It’s a dilemma many small businesses, freelancers and independent contractors have faced: what should I charge for my services? Too high and you could price yourself out of the market. Too low and you’re selling yourself short, and could even lose money.
A free new e-book seeks to help address this challenge. Breaking the Time Barrier was written by Mike McDerment, the co-founder and CEO of FreshBooks, a developer of cloud-based accounting tools for small business owners based in Toronto.
The book is written in a narrative format, from the perspective of a web site developer who, tired of the roller coaster of working for other people’s businesses, decides to start out on his own. He quickly runs up against the issue of pricing and goes to different people asking for advice. After starting off using cost-plus model, billing by the hour based on a multiple of his costs, he quickly hits a wall. A meeting with a friend of a friend who has built a similar business leads him to a new model: value-based costing.
Rather than quote clients an hourly rate and estimate the number of hours it will take him to complete the project, she shows him how it would be more beneficial to both him and his clients to have a conversation with the clients about value. Determine what the project is worth to the client, how it will help their business, and then charge accordingly. For example, if a new web site will generate $100,000 for the client, they’d surely be willing to make a $20,000 investment.
The book further explores how to have that conversation about value with clients, how to differentiate yourself and your experience, and how to help weed out the clients that don’t put a premium on value and will only grind down your time.
With its narrative format it’s a quick read, but contains lots of great advice for small business owners and freelancers. It’s a free download; after reading the book, readers are invited to name their own price. Breaking the Time Barrier worth a read for those struggling with the issue of pricing their services.