* Originally written on http://lettershoppe.com.
An inside look into what techniques are necessary to establish the confidence to charge clients what you’re worth. Time + Expenses + Value = Value Based Pricing.
People seem to think that they only need to be compensated for their time and expenses, but what about the overall value of what you’re providing for your client? If that new website you're building is going to allow that business to grow and make over 500K over the next 3 years, then you should be charging an appropriate price that reflects that.
1. Establish a baseline price for your expenses and time first.
It’s important to include not only your project-specific expenses, but also the equipment and software you use every month to do business. First and foremost you should be charging enough to keep the lights on.
You will have a different baseline price for each different service you offer. For example, it will take more time to develop a 5-page website than to design a business card, so estimate your hours accordingly and don’t forget to add a buffer of 5% as a safety net.
As a freelancer or business owner, you are in charge of paying yourself, meaning that you need to decide on an hourly rate that reflects your professionalism and experience. Once you have established this baseline estimate then you can increase your pricing according to the realized value of the project to the client.
2. Your client is responsible for estimating your value, not you.
When you’re first approached by a client you need to set yourself apart by focusing the conversation around being a consultant not a technician. Be inquisitive about their business goals by asking questions like, “How much net profit do you anticipate for this upcoming year?” or “How much money are you willing to invest to ensure the success of your business?” These questions help your client realize that what you bring to the table creates additional value long after your services are completed.
Let’s be honest, your services alone can add 25% – 50% of additional value for your client. You are an amazing problem-solver and you need to approach your client with confidence in order to build trust. This confidence will enable you to provide additional value that will make your client invest more. Remember that you’re a professional, so if your client says no to your final estimate then you didn’t really want that client to begin with.
3. There is no such thing as bad clients, only bad freelancers.
This can be hard to hear, and with websites like Clients From Hell it’s a hard thing to argue. The sad truth is, taking on clients that are rude, disrespectful and broke is the freelancer’s fault. We should be experienced enough to be able to recognize a potential painful client and be able to say “NO!” If every creative had a higher sense of worth then it would be the client that needed to raise their investment rather than a freelancer who had to underbid to pay their bills.
No matter what, there will always be someone in your industry who is going to charge less than you but it’s important to remember that your prices are not meant to be competitive. You need to distinguish yourself by conveying the unique value you can bring with a positive track record of successful projects. Use your portfolio and case studies to speak for themselves on the quality of work you can provide.
4. Work smart so you won’t go broke.
In the beginning of your business you will need to have diversified sources of income in order for value pricing to work. Allow your professionalism to grow organically, or else you will compromise and end up creating subpar work. Don’t put a financial strain on yourself. Get a day job that pays the bills so you can build up a portfolio that will gain trust for your audience in order to get the clients that you want.
Yes, this technique is going to make you miss out on clients, but think of the kind of client you’re missing out on. One $40,000 project would easily make up for the ten declined $2,000 projects. Its just the fear that the $40,000 project will never come that prevents us from doing our best work. Grow your business the right way and don’t compromise your projects to pay your bills.
5. Be confident and the high paying clients will follow.
You’re not a production monkey, so don’t act like one. Set yourself apart by being confident in your work and don’t show that you’re desperate. If you follow this pricing structure, rather than getting clients that just shop around you will get clients that only want to hire YOU.
Clients need to be managed and consulted not the professional. I’ll end this with just a simple question. What would happen if you hired a doctor and then told them how to operate on you?
You can use this advice or not use it, but it is going create the best results for you. Don’t look at what your friends and colleagues are charging to base your pricing from. Recognize the true potential you have and realize the value that your are creating every day. I want to enable you to pursue your own passions without hesitation.
This article was written by Dina Rodriguez, and originally published on her blog. Dina is a talented freelance hand-lettering artist and founder of The Lettershoppe here in Portland. Her blog is full of helpful tips for creative entrepreneurs on everything from finding your passion, to interacting with clients, to social media marketing. Check out her Scopic profile!