Setting your rates

Those starting out in the creative services need to know what price to charge. Too low and you won't be able to sustain your business, too high and you risk scaring away clients. You have to find the right balance. There are two ways to do this: you can either check the industry rates and base yours from that, or price from the bottom up, which means factoring your costs and determining the best rate.

Check industry rates

Search the net, ask your friends, request for quotes from practitioners. Check to see what others are charging and what clients are willing to pay. Just be sure to check the exact market you're playing in. A small boutique design studio charges differently from an full-service ad agency from a print shop layout service. A freelancer who offers basic web design cannot set the same rates as a larger firm that offers everything from design to hosting to web marketing.

Check the rates of your direct competitors and position yourself accordingly. Will you price lower than them or adopt a premium strategy? Just be sure that the work you do is commensurate to what you charge, especially if you're pricing higher. A starting photographer should probably charge a little bit lower than the big names while a new design studio needs to gain a bit more experience / prestige to command higher rates.

Set your own rates

Of course the rates that others charge still need to be checked against your costs. Given the number of projects you can handle in a month, you need to be sure that what you'll be earning is enough to sustain you. You might also be in a position where competitors' rates are difficult to obtain, forcing you to set your own rates. To do this, first determine your hourly rate.

The hourly rate is simply the cost of your working time. To compute for this, first set your ideal monthly salary (keep it realistic), and divide this by the number of hours you work per month. The average person works 40-hour weeks so you can divide your monthly rate by 160 (40x4 weeks).

Once your hourly rate is set, estimate the number of hours it takes to finish a project. Multiply this by your hourly rate, add your costs (printing, transportation, etc.), add around 50% for allowance, and quote away.

Fine-tuning

Historical data will help you fine-tune your rates. The prices you quote may need to change depending on your speed, efficiency, and the type of clients you have.

Monitor the amount of time it takes you to finish an actual project and compare this to your estimates. If it takes longer, you may need to raise your price or check your work process. If it takes less time than the estimate, cool. You can either charge lower or enjoy the higher margin.

Check if you're posting profits or losses. If it's the latter, determine the cause. Are you getting enough clients? Or is most of your time spent twiddling your thumbs? Are you able to get your name out there? If you find yourselves working to full capacity yet still losing money, then it might just be inefficiency on your part.