How Much Should You Charge Your Clients?

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Determining what to charge for your services can be looked at from different perspectives. If you look at it from your perspective, you look at a job, an engagement with a client, and you think, “It’s going to take 5 days a month, and it costs $800/day, so 5 times 800 is how much I should charge.” This is time and materials pricing.

Another way to look at pricing is to think about the opportunity you can generate for your client. For example, you know it’s going to take you five days, but you think that if you manage this budget for the client they’re going to be able to generate $100,000 in sales every month. Then, you might be able to say, “That costs $7,500.” That’s value based pricing. 

Value-based pricing allows you to charge more because you’re looking at your fees relative to the expected benefits for the client. There’s a little more risk in value-based pricing because it might take you longer than five days a month, or it might take all of your time. Value-based pricing can sometimes run backwards on you if you haven’t scoped it appropriately.

Hours based pricing or time and materials pricing is the least sophisticated way to price, and you’re almost always leaving money on the table. Try to move towards value-based pricing or some fixed fee pricing plus a variable revenue, like revenue share, or percentage of ad spend. Hours based pricing is almost guaranteed to have the lowest return on your effort. You generate fewer dollars for yourself, relative to the effort you have to put out.

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