How do you price your work? This is one of the great questions of life. Surprisingly enough, even the all-mighty Internet cannot provide you with an answer in concrete numbers, because in Finland, the Competition Act efficiently prevents entities in different industries from giving specific instructions on pricing. Of course, the law means well.
The Competition Act came into effect in 1992, after which it has been further specified multiple times. Before that, many entities published specific price recommendation tables. These days, you have to find out the price level in any given industry by asking around.
Pricing your work involves two risk factors: underpricing and overpricing. Either mistake can have severe consequences. If you underprice your work, your income will not cover your living expenses, but if you overprice, you will not be able to sell your products or services.
The basis of your pricing can be time (e.g. an hourly rate) or contract, in which case you estimate how much the customer will pay for the whole job. You can sell products or services as packages or by the piece. Owners of copyrights can also sell compensation for use, the broadness and period of validity of which affect the price. In all the options, you should consider, on the one hand, how much money you will eventually make – remembering that you need to live off of your work – and, on the other hand, how much the customer would be ready to pay for your work, feeling that the quality-price ratio is appropriate and willing to buy your service in the future as well.
New entrepreneurs or light entrepreneurs may be surprised to see what a low proportion of the total sum on an invoice they actually get after withholding all the mandatory expenses from the selling price. You can also turn the logic around: how great will the total of an invoice be when you add all the necessary payments to the target net sum? Do you even dare to ask for such a sum from a customer?!
If you do not know how much you can charge for your work, it may be better to start pricing carefully (even borderline underpricing) and gradually raise your prices when you gain experience and professional competence. Once you have agreed on prices with a customer, it may not be easy to raise prices for the same customer later on. There is no law against charging different customers different prices (this is a question of personal morale, though). However, it may lead you down into a morass of explanations, which is not good for marketing. The prices of products or services are an important marketing factor.
In some industries, it is conventional for students to charge about a half of the professional price level. It is due to the principals taking a conscious risk in terms of the quality and delivery time of the products or services. No industry takes kindly to aggressive price competition (price undercutting), and you should not consciously engage in such a practice. Nor should you do it unconsciously; you have to educate yourself.
An important concept related to pricing is price anchoring. Usually, buyers compare the offered price to another price known to them. When there is no mutual understanding of the price of a product or a service, the first price to come up creates an “anchor”, and the price negotiations revolve around this image of the price level, regardless of how “realistic” the discussed price is. Vendors should have clear justifications for their pricing.
Below, you can find links to different kinds of calculators which you can use to try and understand the problematic of pricing.
https://www.ukko.fi/wp-content/uploads/2017/05/Freelancer_Guide_for_Immigrants_UKKOfi.pdf
https://uusyrityskeskus.fi/wp-content/uploads/2021/02/Perustamisopas_2021_EN.pdf
Light entrepreneur’s income calculator
https://extra.ukko.fi/tools/salary-calculator
https://kevytyrittajat.eezy.fi/en/price-list/salary-calculator/
The Competition Act (especially note Chapter 2 Prohibited Restraints on Competition, Section 5)
https://www.finlex.fi/fi/laki/kaannokset/2011/en20110948.pdf
Price-fixing and price recommendations
https://www.kkv.fi/en/facts-and-advice/competition-affairs/cartels-and-other-horizontal-agreements/price-fixing-and-price-recommendations/