“Pick your price and stick to it — it’s that easy.” It’s an appealing idea, especially if you’re just getting started and have a million other things to worry about. But pricing is complicated and based on all kinds of things — your local market, years in business, certifications, and range of services, just to name a few. How you set your prices and when you decide to adjust them will depend on your business, and it’s something you figure out with time and experience.
Here are a few general principles to get you started.
There’s a benefit to starting low.
Lots of professionals will tell you not to undersell your services and to keep your worth in mind. This is absolutely true. But it’s also true that when you’re just getting started, experience (even more than money) is what you’re angling for.
Consider lowering your prices while going after your first few jobs and getting some solid reviews in the process. Set a realistic limit; commit to raising your prices after 20 hires or winning 15 Thumbtack reviews. The more you work, the more your work is worth, and this is measured in reviews and referrals — so make sure to ask your customers for both.
Check out this guide for asking customers to review your work on Thumbtack.
Make sure your prices cover your costs.
If your costs outrun your prices, your business isn’t going to have much of a chance in the long run. Covering your costs is key to keeping your business afloat.
If your product is just your time and expertise (looking at you lawyers, writers and accountants) you have a bit more wiggle room. Your objective is to figure out what the going rate is (per hour) for someone of your skill set and experience. This rate will change as your customer base grows and you gain more experience and hone your craft.
For business owners with concrete products to sell or physical work to do, it’s different. Your costs are more straightforward because they reflect the cost of materials, labor (either your time or your employees’), and overhead costs like your truck or office space. Once these are covered, start considering secondary factors like how busy you are and how much you want to grow.
For more tips on growing, read this article on hiring new employees.
Research your market.
It helps to understand the level of competition in your market and what other business owners are charging. If you offer the same service as many other professionals in your area, know that entering the market will be tough — and you might have to lower your prices until you’ve secured a foothold.
One way to increase your chances of succeeding: specialize. The more targeted your services are, the better chance you have of cornering your market. If there are tons of locksmiths in your area, but very few of them work on car keys, you have an opening. In some cases this will mean making a bigger upfront investment, like getting extra training or paying more for specific tools. But if you’re one of few people offering this service, there’s also a good chance you can charge more — even when you’re just getting started.
If you’re not sure how to price your services, do some research to see what other businesses are charging — the high and low end, as well as the average.
Look up what professionals in your area are charging with Thumbtack’s cost calculators.
Availability will affect your costs. Track your monthly totals.
There are busy times and slow times in almost every industry. For event planners, there’s wedding season. For house cleaners, there’s spring cleaning. For physical trainers, there’s new year’s resolution season.
Figuring out when your busy season is comes down to tracking your work. Run totals on the jobs you take every month, capturing not just your income, but also the number of projects you’re taking on. After a year or two, you should have a clear idea of what your busiest season is.
Now, play with your pricing. Adjust your costs when your business is most in-demand and see how things fare if you hold onto those prices when things return to normal. The more you experiment with your pricing, the better you’ll be able to adjust your base rate to match what you’re worth. You can even apply this principle on a weekly basis. If your services are most in demand on Saturday and Sunday, those times are premium — charge a higher rate.
Just make sure to communicate these changes to your customer. If you don’t update your job preferences and Thumbtack profile to reflect your current rates, customers will get confused and even frustrated by the the sudden change.
For more on setting your prices, check out this article in Thumbtack’s help center.
More experience means higher costs.
Don’t be afraid to raise your rates. Many professionals are — and it costs them a lot of money in the long run. As you get more experience and grow your customer base, it’s only natural for your services to be worth more. You’re busier, more specialized and you have a lot of happy customers to back you up.
If you haven’t raised your prices in five years, you might have fallen far below the going rate, especially with annual inflation. Trust that customers will see your worth, even if a few gawk at your new price tag. Also remember that nothing is set in stone. If you were too bullish about raising your prices, you can always adjust them until you find your sweet spot.
For more on finding a price that works, check out these Top Pro Tips for Finding Your Pricing Sweet Spot.