This is a question we get asked by professional service business owner’s all the time….

And it’s not just under-charging that’s a problem, I’ve seen businesses over price their time and miss out on good opportunities…

 

A business coach once told me “the right price is the price just before the client says no!

 

But if you want to add a bit more structure around your pricing model then there’s 3 things you need to know:

1. The “real” hourly cost of your employees time – and its not the hourly rate you pay them…aside from “on-costs” you need to factor in that you are paying them for around 8 weeks of the year that they are not at work….

2. The productivity rate of each employee or role you are pricing in your business – ie when they’re at work, what % of their time are they spending on revenue generating activities? The lower this % the higher the average rate you’ll need to recover on their time…

3. What profit margin as a % of revenue do you want to earn on each employee or role? Your level of overhead and net profit goals will impact this number…

Once you’re clear on these 3 things you can price any role in your business with ease! I’d love to hear other thoughts on this topic and if anyone would like a copy of a simple excel spreadsheet I created to help my client’s price their time, drop us a line and I’ll send it over to you.

– Rachael