What's A Service Worth? Pricing Yourself.

"Believe it or not, I can actually draw." Jean Michel Basquiat

A lot of people have been sending me e-mails lately about getting started with consulting / their own business so I've decided to start a series about how to get yourself going. I have had a few businesses, done some things right and a lot of things wrong so at the very least you could probably avoid some rookie mistakes and I can tell you some things that people just don't bring up when you're starting out.
Here's the first thing you need to know if you're going to be consulting starting a business, or freelancing:
Set Your Prices Where They Need To Be.

This is the single most important thing to do and the one thing that I see really talented people doing wrong all the time.
It doesn't matter if you are planning to get started as a fashion stylist, a graphic designer, marketer, or contract builder it will kill your business if you don't price correctly. I know this because I sunk my first business when I underpriced my services.
Pricing is directly related to your confidence level in your product or service. Some people might disagree with me but at baseline I think this is absolutely true particularly with services. I remember pricing out my first project with my first business and coming up with what I would need to charge and thinking "God, no one is going to pay me this. I'm only one person." I then cut that number in half and charged that. Looking back, that was the moment that business was doomed. I didn't believe people would pay for my work because it was a service and not a product.
Know Your Value. Know that your time is valuable and you are doing something that other people can't. I've chosen the Basquiat quote above because essentially you have to believe that you are capable and have something people need. This is incredibly difficult because starting a business can take your ego down a notch or two to begin with but being confident in your service is the first step towards being paid for it. Rachel Zoe is a stylist in LA and is in high demand for celebrity events. If you read her book you'll see that she loved clothes as a child and spent a lot of time buying them, creating them, trying different looks. She could easily have said "Demi Moore isn't going to pay me very much to dress her for a cocktail party" and stuck to C-level stars but she didn't. She knew that she could come up with a dress for the Oscars better than anyone else and charged accordingly. This is for picking out an outfit!
Know Your Bottom Line. This is another thing that I see freelancers and small businesses not doing frequently enough. Deciding how much money you need to make to sustain the business and also support your lifestyle will help you price your work. It's why paintings cost so much. Artists spend a lot of hours, supplies, etc. on those paintings, they know how much they need to give the gallery for showing them, and how many they'll need to sell to live on it. You will have to do the same. I have lots of friends that "just came up with a price" for their work. For example, a graphic designer friend tells me that he's charging $2,000 for a 2 month project. I ask him if he is too busy with this project to take on another of equal size.
"kind of."
"So can you live off of $2,000 for 2 months?"
"not really."
"Could you have gotten $3,000 for this project? Or $4,000?"
"I don't know, I didn't ask."
Knowing how many projects you can take on at one time is also very helpful. If you can do 3 big projects, those will need to cover your costs.
To my shock, when I doubled my prices not one of my clients blinked, balked, whined, or left.

Pricing also should be in line with the market value. Take note of the marketplace value of your service or product but don't let that be the only factor. Your experience, network, specialty, and bottom line should be equal factors.