EP. 45. Are you charging the right amount for your services?

Are you appropriately evaluating the amount of your work in terms of cash?
Are you appropriately evaluating the amount of your work in terms of cash?

Many small to medium entrepreneurs are not just into selling products but several are also focused on providing services. If you are one of them, do you put the right value to your work? Are you over charging or under charging for your services? Do you consider all factors contributing to your output such as time, equipment, space and knowledge? In this episode, David Counsell and David Pritchard talk about charging for your services and making sure that you are paid just right.

Are you charging per hour or per project? Do you have upfront amounts or terms? Or the more important question, is providing service a fruitful business for you or you better work for a company and charge the highest amount you can get on an hourly basis? You do have a lot of pondering to do. Better listen to the conversation and we assure you, it’s all worth your time spent free of charge.

In this Podcast

00:00 Opener
00:58 Welcome to David versus David
01:06 The podcast for small to medium business owners
01:11 We’d might just have the answers to your marketing and advertising problems
01:30 We will be talking about the Charging your Clients
01:46 Ask yourself, “How much is the value of my work?”
02:05 Your work might be undervalued or insanely overvalued
02:15 It is easy to undervalue yourself
02:19 Charging hourly can also be a dangerous thing
03:11 Many small service providers try to justify their services and as a result, end up with low paying clients and more demanding
05:01 People who worry if you are making too much money from them shouldn’t be your clients
05:13 Measure the amount of your charge based on the problem that you are going to solve and the amount they can potentially make
06:05 If you solve their problems and make a fortune, they will not go back and give you a bonus
06:23 It doesn’t mean over inflating your charges but picturing the value of your services
07:00 David C shares that when he was just starting out, he too was wondering how much he should charge
07:18 But there are many people at the top who screws the people underneath them and the cycle continues
07:31 At the end of the chain, someone is going broke
07:42 There was an article that suggests to calculate the amount of your desired earnings , divide it to 52 weeks and then dividing it to 40 hours a week which tells how much you should be charging per hour
07:54 That’s not right because it means limiting the amount that you can earn
08:02 You should think of wanting to solve people’s problems and you don’t have to be a broke to do that
08:24 If you do good work, people will pay you money
08:39 Know what amount you should not go below
08:56 You need to have the confidence to tell them your terms
10:22 You need to explain to clients what you can do to solve their problems, how much they can potentially earn and how much you are charging
11:12 Some people look for cheap services but others look for competencies
11:44 David P shares that in his experience, some people are attracted with the amount of software he is selling but others are after the after sales support
12:32 Focus on the solution and not on the price
13:01 You should also considering paying your time or a worker’s time and the equipment you are using
13:25 Everytime you turn on a pc, it depreciates in value
13:46 Even if you are working from your home, it is costing you money
13:57 And of course, consider profit
14:33 David P shares about a coding work he has done in the past
14:49 He spent 4 or more hours of work producing 6 lines of codes
15:25 He said that since people do not understand the amount of work rendered, they might be thinking that per line is just a dollar worth
15:33 But the truth is, they are paying for solutions
16:06 Clients should not be paying for the time but the end result
16:13 Also, it took him several years of learning and experiences in order to write the code
16:25 David shares that he once wrote a one line advertising slogan within 20 minutes which cost a thousand dollars
16:31 But it also took him years of experience to know how to write that one line
17:25 Nobody cares how long an ad is made but what’s important is, the conversion rate of viewers to buyers
17:54 Some charges an hourly rate but at a premium
18:02 Some has management fee, and then hour fee and then knowledge
18:15 That is why it is really important to understand what you are doing for your clients
18:27 Never be afraid to sack a client
19:21 If you don’t get the amount you deserve, then you should re-evaluate your business
19:32 Or maybe, you are not cut out to be an entrepreneur and better to work as employee and get the highest salary you can
19:50 It might not be the answer that people want to hear but you should also consider that
21:04 If you work with the wrong type of customers, they will always drag you down
21:13 You shouldn’t be chasing clients for the payment after you have rendered the work
21:24 Demand for initial payment
22:30 Evaluate how are you going to deliver the pricing mechanism
22:39 No service provider wants scope creeps where clients keep on asking for revisions or additional for the same quote
23:26 House building contracts in Australia is pretty good except that the last 10% is paid after the keys are handed over
23:34 There are cases that house is turned over but the final payment isn’t given yet
24:09 Most of the profits sit in that final 10%
24:16 An option that might work for service providers who are having problems with pricing might consider having different price points
24:30 You can have entry level, medium level and premium level which clearly defines what they are getting and they are not getting
25:30 An investment adviser in London used to have the highest paying hourly service of a thousand dollars which was huge 30 or 40 years ago
26:08 And when somebody charges the same amount, he said that he will be charging higher
26:14 He was able to build a name for himself and people are even going to him knowing that he is the most expensive in his field
26:42 One advantage of shooting your prices up and delivering the services builds your reputation as the go-to-guy
26:50 All previous episodes we have discussed are linking together
26:58 Just like in expensive cars, part of what you are paying is the add-on value of being part of that circle
27:51 Don’t be embarrassed by how much you are charging but be embarrassed if you are producing non-quality work
28:36 When Hyundai was introduced in Australia, they started with cheap cars the country has never seen
28:45 But they are now moving into a higher sales bracket and the quality is improving that is why they can charge appropriately
29:03 Wrapping up
30:14 Visit our website at www.davidversusdavid.com or check our facebook account at www.facebook.com/davidversusdavid
30:20 Leave us 5-star reviews in iTunes
30:35 You can also visit our individual websites, David Counsell’s http://www.infernopromotions.com.au/ and David Pritchard’s http://www.d10solutions.com/
30:46 Goodbyes!