The main goal of any entrepreneur is to make money with their new company. Setting rates is a decision they should confirm early on.
Atlanta entrepreneur and digital marketing strategist Courtney Herring helps business owners increase their profits. She has learned firsthand how to set her rates and gives tips on the best way for business owners to do so too.
1. Know the value
"Setting rates depends on the value you bring to the client." Herring said. "[It depends on] understanding what your clients' problems are, then determining the value you bring to clients' lives and businesses. Once that's determined, you can place a dollar amount on what your work is worth."
To help determine your client's need, Herring suggests asking this question: How much would it cost you to let this problem persist?
2. Do not compare pricing to competitors
Herring recommends doing market research not to mimic your competitors' pricing, but to get an idea of how much the market will bear.
"Comparing and setting your prices based off competitors could cause you to set prices higher or lower than what your work is valued to your particular set of clients," Herring explained.
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3. Evaluate your pricing options
When setting rates, entrepreneurs have various choices in the way they charge clients with an hourly, daily, weekly or even monthly rate. Herring said she doesn't believe hourly pricing is fair to the business owner or client.
"One, clients can feel anxiety about contacting you since they might feel like they are in a race against the clock when they know you charge hourly." Herring said. "And two, you shortchange yourself by charging hourly because then you're trading dollars for hours as opposed to charging purely off of the value of your expertise."
Herring says that a daily or weekly rate is fine because clients should pay a premium to have a business owner's undivided attention; however, she's an advocate for monthly pricing, which she uses.
"Monthly rates (or retainers) help you to better project your cash flow so you can continue to serve your clients and customers in ways that transform their lives and businesses for the better." Herring said.
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4. Negotiate carefully
"If a client wants to negotiate a price or rate, then that means both you and them should be prepared to adjust the scope of work accordingly." Herring said.
She mentions that lowering the rate at a client's request without adjusting the scope by eliminating deliverables can set a negative tone and make your client believe subconsciously you don't value your work.
"Payment plans are a good way to allow clients to pay your fees, but the worst thing is to chase payments." Herring explained.
With her clients, Herring works a convenience fee within the payment plans and incentivizes full payment by offering a certain percentage savings for clients.
Additionally, Herring wants all entrepreneurs to know that keeping your clients first is the most important thing.
"Once you get to the heart of their problems and how much it's costing them, you're better prepared to create an offer that's valuable to them and price it in a way that is fair to both you and your customer." she added.
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