Setting prices in a knowledge industry is difficult. You can calculate:
* what revenue you want in a year
* how many days you are willing to work for that (but be reasonable!)
* your overheads (the usual stuff, but don\’t forget the high costs of keeping your knowledge up to date and relevant)
Do a quick bit of maths, and hey presto, some sort of daily rate.
But, that doesn\’t take into account the value of the work you are doing. At times you can have an incredible impact on a business which is manifestly worth a lot more that your \”daily rate\” to achieve. But if you charge by results, how do you bill for work that \”had to be done\”, but has no directly monetary value (you simply cannot charge them the profits they now make because they remain in business 🙂 )
So a couple of tales:
Was once taking a quiet coffee on the pavement in Paris. A woman sits down, joins him for coffee and engages him in conversation. After a while she asks if he could do a quick sketch for her. He obliges and after a few minutes\’ work passes her a napkin with a drawing on it. \”That\’ll be £2,000* please\”
\”But it only took you a few minutes!\”
\”No madam, it took me a lifetime\”
For proof of the concept see yesterday\’s Guardian: http://www.guardian.co.uk/uk/2009/sep/24/pablo-picasso-horse-doodle-auction
*And yes, I know it would have been French Francs, but you see the point.
At a recent tweetup in London discussions turned to this topic. Jon came out with a great quote \”never submit an invoice that does not embarrass you\”. I simultaneously see a) the point and meaning of this, and b) the potential for misrepresentation of the quote to clients!
But, the result.
My wife is also self-employed and was recently in a quandary about the rate to quote for some work for a client in a hurry. We threw some thoughts around and came up with a number, X. This just felt wrong, so I persuaded her to go to what felt embarrassing price of 1.5X. After a while, it actually felt OK, and not long after the client accepted without demurring. So should we have got to 2X?
NEVER underestimate your value to your clients…