What Am I Worth?
Hello Jello Beans,
I know that this post is a little different from what I usually post, but as someone who is now working a lot with people, logistics, and pricing, I think it is important to make a post like this to all my entrepreneur friends out there.
I have been very bad at setting a price for my services. I know that sounds very weird, and it sounds like something that needs reprimanding about, but hear me out. I'm not talking about sexual services. There's always a really awkward task associated with clients: setting a price.
For me, the hardest part was getting over the fact that setting a price isn't about how much I want to charge someone. It's about being paid for doing something they are hiring me to do. Here are the things that should go into pricing:
2. Labor time
3. Difficulty of labor
Materials are not cheap. Of course, some materials may have been "free" leftovers from previous projects, or even reusable for future projects (such as printers, cricket machines, etc), but maintenance and scraps can still add up in value as well.
The time it takes to create something is important to factor in. Let's say the item being sold is a hand-woven basket. The weaving material is fairly cheap; you can probably buy it at a craft store for $15, or if you live in an area with a lot of tall, dry grass, maybe you can even get it for "free". However, weaving that basket may take you more than 5 hours; how much are you going to pay yourself for those 5 hours of time? Remember, minimum wage is currently about $10/hr. Time is money!
How do you set how much money you give yourself in relation to time? The difficulty of the task needs to be taken into account. If this is a task that anyone can do, but the person hiring you is just too lazy to do it, then you should probably charge less. HOWEVER, if this is a specialized task, then charge, girl. This is something that you were specifically hired for, because you are a diamond in the rough. You are special. You have a God given talent, and as much as I'm a believer that you should use it to GIVE, you must also learn to receive. Don't sell yourself short, because God has never sold you for less than His life. I know that sounds super duper dramatic, but seriously. Know your worth.
And lastly, how much do you plan to profit? Adding onto the example of basket weaving, profit cannot just be measured in "Materials cost $15, and I sold it for $20; $20 - $15 = $5 profit" As mentioned before: Time is money. In the five hours you spent creating the basket (not counting the time it took to procure materials), you could have been studying for a Ph.D that can lead to a $1,000,000 career. Or, more likely, you could have been marketing your services for a larger client. This time has to be accounted for and paid for as well. Let's say you decide that for the five hours, you plan on giving yourself $8, which is slightly less than minimum wage, but since you find that basket weaving is relatively easy, you are willing to charge less for the skill set. That sets your price at $15 + ($8*5) = $55. Whatever you decide to charge over $55 will be your actual profit. Keep in mind: Every dollar you earn is taxed at a rate of about 15%, which really digs into the amount of money you get to keep. That means you only get to keep about $85 of every $100 you earn, and that needs to be put into account as well.
Now, you're probably asking: "Who the heck is going to pay $55+ for a basket? They have them in the dollar store!"
You're right. Not very many people will buy a regular basket for $55+. That's why you are going to have to make your product stand out. Know the worth of your product(s): what makes it worth it? You're obviously not Anthropologie, CB2, or any other bougie home deco brand, so why? Why should anyone buy your handmade basket over the cheaper, machine-made baskets that cost a lot less? That is where marketing and branding comes into play.
Regardless of what it is that you are selling, set a price that you can live with. Do not sell yourself short, and feel like you are working for nothing. In the end that gives you a burden and takes joy from something you might truly enjoy doing. Give discounts to friends and family if you like; that's a courtesy. That is up to your own discretion, as long as the parties involved understand that they are getting a special price. HOWEVER, it should not be a price less than what your services are worth, unless you plan on gifting your services. As friends and family, they should be encouraging of you, and want to give to you for your services as encouragement aand support.
Ultimately, it comes down to this: if you sell your services at a price too low, you are hurting yourself and others. You end up with way too many price-chasing clients with a million and one expectations, and your fellow sellers are losing clients because they understand their worth, and cannot give a lower price for the same quality. Do not feel bad about charging, because you have way more to feel bad about for not charging.