Selljam logo

The Service Pricing Guide: How to Calculate The Optimal Price for Your Services

service-pricing-guide
Calculate the optimal price for your services with this comprehensive guide, essential for ecommerce businesses and online professionals.

In the post-COVID era, the world is shifting towards the gig economy as more and more people want to work on their own terms, build their own businesses, and, most importantly, be their own boss. While there are several challenges freelancers or gig workers face when starting out, one of the most crucial obstacles is determining their pricing.

  • How should freelancers price their services?
  • What things must be calculated?
  • Should it be on a time basis or an effort basis pricing?
  • Should freelancers charge less as beginners?

Well, if you have all these questions and more, you’ve arrived at the right place. In this article, we take you through the steps to help you set a price for your services. Without further ado, let’s get right to it.

Determining Cost Components

Even if you’re in the service industry, you do incur several costs. Whether you’re a copywriter, a graphic designer, a software developer, an AI engineer, or anything else, you will have expenses while providing the respective service. These include internet cost, cost of subscription for different tools, cost of office rent (if any), website hosting (if you own a website), and more. Ensure you account for the most minute expenses and arrive at the final sum. Once you do this, you’ll realize how much money you need to make to break even.

Researching Industry Standards for Pricing

One of the most common pieces of advice you would have received is finding out the industry standards. But how do you go about it?

Step 1: Research online. Google the pricing based on your field and your service. This is because the pricing and the industry play a huge role in the pricing you can set. You can go to public forums where such discussions take place or even learn from freelance portals such as UpWork and Fiverr.com.

Step 2: Look for surveys and reports from reliable sources. Any industry will have reports about its growth/decline, the trends observed in the past year, and what the future looks like. Find out such portals for your field and services, and learn about the pricing set by freelancers who provide the same service as you.

Step 3: Start networking with people in your industry and your competitors. Find out how much they charge. While some might not reveal their exact charges, other freelancers tend to put out their pricing models for others’ benefit. So learn how much they price, what services they provide for the price, and also find out how they go about explaining the pricing to the clients.

With these three steps, you can get some idea of what kind of services you’ll provide. Furthermore, you’ll also know how to price your services.

Gauging Your Expertise and the Value You Provide to Clients

This is a crucial step to determine your pricing.

  • How much expertise do you possess?
  • What kind of value do you provide to the clients?

The answer to these questions can either make you another brick in the wall or set you apart from your competitors. Companies tend to look for freelancers who come with a holistic perspective. It makes them more clear about the service they provide, the goals it should accomplish, and how it should impact other parts of the client’s business. While this is just one quality, there are several other valuable qualities that you bring to the table. Take those into account while determining your pricing.

Establishing a Pricing Strategy Based on the Above Factors

Now, there are different pricing models you can adopt for your business. This depends on the kind of work you get, the hours you’ll spend on it, the complexity of the work, and the turnaround time you have to complete the gig.

Hourly Pricing

You can always price on an hourly basis. Use tools such as Upwork to keep track of time and know how much time you spent doing the project. Although hourly pricing is recommended for beginners, it is slowly becoming outdated for multiple reasons.

  1. It does not pay for expertise, skill, or efficiency.
  2. You might not get advance payments.
  3. The final pricing might surprise clients, and there might be back and forth on the payments.

Project-Based Pricing

Here you share the complete scope of work you’ll do, and based on the expertise and the experience you provide to the client, you must set the pricing. Furthermore, here you will be able to get advance payments in a model where you get 50% in advance, 25% before the final delivery, and 25% after the final delivery. The advance payment percentage is subject to change and will likely differ from client to client based on multiple factors. So, keep this part flexible.

Retainers

For projects which are always-on or go month-on-month, you can charge differently. Here, you charge slightly low because you’re getting stable work from the client. But, you must set the expectation after a specific period. Your charges could increase after the first six months or annually.

These are the three models you can follow, but also keep them flexible as client-to-client expectations and interactions would differ. So, a simple and straightforward formula you can use to get started it

Pricing = (Sum of All Costs) x (Margin that You Want to Earn + 1)

For instance, if you’re a writer and your costs include electricity bills, subscription to tools, and more, you add them and multiply it by a number which is

Offering Competitive Pricing but Ensure Profitability

You must have heard phrases such as competitive pricing, but what does it mean? The idea is to not keep the pricing too high or low compared to your peers or industry standards. If it’s too high, people might feel it’s over the top, and if you price too low, people might not expect good quality work from you. Hence keeping competitive pricing for your projects is necessary.

