MBA1092 How to Set Your Rates as a Service-Based Business + Ride Friday!

Hey there. Today is Free Ride Friday, so make sure you hang on to the end of the episode to hear who won this week's Free Ride. Every Friday, we give away a lifetime membership to one of our programs. This month we're giving away Easy course, our $500 course over at EasyCourse Co, showing you how to create and launch your own online course in 30 days. All you got to do is leave us an iTunes rating and review to enter our weekly random draw to win the course and you automatically enroll in the draw once you left us a review for every week until you win. It's our way to say thank you for leaving us love on itunes. All right, let's jump into today's episode. Heyo. Welcome to the $100 MBA Show. The business world doesn't stop, so neither do you. That's why we deliver daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zen Home. I'm also the co founder of the Hundred Dollar mba, a complete business training and community online. And in today's lesson you will learn how to set your rates as a service based business. Whether you're a marketing consultant, a photographer, a freelance developer, if you're delivering a service exchanging time for money in your business, you need to set some rates. And if you're just getting started, that might be a little hard. You're like, how do I set my rates? How do I know what's too low, what's too high? What's the formula for all this? Well, in today's lesson, I'm going to give it to you. I'm going to give you three options, three methods for you to set your rates and how often you should revisit your rates so you can make sure you're pricing yourself fairly. Time is money with a service based business. Let's make sure you're making money. Let's get into it. Let's get down to business. Support for today's show comes from Microsoft Surface. Looking to be more productive on the go? I sure am. I need to make sure I can manage my team and make it all happen no matter where I am. Introducing the all new Surface Go. The smallest Microsoft Surface ever. At just over a pound and with a 10 inch touchscreen, the Surface Go adapts and adjust for home, travel and everyday tasks and prices start at just $399. So what are you waiting for? It's time to go. When you're getting started with setting your rates, you need to make sure that you find Your minimal hourly rate. This is the minimal hourly rate you need to charge so you can sustain yourself as an entrepreneur. I'm talking about when you're first getting started and it's just you running the business and you're exchanging your time for money. The first thing you have to establish is how much money do you need to take home? After all expenses are paid every month to sustain yourself. Let's say that number is $3,000. You have $1,000 of expenses. Let's say rent for your business, Internet, other expenses. Your expenses for Your business is $1,000 a month, and you need to make $3,000 to be able to live your life. This is just an example, but the point here is, is that you need to bring in $4,000, $4,000 every month. That's the bare minimum. Everything above that is gravy. So how we're going to calculate to know what your minimum is? So now we know we have $4,000 we need to take home every month because we have $1,000 on expenses and $3,000 to take home to pay for our personal expenses. So let's say you're working full time, 40 hours a week. Half that time is not going to be spent with billable hours. It's going to be spent getting the business, marketing, your business, content marketing, invoicing, working on your website, all that kind of stuff. So you're actually going to have 20 hours, bring in your service and charge by the hour. Now you're being very optimistic if you think that you're going to be fully booked for every single hour that's available all month long. So let's be a little bit conservative here and say, okay, 10 hours, half that time, 10 hours a week, I'll be able to bill. That means every month around 40 hours. So if I can bill for 40 hours and I need $4,000, that means I need to charge $100 an hour. That's my minimum. Now, if I can bring in more business than 10 hours a week, great, that's gravy. The business is growing, but at least I know my baseline. That's a good way to start setting the rates for your services. Now, method number two, result based rates. Most people that are buying a service, they're looking to go away with something, a result. So for example, if I'm hiring a photographer, I would prefer to buy a package. A package that tells me that, hey, for X amount of dollars, you're gonna get XYZ, you're gonna get, you know, 20 headshots 10 full length shots, five action shots, and five you can use for advertising. Whatever. There's a package, this is what I'm gonna take home after the shoot. After all the time, after all the editing that person is gonna do, they're gonna calculate how much time it's gonna take them. I'm not really concerned about that. As a consumer, as the customer, I don't really want to pay by the hour. I want to pay by what I'm going to get. It makes more sense to me. And for you as the freelancer, as a service based business, it's going to be easier for you to sell these packages and make more money. People are more likely to spend $3,000 on a package that's going to give them, you know, specific things than telling them, hey, this thing's going to take 10 hours and my rate is $200 an hour. Like, whoa, $200 an hour. That's crazy. They're not really seeing what they're getting. When you display what they're actually getting. They're more likely to buy because they see the value. See what I'm saying here? I talked about this before. When people see the value is more than the price, that's when they buy. And when they see the package and they see the deliverables, what they're actually going to have at the end of this transaction, they're happy to pay option number three. And that's return on investment based. Sometimes it's just all about how much money I will make