Determining your prices as a business owner is a challenging aspect to get right and requires careful thinking. It’s very common early on in your journey to undercharge and then start increasing as you get more experience. Part of determining your new pricing involves weighing the pros and cons of value and hourly pricing. To discuss this and more, I sat down with Daphne and Lucy from Salt Design Co. They are graphic and web designers with over 7 years of experience in creating amazing value for their clients and have plenty of experience in managing their pricing.

How Do I Determine My Prices for My Service-Based Business?

The easiest way to determine your prices for your service-based business is to choose between value and hourly pricing. Value based pricing is charging based on how much the deliverables will impact and improve your client’s business. As has happened with Daphne and Lucy, sometimes clients might not understand why you’ve priced it a certain way, but once they go through the process it becomes clearer to them. 

Whereas hourly pricing is based on charging for your time to complete the work, otherwise known as exchanging time for money. The final cost is not always known in advance as it can fluctuate depending on your actual time to complete the project. 

Advantages and Disadvantages of Value Based Pricing

A great pricing strategy for freelancers, consultants and agencies is value based pricing. This is all about what the client gets in terms of deliverables and the overall impact this work will have on their business. 

Value based pricing helps businesses scale, as they aren’t punished for their efficiency. It’s also handy for experienced businesses who know their craft well and have achieved success for clients in the past. The value of all this knowledge and how to handle situations is what gets passed on to the client.

The downside of this is you need to be extremely clear with client deliverables and be upfront with this cost as this method runs on knowing this at the start. If the project is likely to change as you progress, it’s best to provide hourly pricing.

Advantages and Disadvantages of Hourly Pricing

Charging by the hour is one of the simplest ways to charge clients as it’s all about charging for your time. This pricing method is perfect for new service-based businesses. This is also handy when the scope of the project is not clear or is going to change from the original plan. Unfortunately, this pricing method is not great for scaling as it punishes you the more efficient you are at your work. As you become better at your work and gain experience, it can warrant switching to value based pricing.

Figuring Out Your Ideal Pricing Method

Knowing your financial goals and how much time you want to dedicate to client work can help you choose the right pricing method. Along with your skill level, the type of client and projects you want to be involved with help give context to this. As a business owner, you have the power to define what success looks like. Your pricing method is a tool to get there as long as you are able to provide excellent service and keep clients happy and coming back.

Show notes: