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copyright © 2004, by Karyn Greenstreet. All
rights reserved. You must decide for yourself whether you will charge for
your services or not. Should you decide to charge, the next question is
"what should my fee be?" 1. Determine What You Need To Make
When setting fees, part of the calculation is how much you need
(and want!) to make. If you first decide how much profit you need to make,
you can then determine what to charge in order to make that profit.
It's necessary to do a personal and family budget first, to determine the
minimum you need to bring into your home each month.
In addition to that minimum, add the amount you'd want
that would give you the lifestyle you want. If you're just
starting a business, you may have to make ends meet with other income or
savings, but you need to have a goal of the full amount you want to bring
home each month when you have a successful business. While income
isn't the only measure of success, NOT making enough money in your business
will bring frustration and dissatisfaction. 2. Research Your Fee Options
First, examine carefully your skill level. It is common practice in business
to charge based on skill. The more skill and experience you have, the more
you
charge.
You have several choices on how your services will be billed:
Next, find out what others are charging for similar services in your area.
You will have a difficult time getting clients if you set your fee at $100
per hour when other providers in your area are only charging $60 per hour
unless you can justify the added value clients will get for the additional
cost.
One interesting note is that you can charge much more in big cities than
anywhere else: in the suburbs you might be able to charge $60-$75 a session
and in New York City charge $150 a session. Ask others in
your industry what they charge. It is not collaboration or
price-fixing to simply inquire as to industry norms. Ask your attorney
if you have concerns about this area.
Another consideration is how much your education cost you. As an example,
some massage therapists can spend $4,000 to $6,000 to get their certification.
These education expenses, as well as other business expenses, need to be
figured into the mix when setting fees.
Finally, decide if you will offer
discounted fees and how you will apply them. Some people create their fees on a
sliding scale, based on what the client can afford. Others offer either full
fee or free sessions, with no discounting in-between the two extremes.
Some take one or two free clients per month as a way to give back to the
community, or volunteer their services with a local non-profit organization.
3. Determine Your Payment Policies
Decide if the client must pay in advance or if they can pay after the session is
complete. Also decide if you will offer a discount for
early payment of invoices. This encourages those clients you invoice
to pay their bills early, thereby giving you earlier access to your cash.
Finally, if you will be invoicing clients, determine how much time they have
to pay. Typical time periods are 15 days or 30 days after the invoice
date. You must be willing to be assertive in collecting past-due
accounts and be firm with people who don't pay on time. For example,
if your policy is that payment must be received in your office by the first
day of the month, consider warning, then firing, clients who habitually are
late in sending in their payment.
EXERCISE - How Many Sessions Do I Need To Do?
For this exercise, you'll need a piece of paper and a
calculator.
1. Calculate the income you need to bring into your home (after taxes
and expenses) so that you'll have a comfortable life. Don't short-change
yourself
here; be honest with what you really need.
2. Add 30-35% to that number to figure out the gross income you'll need.
This covers taxes and expenses. (Adjust the percentage if you will have an
unusual
number of expenses.)
3. Determine the fee you'll charge for one session (hour/program).
4. Divide your total
income by the per-session fee to calculate the number of sessions you need
to do in a
year.
5.
Now divide the yearly sessions by 12 to determine how many you need to do
per month.
6.
Assuming you'll work an average of 20 days per month, divide the total
monthly sessions by 20 to figure out how many you'll need to do per day.
For example: 1. Desired
Net Income: $35,000
2.
Plus 30%: 35,000 x 1.30 = $45,500
3.
Per Session Fee: $60
4.
Number of Sessions
per Year: 45,500 / 60 = 758.33
5.
Monthly Sessions: 758 / 12 = 63
6.
Average Daily Sessions: 63 / 20 = 3.15
Your Calculations: Net Income:
Plus 30%:
Per Session Fee:
Number of Sessions per Year:
Monthly Sessions:
Average Daily Sessions: Now, look closely at that final number. Can you physically and emotionally
do that many sessions in a day? For instance, if each session is one hour in length
(with 15 minutes of rest time in-between sessions), do you have enough time
and energy to do that many sessions?
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Karyn Greenstreet is a Self Employment expert and small business coach. She
shares tips, techniques and strategies with self-employed people to boost
clarity and focus, create sustainable motivation, and increase sales and
profits.
Visit her website at
www.PassionForBusiness.com
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