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Tips For Determining What Rate To Charge In Your Home Based Service Business

Written by: Chris Simpson

Article Overview: Deciding to start a home based business requires careful planning and making decisions. One of the most important decisions that need to be made is what rate will you charge to your potential clients? There are a few factors that you must take into consideration when coming to this conclusion.

Tips For Determining What Rate To Charge In Your Home Based Service Business

Deciding to start a home based business requires careful planning and making decisions. One of the most important decisions that need to be made is what rate will you charge to your potential clients? There are a few factors that you must take into consideration when coming to this conclusion. First of all do you have any experience in the services that you offer? Experience can include past employment, past freelancing or even past education. Potential clients become secure in your abilities if they can see that you have had past experience in what they need done.

This experience will equal a higher demand for your services and will let you charge a higher rate for your services. A good suggestion would be to research other companies that offer the services you offer or even somewhat similar services that you are offering. See what these companies are charging for their services and it may in fact provide a good baseline for what you would like to charge.

Something else to take into consideration is the time factor. Are you treating your business as a full time job or something you will do part time? Will a project take twice the time for you than it will for someone else? Or can you do a project in half the time another person can?

This will definitely affect the rate you will be able to charge for those projects. Also in retrospect, if you get a client who needs something rushed you may in fact be able to charge a premium rate for that project if you honestly feel you can produce that project in the time the client has specified.

Another tip for deciding what your rates shall be in your business is the option of Specials and Discounts. If this business is new you might consider with an opening special rate, possibly a discount to the first ten customers. Be aware that this may seem that you are working cheaply but if in fact if you do the job well it may give you your first of many loyal clients.

Loyal, happy clients will refer you to other clients which will keep your business successful and busy for a long time to come. This will give you a large increase in income all stemming from a small discount you offered that first client on your first day in business.

Another option would be to sell your services by the package. Customers can purchase your services for set amount of time or a set amount of tasks for a discount. Again this keeps your customers referring others and coming back for more services just as long as you listen to them and meet their expectations.

As you can see there are many options when deciding what rates to charge. A great rule of thumb is that rates are not set in stone and can be changed! Through trial, error and a bit of research you can see what works for you and your business. Remember as your experience and business grows so can your rate! So provide customers with what they are requesting to the best of your ability and your clients will come back wanting more!

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Article Tags: baseline, conclusion, education, freelancing, full time job, half the time, home based business, important decisions, loyal clients, making decisions, must take into consideration, part time, premium rate, retrospect, similar services, suggestion, time factor



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Re: Service Or Product? - I agree with starting a Service-based Business in the economy. Here is what I think is critical: 1. Researching that your Service business has a market. 2. Marketing the Service with as much leverage as possible. 3. Product-izing the Service (aka Package Expert Knowledge). This will only help elevate you as "the" expert in your niche and make you accessible to people in different price points.
Offer Credit instead - I'm not sure if ChrisH was referring to this but i'll state it more expicitly .. Charge upfront and offer a refund of double the value back in "Credit" towards your Product or Service you have for sale at the end of the event.
Business Tips - How about: Tips for managers to handle employees more effectively? Tips on how to deal with difficult customers? Tips on how to deal more effectively with suppliers? The only three I have in mind right now, but will try to come up with something else. Chris
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How to valuate a business - Hi Garth - here is how we did it at Northern Crown Capital when I was helping them raise venture capital for Toronto-based entrepreneurs. Assume the start date is 2003 so 2008 projections are 5 years out: How Northern Crown Capital Valuates a Business 2008 Financial Projections Earnings Before Tax $5,865,000 Tax Rate 42% Taxes $2,463,300 Net Earnings $3,401,700 Amount Seeking to Raise Today $3,500,000 Discounted Value of Future Opportunity, 5 Years Out 2008 P/E Ratio 15 Value of Company in 2008 $51,025,500 Discount Rate Applied 30% Year 2008 $51,025,500 Year 2007 $35,717,850 Year 2006 $25,002,495 Year 2005 $17,501,747 Year 2004 $12,251,223 Value of Company at Investment in 2003 $12,251,223 Less: Investment Amount $3,500,000 Present Value $8,751,223 Discount for Risk & Private Company 40% Less: Discount for Risk & Private Company $3,500,489 Private Company Value $5,250,734 Present Value (What the Owner Keeps) $5,250,734 60.00% Financing (What the Investor Gets) $3,500,000 40.00% Total $8,750,734 100.00% I hope this helps!


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