How to set a price, without checking what others charge

01·Where you are now

How did you set your price? You checked what everyone else charges, you asked for what felt possible, or you kept what your first customer agreed to pay.

Could it be that your price doesn't cover what it has to cover? Most self-employed people know what the materials cost and don't know what the labor cost. So they feel like they're making money, and at year's end they find out they weren't.

And it costs you. What you gave away for free was not free: it went into the price of something else, or it came out of your profit.

And waiving it disguises itself as generosity. But waiving isn't generosity when it's automatic. Generosity is a decision, and automatic waiving is a habit.

02·Who's talking to you: Axel Jedlitschka

I decided to take myself in hand

I was told “work hard and it will be fine” and “everything will be okay.” I found out that none of it is accurate. My correction: work hard on yourself and it will be fine, and if you do something about it, everything will be okay.

I'm proud of my decision to take myself in hand, and to be the cause of my own future. So I'm against “I work so much and there's nothing left” as fate. A price is not something that happens to you. It is a decision.

Axel Jedlitschka

04·There is a way

Between the floor and the ceiling

“Anything must be sold for a price comparable to its value in the eyes of the purchaser.” Not against the market, and not against the cost. Cost sets the floor only: below it you work and get ground down. Above the ceiling people stop buying, and it is set in the eyes of whoever pays. Your price sits between the two.

1. 01The cost of delivery.For every kind of job, you work out what it actually costs to deliver it, including the hours that never get sold: the quote, the travel, the phone calls, the fixes.
2. 02Three components.You break apart your current price: total expenses, room for losses and errors in delivery, and a reserve. And you mark which one is missing.
3. 03The leaks.You list everything you deliver without charge, and mark each one: planned sample, or leak.
4. 04Five calls.You call five customers and ask one question: “What were you looking for when you came to me?” And you write down what they said, in their own words.

A shoe store sells shoes at no profit to push the number up, and makes no money. And from the other direction: “We try only to make money, we sell cheap shoes at high cost and our customers don't come back and we don't make money.”

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