Have you ever wondered how to set pricing for charities and non-profits? Maybe you want to give back more but don’t know where to start and how to price accordingly. It can be difficult finding that balance between earning enough to cover your business expenses and own salary, and also helping a wider range of people. But it is possible to give away your time for free, in a more structured way in your business.
It’s a subject I had the recent pleasure of speaking about with Rosie Gilderthorp. Rosie is a clinical psychologist and splits her time between her social enterprise business, a perinatal mental health practice, and her Psychology Business School, where she teaches psychologists and therapists about setting up and ethically and effectively marketing yourself in the business world.
As a business owner, you often find yourself in a situation where you want to give back more. But if your business model isn’t correctly structured, you’ll find yourself giving away loads of free sessions. Setting yourself up as a formal social enterprise is one way to stop that from happening.
A social enterprise is essentially a business where the profit you make gets reinvested into helping people who can't normally access your services. Essentially, you use some, or all of your profit, to help people who can't afford to pay for your services. It doesn’t matter if you’re a sole trader, a Limited Company, or whether you have a formal structure such as a Community Interest Company (CIC).
The difference with the formal social enterprise structure is simply that you’ve told the government that's what you're going to do with your profit. So you’re asset locked. That means you can't pay yourself a dividend, you can't keep the profit for yourself and you don't get anything when you sell the company - you can hand it over to somebody to take over the reins, but you can’t sell it. There are a few other legal things involved in a formal structure, but otherwise, it functions much like a Limited Company.
You can, however, pay yourself a reasonable salary. You decide what that will be and you then have the security of knowing you’re earning the same amount of money each month. Every year, you can then decide whether you’re going to give yourself a pay rise or not. So it’s nice and straightforward.
One of the big challenges you face, when running a non-profit, is deciding how you're going to distribute those profits. How do you decide if people can and can’t afford you?
There are often people who will say they can’t afford you, but the reality is, that's often about priorities. You may also find yourself putting your own money story on other people and making value judgement calls as to who you can and can’t help - often missing the people that desperately need your help.
So many business owners then feel like they’re doing the right thing and offering free or low-cost sessions to everyone. But this often gets messy, as you don’t use the same selection criteria every time and you don’t know if they can afford you or not. Does the person who asked you on Friday get the same response as the person who asked you on Monday? Often no, because you've given away your free spots already! So it all becomes a little bit unethical.
That’s why it’s more ethical, to develop a relationship with a bigger organisation who can do that vetting for you, because it's already part of their process, such as a local charity or local GP. that takes you out of that decision-making position.
Another way of doing it is to just decide how much of your time you’re going to give to charity work. It may be half a day a week or whatever time that charity wants. Because there are a lot of charities out there that are desperate for qualified psychologists, or qualified therapists. They can't afford to pay for them and so half a day of your time, whether that’s offering supervision or therapy sessions for them directly, can be super valuable to them. And it's a way of donating without having to worry about how to make it work within your business.
If you opt for this, ensure you’re being deliberate with your time. Don't then give away other free sessions or increase your free session quota. It can be very tempting to do that, especially if it’s only one or two sessions to someone who’s already had several with you. But this then becomes a boundaries issue. You also have to think about, particularly as a therapist or similar, how stressful it can be dealing with a client. It's really hard work. And, if you're trying to see too many clients in a day, you're not giving the right level of care to those patients than you would if you could see less, or charge more.
If you want to have some pro bono work, or operate as a social enterprise, you need a formal process that you force yourself to follow every time you think about doing something for free. You have to think of it as a project that requires funding. How much money have you got sitting in your business that you can use to fund that project?
And that's where you draw your boundaries. Because your heart and inner critic will always want you to do more, but that doesn't serve anybody very well. Look at your figures and see how much pro bono work you can offer, without it negatively impacting on you and your business. Set those boundaries and stick with them. If you can get grant funding to expand that, brilliant - but never compromise on paying yourself for your time.
