One of the most common pieces of advice I give to the entrepreneurs I mentor, or the readers of my books I end up chatting to, is to charge more money!

It's amazing how common it is for owners of start-up businesses to undervalue the work they do.

In one example a friend of mine started a very specialist consultancy business using his expertise in one vital area of the web. He asked me if £25 an hour sounded too much! I told him that clients would expect at least £100 an hour, and probably more like £150. He thought I was being ridiculous, but eventually agreed to increase his rates to £50.

Eventually he put his rates up again to £100 an hour, and is now winning bigger clients that ever before, including a national newspaper and government departments. These people now see him as a serious expert, because he charges serious expert prices.

Of course you have to deliver the quality of work that the customer expects for that price tag, which he was able to do. Previously however, even though he gave the same level of work, many clients didn't believe he really was at the top of his field because he was so cheap. If a shop is offering a Rolex watch for a tenner you instantly doubt that it's genuine, or that it works. if it's on sale for £500 you don't doubt it's quality for a minute. But of course you'll only buy it if you do want a Rolex watch, rather than simply because it was a bargain - but customers who really want what you offer for the right reasons are the best sort to have - and the easiest to sell to. You just have to find them!

Behind this story is also the fact that he didn't really understand what the costs of his business were either, or the fact that he wouldn't be able to bill for every hour of the week - and that therefore £25 an hour wouldn't get him very far!

Today I found an excellent blog entry about how small business owners and freelancers who charge by the hour can calculate the right rate to charge. If you run a consultancy or service business that charges for time worked, then you should follow the link and read it too. Do the calculation, and I bet you find you should be charging more for your work!

http://www.firewheeldesign.com/sparkplug/2006/March/the_secret_to_small_...