08-Oct-2013 14:23

Are you pricing correctly?

As business people you all understand that working out how & what to charge for products, goods and services remains a perpetual challenge.

Too high a price and you may alienate clients; too low a price may put at risk your profitability.

A continual conundrum and one exacerbated perhaps by the difficult economic conditions we are experiencing…

For businesses selling goods or providing a product it may be fairly simple to calculate the sales cost; using purchase price + overheads + profit to arrive at a final sales figure. And for most professionals the tried & tested model is to charge a client for time/per hour.

The disadvantage to this last system is that from a client’s view, charging per hour may not appear terribly transparent. After all, the client will not be sitting in your office, watching staff, so they will have very little idea how efficient your practice may or may not be…

So are there alternatives to a ‘pay per hour’ system of charging?

May I suggest a few other billing options?

1. Contingent Fees – typically to be used when a transaction will take place. The professional will only get paid if and when the deal happens.

2. Define Outcome – Get paid upon results. For example, winning a vat refund for a client or achieving specific & agreed sales figures means you will receive a percentage of that amount.

3. Fixed Quotes – Calculate time, overheads, wages and tender for work or job.

4. Mixed Charges – pay per hour &/or pricing per job

5. Ongoing Charge – for longer contracts or protracted works, weekly or monthly billing may be a fine way to show transparency & help your (and clients) cash flow.

In any event, remember that although some lateral thinking may be needed, options are available to help you and your business expand and succeed.