Although the pricing needs to be competitive, know that you must be profitable. Regarding profitability, you must start by ensuring that all your needs, wants, and savings are handled. Once these are sorted, you must charge enough to grow your business.

Communicating Pricing to Clients

Communicating pricing to clients is one of the biggest challenges for any service provider, whether a beginner or a veteran. Although it gets easier with time, you must hone how to communicate pricing to your customers.

First, establish authenticity and ingenuity with the client. This is by being transparent and offering realistic deliverables. Once they know you’re genuine, you can showcase the values you will provide to the client and how that sets you apart from your competitors. Finally, the most important thing you need to do is negotiate well. There’s no rule book that can teach you how to negotiate, as each scenario is distinct and unique. So, always go in with a flexible mindset and do what works best for you and the client.

Conclusion

Overall, these are the various steps for setting a price as a freelancer. In summary, you must remember the following things:

  1. Always ensure profitability and have a growth mindset.
  2. Keep your pricing models flexible to accommodate more clients as long as you are benefitting from them too.
  3. Charge based on industry standards but also charge based on the value you provide.
  4. Offer unique value propositions that are scarce in the market.
Written by:
James Mew
Selljam Founder | Head of eCommerce

With 18 years of experience in the eCommerce industry, I have successfully launched and grown multiple e-commerce businesses, the 2nd one hit 7-figures in revenue within its first year. In 2022, I joined a European food technology equipment and IT service provider as their Head of E-commerce, overseeing 14 eshops across Europe and South Africa. Selljam is where I share all those ecommerce tips, tricks and hacks learned along the way that I hope will also help you on your journey to success. 

Related Posts

Customer Identity Verification Tools: The Best Apps to Protect Your Ecommerce Store

When secure card payments aren't enough and you need an extra layer of protection, then customer ID verification may be just what your business needs to level up. Comply with regulations and also protect your ecommerce business or app from fraud and chargebacks with the best customer identity verification tools.

Holy Sheet! Give Google Sheets Superpowers with These Add-ons

Looking for ways to supercharge your Google Sheets? Check out these amazing add-ons that can help you bring in data from your business or ecommerce store, automate tasks, analyze data, and create stunning visualizations.

Guide to Email Marketing Campaigns: The Automated Growth Hack for Ecommerce Businesses

Learn how to create and implement email marketing funnels to automate your sales and grow your ecommerce business. This article show you all the best campaigns and sequences to run on your ecommerce store.

How to Get Your PageSpeed Score In the 90s

Boost SERP rankings, improve your website's performance and SEO with these tips on how to get your PageSpeed score in the 90s. Get more traffic to your website and convert visitors on your "money pages".

Email Automation Tools and Platforms: Case Studies and Success Stories in the E-commerce Space

Learn how to use email automation to grow your ecommerce business. Discover the best email automation tools and platforms, and see how other ecommerce businesses are using them to achieve success.

Domain Buying Secrets: The Things I learned From Buying a €3,000 domain

Discover the secrets of buying a valuable domain name. Learn how to identify the best domains and avoid common pitfalls to securing your dream domain.

PDP Ecommerce: Anatomy of the Perfect Product Page

Learn what makes a perfect product page (PDP). Discover the key elements of it, and see how to optimize your product pages for conversions.

How to Use ChatGPT & AI for E-commerce to Boost Your Business

Discover how to use ChatGPT and AI to boost your ecommerce business, with tips on generating creative content, optimizing your website, and improving customer service.

Dictation Apps and Speech-to-Text Are Your Secret Weapons For Increased Efficiency and Productivity

Boost your productivity with dictation apps and speech-to-text technology. Learn how to choose the right tool for your needs and use it to create content, send emails, and more.

AI Chatbots for CX: The Future of Customer Service for eCommerce Stores

Learn how AI chatbots can help you improve customer service and boost sales for your ecommerce store. This guide includes information on the benefits of AI chatbots and tips on implementing them in your store.

The 30x eCommerce Metrics & KPIs That Matter (And To Monitor)

Track the right ecommerce metrics and KPIs to boost your sales and grow your business. This guide includes 30 of the most important ecommerce metrics and KPIs to track.

Productivity Hacks: The Best Text Expanders and Autotext Tools

Discover the best text expanders and autotext tools to boost your productivity and save time, essential for ecommerce sellers and online professionals.

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram