A light entrepreneur prices their own work. A beginner should acquaint themselves with pricing so that the remaining portion won’t surprise you or be lower than you expected. Experienced light entrepreneurs should update their prices, too, if the operation is evolving. What to consider when pricing your own work?
The salary of a light entrepreneur?
Firstly, the invoice is not the same as gross salary. In a traditional employment relationship, the tax withholding, employee health insurance premium, health insurance contributions and unemployment insurance contributions are deducted from the salary, after which the employee receives the net salary on their account.
For a light entrepreneur, the service fee and the additional service fee of the invoicing service will be deducted. Additionally, the VAT, tax withholding, acquired materials, equipment, travel expenses and other possible expenses should be taken into account when determining the invoice.
The salary of a light entrepreneur isn’t formed in a similar way as for a traditional employee. Even if lower pricing is tempting, a light entrepreneur must think of the disadvantages for themselves as well as the industry, however.
What kind of pricing is suitable for different light entrepreneurs?
In practice, for light entrepreneurs there are two pricing alternatives: hourly pricing and contract pricing. The invoice varies in each case, however, which is why giving universal advice is difficult. A light entrepreneur might get help for the pricing by examining the general pricing in the industry, for example.
With hourly prices, the light entrepreneur must estimate the time needed for the work and determine an hour price. For the customer, it is important to know how much time is needed for the work. In this case, the light entrepreneur and the client have to agree on the that will be spent on the job, which might change or be difficult to determine.
Contract price is used for project-like assignments. Contract pricing is usually more profitable and easier for the client. With a price per hour, the light entrepreneur determines the price per hour and agrees on the time with the client, but with contract pricing the light entrepreneur can give the client a fixed price. Therefore, the price is clearer for both parties.
How can a light entrepreneur raise the prices?
A starting light entrepreneur determines their prices based on their current experience and training. If the light entrepreneur is starting from scratch, they must take that into account in the pricing. As one gains more experience, the prices should be updated. However, one might be nervous about raising the prices. Will the clients buy the service with a higher price? Will they go for a cheaper option? It is worthwhile to justify raising the prices to the client. They may get better, quicker and more valuable service in which case raising the price is justified. It is useful for the light entrepreneur to keep an eye on the prices of the other operators in the industry to avoid underpricing or overpricing their work.
Tips for the pricing for a light entrepreneur
- Find out the general price level of the industry
- Don’t underprice your work
- Use the FREE.fi calculator to determine the billing amount