Pricing is not magic, but it is not easy either
Pricing your work is a perennial problem for self-employed people and freelancers.
Pricing is not easy, but there are many ways to make it easier. The same principles apply in many different fields, and they can be a good starting point for many self-employed people and entrepreneurs when thinking about how to price products and services.
We have just released an updated version of our popular pricing guide, so to celebrate, I decided to share a few basic, proven tips for budding self-employed people, freelancers, light entrepreneurs and just plain entrepreneurs.
An invoiced sum and earned income are two different things
Many people who have only worked traditional jobs might have difficulties understanding all the expenses that they should take into account when pricing their service. Even though an employer will pay for different social security costs, they are often not visible to the employee. In addition to gross wage, the employer often pays for different types of pension and social security contributions.
When pricing, a light entrepreneur should be aware that their invoiced sum is not the same as the amount of money they will get on their bank account. Besides potential pension contributions, UKKO.fi will also deduct the invoicing service’s commission fee, social security contributions and an accident insurance premium from a light entrepreneur’s wages.
In addition to these costs, there are many other costs that you should consider when pricing your service.
Your invoiced sum should also take into account
- social security costs,
- materials and supplies,
- travel costs,
- phone and internet bills,
- marketing costs,
- the costs of professional training,
- vacations and sick leave,
- other possible costs.
It is also important to note that traditional jobs pay a monthly salary regardless of how productive some working hours have been. As a light entrepreneur, you should account for this, because you will not be able to monetize every hour you put into your work, especially in the beginning.
Set a goal for your income and calculate how to achieve it
A good way to price your service or product is to think about how much you would like to earn to be satisfied with your income. Think about the amount on a monthly and annual level. After this, you can calculate how much you have to bill for your service or product within a certain timeframe to achieve your desired level of income even after accounting for all costs.
Next, remember that you cannot bill your first client for the entire year’s or month’s pay. In other words, you should calculate how many clients you would need to have in, say, a day or month. Once you have an idea of how many clients you need, you can start thinking about how much time you have for each client or task.
Moreover, make sure to have time for sales and marketing, because clients rarely drop into your lap!
You should also remember to account for different seasons, since almost no field has a steady flow of clients. You might even have no clients during the slowest seasons.