It’s so easy to get into the bad habit of thinking the first thing that gets paid last, is you. You need to ensure you’re paying yourself first, or that you've thought about how you're going to pay yourself what you need. Because you want a business, not an expensive hobby. And if you’re not paying yourself, it IS an expensive hobby and it’s also extremely exhausting. And when it gets to that stage, you might as well go and get a job.
Because when you feel stressed about money, or when you feel like you're not well compensated for what you're doing, you become resentful. You feel undervalued and underpaid. And the problem is that then comes out in your work. It comes out in the clients that you get stuck with and you can't quite figure out why you're stuck with them and not progressing. You feel insecure in your business and stressed about your own expenses and bills. When you get your pricing sorted and feel more secure in my business, you’ll feel a lot more confident about your work. You’ll also be more present and more available to your clients.
If you want to get your pricing right, that will often mean increasing them. This often leads to fears around your affordability and whether you’re too expensive compared to others. But you do need to set pricing that is right for your business.
You can do this by initially figuring out what the running costs of your business are. Write all of those costs down and see what you need to charge to pay yourself a decent salary. There are often a lot of small costs that add up, as well as bigger things, such as insurance and Continuous Professional Development that need to be considered, so you need accurate figures. And be sure you're spending on the right things too!
And then permit yourself to charge that much. Think very clearly about what your mission is and who you want to help. You may find there are two distinctly different categories of people - those who can pay your higher fee, and those who can’t. Recognise that and set up a formal process for helping people who are at the bottom end of that.
Recognise that in making more money from those people that can afford it, you can then help more people who can't. Lowering your prices isn’t going to help anyone, because often, the person who can’t afford your £130 fee isn’t going to be able to afford your lower £60 fee either.
Think also about the overall investment too. Quite often, therapy or coaching work isn’t a one-and-done kind of thing. Many clients will need several sessions. If someone can afford one session, there’s a good chance they can afford another. It won’t help if you lower your prices and don’t then have time to have lunch, go to the toilet or are working too many hours. You’ll feel resentful about that and there will still be a massive group of people who will still say you’re too expensive for them to work with! Everybody then loses. Whereas if you can offer some genuinely low-cost work through a charity or your own business, but charge a premium end for people who can afford to pay it, both groups get helped in different ways.
Be clear with your niching. When you set a niche you’re seen as a specialist and that will positively impact your pricing. People want to go to the person who specialises in something, rather than the generalist.
There may be big generic networks or larger companies out there who are charging less than you, but don’t base your prices on them and don’t worry about them either. Because it’s not going to work, you can never charge what they charge. And you want to typically offer a service that is more bespoke and tailored to the needs of your clients. So to do that, you need to pick a specialism and make sure that people know that they should come to you, not one of these generic networks of companies, to get help with their specific problem.
Because a specialist is absorbed and interested in helping people exactly like them. And so pricing very rarely comes up and you’re less likely to be compared to other people too. Occasionally somebody will get in touch and question fees, but you can then signpost them to your other offers. Generally, though, people are very happy with a higher fee, because they know that it's going to be tailored to exactly what they want. And they know that you’re making time to know the latest stuff in your particular field.
Personality is key for any small business. At the end of the day, people buy people, especially in coaching and therapy. It’s all about the goodness of fit.
That’s why it’s so important to show your personality in your marketing. Let people know what it’s like to be in a room with you or to work with you. Because once they get to know you and want to work with you, you become their only choice and pricing becomes almost irrelevant.
If you’d like to work out how much you need to be charging by the hour, check out my pricing calculator. It’s perfect if you’re stuck with your pricing or are not sure where your minimum prices should be.
If you're a psychologist or therapist, getting set up in private practice, or feel like you want to grow and expand and get ready to scale up your practice, head over to psychologybusinessschool.com. Rosie also has a checklist to help get you up and running, which you can find here. If you’re struggling in pregnancy or you've had a difficult birth, then you can find out more about Rosie’s therapy work, at Drrosie.co.uk.