Failure to Charge Costs More than Dollars

Over the past few years, I’ve done a variety of small jobs for a variety of clients, with the size of the projects varying in size. A friend of mine with a similar, though significantly larger, business, is in the same situation. A recent conversation regarding pricing of our services made us realize something, when I got a bill from my graphic designer for my new business cards and was well aware I had been given a fantastic deal.

Jeremy and I have been forwarding business to one another for the last few years, and so when it comes to doing work directly for each other, we consider it part of a trade. Since the work we do directly for one another is generally a matter of minutes at a time, it’s rarely worth our while to actually bill one another. Instead, we stack it up to maintaining our reciprocal relationship.

This trading of services is useful for both of us, as it allows us to share skills where it would otherwise be extremely costly to get specific bits of work done. When it comes to charging for that work, though, we both take a different attitude, as it has the potential to seriously affect our individual businesses.

Quite simply, we have to charge a minimum amount to make it worth billing. That is, a $100 or even $500 bill is not likely to motivate either of us to perform at our best. With tiny projects, the margins are generally small to begin with, and if we have not estimated the size of the project accurately, can actually end up losing us money. As such, the motivation to work on the projects, and to complete them, are reduced significantly.

Once we get to the larger projects, this becomes a smaller issue. With larger buffers in place to allow for changes in our understanding of the scope of the project, we less likely to lose money by completing the project. With a larger payout at the end of the work, we’re more motivated to complete the work.

Realizing this made both of us come to an understanding about what we need to do – we need to charge more for the smaller projects, even if we leave the price for larger projects the same. That is, it is no longer effective to take on tiny projects under a certain minimum, because we’re not likely to shine there due to a lack of motivation.

When you’re starting out, the small projects can be really useful by getting your name circulated and build out your portfolio. But as your reputation grows, you need to start cutting the small projects with the non-existent margins, and start focusing on the bigger things.