One of the biggest challenges of starting a business is figuring out how to price the goods and services you offer. You don’t want to undersell yourself and devalue the market, but overpricing and scaring off potential clients is just as dangerous. Pricing similar to the competition is a good place to start, but since what you’re offering is presumably not exactly the same, the prices shouldn’t be either. That’s why we’ve compiled this guide that will break down everything you need to know about pricing.
The first thing to remember is that your pricing shouldn’t be exactly the same as the competition’s, just as your services aren’t exactly the same. While it’s good to compare pricing, it’s also important to have a strong sense of what you’re offering, how it’s different and how that will play into cost.
There are a few ways to break down the pricing for your services, and each option comes with its own unique set of pros and cons.
Commission: Working based on commission won’t always get you the highest pay check, but it can be a great option for business people who are just starting out. For example, if you’re starting as someone’s second shooter or assistant, and you’re getting paid by commission, your pay will depend on the number of clients you bring in, rather than the number of hours you work. If you’re an event or wedding planner getting paid on commission, and you hire other services like a florist or a bakery, you’ll make a certain percentage of their fees. Pay by commission isn’t the best option for established business people, but it’s a great way to get started and to spread the word about your business.
Percentages: This is a great option for wedding photographers because you won’t alienate potential clients with a fixed fee that might be higher than what they can afford. Working based on a percentage means you’ll make a certain amount (let’s say 10 or 15 percent) of whatever your client’s overall budget is. So if you’re a wedding or event photographer and you charge 10 percent for a wedding whose overall budget is $10,000, you’ll end up with $1,000 for your work.
Be careful of clients who say their budget is a certain price and then raise their budget later to avoid paying you the full percentage. Consider including a clause in your contract that ensures your pay will increase respectively as the client’s budget does.
Hourly: Charging by the hour makes sense if you’re work includes services that don’t last an entire day or days, like portrait, engagement or event photography, or design work. In order to figure out what you should charge as an hourly fee, you must first figure out your desired yearly salary. If, for example, you hope to make $50,000 in a year, you have to calculate 50,000 / 50 weeks / 5 days per week = your daily goal, or $200. Then you take your daily goal of 200 and divide by 8 (hours in a working day), which equals $25 per hour. Many people also increase their hourly wage depending on the additional expenses that go into running a business.
If you’re a photographer charging by the hour, it’s also important to remember to factor in editing time. Be careful when charging by the hour because you could encounter clients who try to rush the job along in order to pay less. Make sure you get all of your business deals down in writing in order to avoid payment disputes later.
Package or Flat Rate: This option will also require some math, but it’s by far the most popular billing method for photographers and event planners. Figuring out how to start off pricing your package deal will require some trial and error. Start with a sample client to figure out how many hours you’ll work the day of the event, the number of meetings you have with the client and how much behind the scenes work you end up doing. Once you have all of the hours tallied, you can determine appropriate flat rates for a variety of different services.
Discounts and Negotiation: As a businessperson, it’s important to know how to negotiate and when to offer discounts to clients. Especially when you’re first starting out, many people will want to hire you at a discounted rate, but be careful not to undersell your services. If a client is asking for a discount on the overall fee, offer an additional service instead. That way, if they agree, you’ll still make your original flat rate fee for only a little extra work, and your client will leave feeling happy.
Pricing can be tricky, but the most important thing to remember is that your service has value. Don’t let a client pressure you into giving them an undeserved discount, and don’t stress out if you lose a client who isn’t willing to pay a fair price. If your services are worth the cost, you’ll find clients who will be happy and willing to pay you’re carefully thought out fees.