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Tip for Setting Prices – How Much Do you Need to Earn to Survive?
Many young technicians tend to under price themselves and some even feel guilty for charging so much for something that they enjoy and would probably do for free. The leading cause of undercharging is not knowing “the cost of doing business”. Here is a method of determining what your “cost of doing business” is which will help you set your prices and not feel guilty for it.
To find out you cost of doing business, you first need to determine how much you need to make per week to survive and remain in business. Here are some sample figures for a middle of the range, mid 20’s technician. Adjust accordingly for your own situation:
Necessities to live (per week):
Rent: $170
Food: $50
Utilities: $50
Petrol: $60
Business:
Internet: $21
Advertising: $90
Business Insurance: $8
With these stats, we would need to earn $449 per week, or $64 per day to cover these costs. If I was only to count weekdays (since many of us don’t work weekends) we would need to earn $89.80 per day to survive.
These are just basic figures and everyone’s situation is different. If you are young and still living at home, you may not have any rent so you can survive and increase your client base with lower prices. Here are some other expenses you might want to include in your list if you have them:
- Mobile Phones and Telecom services such as call waiting, voicemail etc..
- Interest/Debt on credit cards
- Industry magazines/subscriptions
- Memberships (local commerce cambers, BNI, Yellow Tie etc..)
So now that you know how much you need to break even, you need to charge a little more so you can grow your business. To do this, work out how many repair jobs you currently get per week (or expect to have if you are just starting out).
For examples sake, lets say we get an average of 2 inhouse format jobs, 5 onsite jobs and a hardware sale per week. Assuming we are going to charge $60 per hour we would have these figures:
$120 per format x 2 = $240
$60 per hour for the onsites with an average of 1.5 hours each = $450
Wireless router/usb dongle = $120
If we charged $60 per hour, we would make $810 per week with this amount of work. We now need to subtract our expenses of $449 per week leaving us with a total of $361 profit per week.
$361 per week is ok for someone just starting out, but to live comfortably (depending where you live of course) you would want to make at least $700 per week profit.
If you are a beginner, break out your own calculator and find out how much you need to charge to break even. If you are an advanced technician, you can use these tips to find out if what you are currently charging is enough.
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Good article Bryce – I’ve noticed the people just starting out are under pricing themselves. I even did it myself, but I found that people were prepared to pay alot more than I was charging. I would try adding £5 to my hourly rate for one customer and see if they accepted it. I would then add another £5 for another customer and so on. I added £15 to my hourly rate and everyone was still prepared to pay that!
Don’t forget you will need to pay tax on anything you earn. So to make a living using the example above, you will need to earn your basic living costs + whatever your tax /national insurance rates are for your country.
I have also been guilty of underpricing. I still do by some standards. Although my rates are about twice what they were when I started full time about 7 years ago they are still somewhat low by most techies. I think a lot of it has to do with location. If you live in a more wealthy location you can get away with charging more. I live In a rather poor rural location and people simply will not pay more than a certain amount. I have actually seen people here through away a virus infected system here because a shop quoted a price of $250 for a reformat. It was a 3 yesr old Dell and they just tossed it and bought a new one. I have also been guilty of telling the customer when its time to stop putting money into an older system. Its just stupid to drop $200-$300 into a system worth maybe that much. This may cost me a little money up front but I make up for it by setting up their new system and gaining their trust. So I think techies need to also be sure not to over price themselves.
I have no qualms at all about telling people to stop putting money into a system. There’s no good reason to spend $150 to get a replacement part for an 8-year-old WinME system when for $300 you can get a whole new box at state-of-the-art-in-2006 levels.
There’s also no reason to pay that $300 if the 8-year-old WinME system is still working.
I am also guilty of underpricing my computer repair and restoration services. Sometimes it is hard to convince a customer that it would be best to invest in a new machine, especially when they spent $2200 for the system. I am working on one now for a rather wealthy business person that just does NOT want to get another machine, even though his machine is 7 years old and 1 gig of RAM for it costs about as much as a cheap Wal-Mart box system lol.
There
Amazing how the universe works.. I could swear it’s “The Secret” in action right in front of my eyes. I’ve had this EXACT dilemma in the past few weeks.
I’ve been charging $45 to some clients, $50 to others.. $45 to all residental clients and $50 to all businesses. The market rate here is $75 / hr for desktop support (remote and on site during normal business hours). In any case, after speaking to my good friend whom also happens to be a financial advisor he gave me this tidbit of wisdom (maybe it’s not wisdom to you guys but it was to me) I thought I’d share..
