©Ronald Hudson | Dreamstime.com"

"I'm not sure what to charge my clients" is one of the most common refrains I hear from new online service business owners.. It's a problem that plagues even the veteran business owner as she becomes more aware of her competition and what monetary value her skills hold in the marketplace.

How do you decide how much you're going to charge? Here's the bottom line --

you have to charge enough to be able to sustain yourself in business. Make sure

that you're a "true" business owner netting a decent take-home pay each month

without depending on savings, another job, or a spouse's income to make ends

meet. This rate easily enables you to pay for your overhead and business

expenses, ongoing professional training and development, and benefits you had

while working for someone else -- things like vacation time, health insurance,

life and disability insurance, for starters. And remember, you'll need to factor

in what you'll pay in self-employment taxes and state income tax (as applicable)

and pay those as scheduled to prevent the tax man from knocking at your door.

When you determine your rate, realize that if you're billing hourly, you'll

probably only bill 20-30 hours per week, rather than 40. Why? Because you're

running a business, which means that you'll spend part of a day engaged in

non-billable tasks, like marketing activities, meetings, consults with

prospective clients, lunches with friends, etc.

If you decide to use pricing as a strategy to undercut your competition by

charging less than everyone else, in the long run you're not doing yourself or

your clients any favors. You'll soon discover that your low prices make it

impossible for you to afford to stay in business after the first year. This

means that you've put your clients in a bind, as they have to go now and find

someone else to provide the service for which they hired you. Ultimately, this

low pricing decision will probably result in you closing the business and

returning to work for someone else, as you need some income to pay the bills as

they arrive. So, who's won in this scenario? I frankly don't see any winners

here. In the long run, low pricing strategies only work for high volume

businesses and make service business owners go out of business quickly.

"Emotional price points" are another key issue that will frequently hold an

online business owner hostage. A service business owner will set a price that

she'd like to charge, but in her heart of hearts, she truly doesn't feel she's

worth that rate. How can you "convince" your inner critic that you're worth what

you need to charge to make a decent living? Play around with your pricing

structure until you've found a rate that you can comfortably discuss with

potential clients without stammering or stuttering. Trust me, if you don't

believe you should be charging what you say you charge, potential clients won't

believe it either. And, if that price point falls below that minimum standard

that you need to be successful, seek the counsel of a business coach, friend, or

colleague for support. You deserve to make a decent living and be successful in

your business, but you have to be willing to set yourself up for success to make

that happen.

If you still have difficulty with this concept, here's what John Ruskin, a very

successful Victorian-age entrepreneur said in 1890 about this subject: "It's

unwise to pay too much, but worse to pay too little. When you pay too much, you

lose a little money -- that's all. When you pay too little, you sometimes lose

everything, because the thing you bought is incapable of doing the thing is was

bought to do. The common law of business balance prohibits paying a little and

getting a lot -- it cannot be done. If you deal with the lowest bidder, it is

well to add something for the risk you run. And if you do that, you will have

enough to pay for something better."

Comments or questions? If so, please post them to the discussion forum.