with this service. This is great for consulting, coaching, marketing, things like that. Say for example, you are a social media marketing consultant. Instead of just saying $2,000 is my rate, say $2,000 will get you this given certain variables. So say for example, you say $2,000 is going to get you $5,000 in sales. If you spend $1,000 on ads, that means for the customer, they're going to pay you $2,000. They're going to pay $1,000 on ads for you to manage those ads. So out of pocket, they're going to spend $3,000, but they're going to get $5,000 in sales. That means they're going to get a return on investment of two grand. That's like an 80% return. Every entrepreneur is going to say yes to that opportunity. They'll do that all day long because they see the value. Again, a return on investment. But if you just say, hey, if you want me to run your Facebook ads, it's going to cost you $2,000. Oh, and by the way, the minimum is $1,000 ad spend. That just paints the picture of what they have to pay, but they don't really see what they're going to get. When you have dollars out and dollars in, it makes total sense and it's an easy sale. So if you want to set up your pricing based on return on investment, that might be easy or easier for you to be able to set the price. That's sweet. Meaning that, hey, if you know you can get people sales or get a return on investment based on, let's say, their traffic on their website, their conversion rate, and your expertise in marketing, then you can charge a premium. This is a fantastic, fantastic strategy to set your prices based on return on investment. I have more on today's topic. Some more tips on setting your rates in a service based business. But before that, let me give love to today's sponsor. Support for today's show comes from wgu. WGU is an online university that's changing lives by changing higher education. Its innovative competency based learning model was designed specifically to fit the lives of busy adults. WGU is non profit and surprisingly affordable, offering bachelor's and Master's degrees in business, IT teaching and nursing study anywhere. Anytime your schedule allows, you can move through the material you already know and spend time learning what you don't. Which means the faster you demonstrate what you know, the faster you finish. That sounds amazing. WGU works with employers to make sure your degree is current and relevant so you get the skills and credentials employers are seeking. It's also about half the cost of other online universities so you can graduate with far less debt or none at all. At WGU you get personalized one to one free full time faculty mentors from day one to graduation. Get your $65 application fee waived at WGU.edu 100 MBA that's 100 MBA that's WGU edu 100 MBA to learn more and get your $65 application fee waived WGU edu 100 MBA another tip I would give you when it comes to setting your rates when you're just getting started, take a look at a similar service that's in your marketplace that has similar experience. So if you have one year experience, try to find a business that's about one year old. You find a business with three years experience, try to find a business that has a similar amount of experience. Take a look at their rates and see if you're comfortable with that hourly rate or package or ROI based prices. Find out where you feel comfortable and move from there. But that's a good place to look similar businesses in a similar marketplace with similar experience. Now, it's also very, very important for you to revisit your rates every single year on an annual basis. Take a look at your rates and see if you can increase them. I personally think you should increase them because, hey, if you're at a job and you had an additional year of experience, your value is higher than other people. Most pay scales are based on years of experience along with education. So if you're running a business and you're more experienced now from last year, the product you're going to be delivering is going to be of higher quality and therefore the price should reflect that. Even if you don't raise your prices, you should revisit it, reevaluate it, take a look at it and consider it. All right, that wraps up today's lesson. Today's lesson is over, but today's episode is not. Because it's Free Ride Friday. Let's see who won this week's free ride. We give away a free ride to one of our courses every single Friday to show you love. For showing us love on itunes. Just leave us an iTunes rating and review to enter our weekly random draw. Let's see who's gonna win Easy course. Our $500 course over at EasyCourse co. Let's see who won this week's free ride. And the winner is. K. Ashish. K. Ashish says Most amazing podcast ever. Hands down. I love your podcast, Omar. Thank you so much for bringing it into the world. I wish I discovered it earlier. It's making my life way easier and better and making me smarter with every episode. Keep up the good work. Thank you so much Kasheesh for that great review and thank you for listening. You are a Free eyed Friday winner. Just email me at omar00nba.net so I can hook you up with the free ride. Hey, if you haven't left us a rating and review yet, you cannot win. Leave us a review. So you enter our weekly random draw and you too could win a free ride to one of our courses. Thank you so much for listening to the $100 MBA show. Before I go, I want to leave you with this. Obviously as you grow your service based business, you can start getting other people on your team to to actually roll out the work and do the work on an hourly basis and you can start scaling your service. But you have to have a model for the way you're setting your prices in the first place. And even if you're starting with yourself. This is a good time to set that foundation. That way, when you do bring in other people into your business to deliver the work, you can be able to scale that model as well. Thank you so much for listening. I'll check you in Monday's episode. I'll see you then. Take care.