If you’re under-charging what you do is make a RATE Sheet and send an email announcement that on X date(in my case I’m doing it in 3 months, in May) your rates will Officially be THIS Rate. I have clients whom I currently charge $50/hr and I’m moving my rate up to $65/hr for businesses and $50/hr for Residences as of May 1st. After one more year I will go up to $75/hr which is what I should be in the first place.
Up till recently I had been charging some clients one rate and another another.. Now they will all be the same across the board so there will be no bad faith conversations about my business.
Anyway, thought I’d share that thought process. Hope it helps anybody who has been wondering wtf to do if they were in my situation..
Allan
Just imagine how much you pay for an electrician or a plumber and you can soon imagine how someone who isn’t an IT expert appreciates someone who can come in and sort the problem. Can you really imagine paying a plumber $150 for less than an hour of work?
I need to move, I wish all my expenses added up to $1700 a month.
You need to research your area and find the sweet spot. I am able to charge $75 here. If I go 30 minutes East I am able to charge $110 and 30 minutes west I am at $50.
If you charge too little you sacrifice respect as a professional, charge too much you will be under a microscope. Most of your new business is based on price. Consumers no longer value great service, timely response, they expect it.
You cannot base your prices on what you need; you need to price your services on what you can get. This is a basic guideline for doing business. Stats breakdowns need to be done weekly. I do stats on everything. Return on advertising investments, time it takes to do a reload, cost of travel, downtime spent by employees. It can make you go mad. This is a long term goal. You cannot do this for a few weeks and start tweaking. Let it go 6 months, 1 year. Patterns will start to form and then you can adjust.
@ Phil Benwell
But then again the electrician or a plumber is working on my house, about an $80,000 thing, vs. a $400 computer. If they mess up my house could flood or burn to the ground, if the IT guy screws up on a home computer you might be looking at some data loss. I know,I know….the data on the system could be worth millions. If it is I’m certain they most likely have double backups, or they should.
Good article and yes most new techies charge so little that they can barely cover their operation expenses, but what about if the technician charges lower than most computer shops and still received crying people about the cost of the labor.
These days getting the correct price for a computer job is very hard, and in my case I end up charging lower than usual to keep my client a little happier.
In my opinion if these people don’t want to pay to much why they don’t take a pc repair course so they can fix it by themselfs.
Thanks
Joel
It is a difficult question tp price correctly the services you offer. Many under price when new to get business then increase when they become established. Depends where you live also.
Thanks you for good advices on the pricing, makes sense and since i’m starting up a business of SEO services it can be a great guideline. a good service i believe is worth a decent payment and as well it’s a nice gift to ourselves to put a value to the energy we put into the service we provide. even so, it feels like it can be a good idea to stay low until you reached a broad group of clients. a balance act.
I once went to a headhunter who asked me what I would charge for contract work. I told him I have no idea. He suggested that I should come up with an “annual salary” that I would like to make. Lets say (keeping the numbers easy) 52,000 per year. He then said that you will probably spend 1/2 you time working and 1/2 your time looking for new work. So I need to make 52k in 26 weeks. Or 2,000/week which in a standard 40hr work week works out to 50/hour. This has been a good starting formula for me, but I have also taken into account what the competition charges as well as what my years of experience are worth. Currently I’m charging 75/hr and few have balked at my price. I also offer reduced rates for seniors and people on fixed income. The “grey market” has been very good to me.
“Under price themselves and some even feel guilty for charging so much for something that they enjoy and would probably do for free.”
That’s exactly me, I never know what to charge.
I’m looking at starting a small in home computer service and will also do on site services as well. I’ve recently completed a 9 month Professional IT program and have my MCTS: Server 2008/Active Directory; MCTIP: Enterprise Support Technician: Vista Cinfiguring; MCP; and my A+ certifications. However the job market is slow right now and I really could use some income besides unemployment.
What would be considered a good well rounded Computer repair kit that would include sofware and hardware? Any suggestions would be helpful.
My husband is the tech; I do the webdesign and advertising. He is in competition with about 15 other folks in our valley of about 90,000 people. He is A+ certified by CompTIA, and has over 10 years in the field experience. Our prices are the same as our competition, which is FIERCE. We are only less expensive than the big box stores… Hard to raise your prices when you’ve got that kind of competition… We offer “Value Added Services” and he does phone support for up to a half hour for free for all his clients… this helps to keep the loyalty, plus we offer 10% discount programs for seniors, hometown folks, and to existing clients that refer a new paying client. This also helps to retain customer loyalty as there’s many others they “could” switch to… Tough biz to charge a fair price and keep up with the competition!