that in a second.

29:47 do, this is what I'm not going to do, this is how much it costs, here are late fees, here is the payment schedule, here is all the information you need to know and how I operate. Here you go. And if they have questions, comments, concerns, or want to make changes, be a little bit flexible, but understand that you're establishing a business policy, a corporate policy for your business. This is your pricing. Stick to it. It's policy, okay? Because you don't want one client talking to another client telling them that, "I got cheaper rates," and they're calling you up asking if they can get the huge discount. Not saying that happens, but it is a real thing. What I am saying is, if you're consistent in your billing, you're operating as a business, you can prove more, you're operating as a business, and you're not piercing that corporate veil as much. That's a whole nother conversation.

30:51 write profits: gas, travel, um, services, software, hosting, storage, hard drives, SD cards, rentals, employees, employees that you're paying, contractors you're bringing in. Lack of understanding those overhead costs and including them in your invoice makes you ignoring them, and you're going to start losing money. That's the third. Fourth is inconsistent billing practices. Not having a standard billing process can delay payments and affect your cash flow. Get QuickBooks, get straight. Maybe use my service when it comes out. Maybe use my service when it comes out, you know. So bill consistently on a timetable. Know what that timetable is and know what your net is: net 15, net 30, net 60. Five, fear of losing clients. Do not go into a negotiation, don't go to

31:52 a sale, don't go to something with the mindset, "I need you." Okay, if you do, now is not the time to get into business. I understand that business, that scrapping a business together, being an entrepreneur, is going to take a lot of you, but sometimes it's okay to eat nothing but noodles for a whole month, so to speak, when you're starting a business, than to take a client knowing you need them, okay? And they know by your body language. You may never say it. They know by your body language how you come back to the floor, if you come back to a meeting, and that's one, two, three, four, five, six, seven, eight meetings before closing the contract. It's okay to lose a client. You have to understand a workman's worth his wage. Everything costs money. Business costs money. Everything costs money. You should be making money, otherwise you're going to be in business not for a very long time.

32:52 fail. Entrepreneurship fail. Starting a small business fail within a couple years because of this underlying: underpricing services, lack of clear contracts, ignoring overhead costs, and inconsistent billing practices, fear of losing clients. Those five things is why businesses, service businesses, and pretty much any business fails.

33:54 great relationship, what, to many business owners, once you pass a certain level of money, right, certain level of clients, certain level of stability, money is just an object, okay? They're not going to whole hoard it, they're not going to hold it back and be like, "My precious." They're going to be like, "Oh hey, you did us a service, you valued us, we value you, this is how we prove our value, here's your payment." And in most cases, a great relationship, they're going to pay it within the net terms, if not the same day they get the invoice.

34:55 if three, implement late fees. No one values Netflix until it turns off. No one values a subscription service until it's gone. If you don't implement late fees, here's what's going to happen: you're going to send your bill, boom, and a client who's maybe strapped for cash or just doesn't value you, yeah, we'll process it, and keep saying, "We'll process it. We'll keep saying we'll process it. We'll process it. We'll process it," until they begin to see that late fee. And when they get that, and they call up, "Hey, we just thought we got a late fee." "Oh my God, we're gonna pay it right now. Is there any way you can wait a late fee?" "Yes, I can."

35:58 it's industry standard for work that's been completed. Now, since post-COVID, for net 14, some people do net 15, some people do net 30, some even do net 60. Don't recommend that, especially if you're starting up. If you grow a little bit, you can give more corporations some time to maybe have the liquidity, especially if your invoice is going to be a multi-million dollar invoice. You have to give them a little bit more time, so that's kind of understandable.

37:03 know that you're, it's to reflect your growing experience and market fluctuations. Everything is going up. If your prices aren't going up to join them, you're just going to get in the negative. You don't want to get in the negative. Now, people call it cost of living, whatever. Inflation is a real thing. You have to factor that into your pricing. It sucks, because a lot of businesses and such have a bottom line and they try to just be leaner, leaner, leaner, and that works. Now, if it's a non-profit, it's a whole different scenario, whole different scenario, because they're operating on someone else's money and donations, and I will tell you, donations across the board for certain, uh, non-profits have dropped considerably. So you, that's industry fluctuations happen. You have to just be able to assess through industry fluctuations and, of course, through your costs and expenses. If your costs goes up, your prices go up.

38:06 offer you, I can't make any guarantees about this, this, or this, but this is what I bring to the table, and clients will be so much more receiving of knowing what that value is. Use contracts, always use contracts. Outline project scopes, outline payment terms, outline essential details, like I have a communication clause, and I had to do this because I had a client that dropped out of communication and we went past their deadline. They weren't responding, so I changed my contracts to say, "Hey," equitable communication clause in there, and if you do this and this and this, we're good. If you don't...

39:14 your pricing is not just about numbers, okay? It feels that way, because if you're just entering entrepreneurship, and this is the psychology behind it, if you're just entering entrepreneurship, you hate when you have to pay lots of money for something. That's because you don't value it. Your car, you don't value the car, you use the car, but you hate that you have to pay these outrageous monthly fees. Credit cards, you may hate that you, but you don't remember the value. As a business operator, there's value to everything. Businesses attribute pricing to value. Good pricing, good value. Bad pricing, and I'm probably gonna get what I'm paying, and it's not gonna be worth anything. It's not just about numbers, it's about valuing your work and setting boundaries and communicating your worth.

40:15 with you, that he guide you, that the Holy Spirit be with you, that wisdom and understanding just fall in your way, Lord, that he would order your steps and he would direct you into being able to make the appropriate change, not only to be profitable, to be a successful, prosperous man or woman of God. And if you don't know God, I pray he becomes very real to you in this moment, that his presence be with you, that his peace be with you, and you find out who God is, truly, not if someone says he is, but who he is. In Jesus' mighty name I pray, amen.