I’ve started to see business blog articles like pop songs. There are endless numbers of both but we only listen to the ones that effect us emotionally. Now, I’ve read hundreds of people’s takes on project pricing and they’re all much of a muchness. It’s pretty clear why – pricing isn’t difficult, it’s a very simple calculation. What’s difficult is the emotional decisions you have to make when setting your prices or in a client negotiation.
For some of you reading this, the decision is how to increase your prices and take the next step in your career without losing existing clients and inadvertently shooting yourself in the foot. For others, a client negotiation is a battle to stick to your principles and charge “what you’re worth” or whether to pay rent and eat next month.
Either way it’s an emotional decision. No amount of calculation can force you to make the change you know you need to make. We gotta deal with those pesky emotions first.
Understanding your problem with pricing
The crucial part in these situations is that feeling of what you’re worth. Believers in “the market” will tell you that something is worth whatever someone is willing to pay for it. That’s why some idiot paid 44bn for a website he didn’t understand and has now turned it over to the incels and fascists. Or why folk pay over the odds for shiny shiny Apple laptops that have the same specs as less shiny laptops that cost less.
The butthole billionaire wasn’t buying a website, in his mind (I’d guess..) he was paying to save free speech from the woke agenda. And boy, doing that costs a lot of money!
In the mind of you dear reader reading this on your Apple product (again, I’m guessing..), you bought it because you like how the product feels, or how it “just works” how you want it to or you like the cool by association of having a Mac.
In both examples the seller relies on an idea of perceived value and the buyer thought the price was worth it. And by spending that money they made the product worth it, they gave it that value.
The buyer, based on their wants, needs and desires decides if the price set by the seller is worth the money. They perceive the value (what they’re getting from the sale) is worth the price (the money they spend to buy it).
Value is often an emotional decision. Based purely on specs, your Mac is likely not as good as the Dell I’m typing this on. But you won’t have wanted to spend the two weeks I spent researching laptops in order to buy my machine and, let’s be honest, few people think mines is cool until they see how fast it loads Civ V 😉
So as a freelancer setting your prices, your audience and their perceived value of your service is important. If you change the audience you’re aiming at the value they attribute to your service also changes along with the potential price of a sale.
So what are your skills actually worth?
Your skills are worthless
We’re visual creatives. When the apocalypse comes, no one needs a logo or an artistically shot photoshoot or a beautifully constructed website. Our skills, as far as human survival goes are pretty useless. This creates a rotten conundrum. Our work is at the top of Maslow’s hierarchy but that work needs to provide for our needs at the very bottom.
I want to self actualise through creative work but I gotta pay rent.
As creative folks we know the value of what we do. We know the torment, sweat and tears that go into making creative work. But we’re selling to the rest of the world. To people who don’t think how we think and don’t value the work in the same way. So we have to empathise and understand how to talk to them to make them understand that our skills have value in their terms.
You can’t rely on most clients just knowing how you’re better for them than someone else who does what you do. You have to explain it to them, or better yet show them the value in ways they understand. That comes by understanding them and what drives them.
Something it took me far too long to understand is that people who work in a business are not a homogenous blob. Whoever your contact is at an organisation, they are a human being with wants and a needs. They want to do well at their job. They want to look good to their colleagues. They want less stress and someone to make their life easy. Serve those needs and they’ll pay you handsomely.
The interesting thing is, no matter how large the organisation, the humans in it have the same challenges and the same needs.
The interesting thing is, no matter how large the organisation, the humans in it have the same challenges and the same needs. So selling at a higher price is much the same as selling at a lower price. Building trust may take longer but once the trust is there you’re often given a lot of free reign to deliver how you want to. People in larger companies know, if you hire someone good and let them do the job they’ll often excel.
So charging more isn’t as tough as you might think. The process to there from where you are now might take time, but life is long and you’re gonna get older whether you up your prices or not. So might as well eh?
How to make your skills have value
Enough blabber, let’s get practical.
What does a 1000€ project look like in your field?
What would a client get for that money? If you were to sell a package at 1000€, how would you talk about it? How would you sell it to a client? What would you show them to indicate it’s value?
Now take that same package and say you were selling it for 30,000€.
Nothing extra added. The exact same thing but thirty times the price. What would change about how you sell it? Would you sell it in the same places or to the same people?
It takes the same amount of effort to sign a 1000€ clients as it does a 30,000€ client. I’ve done both and in each situation I’ve talked about the work in different ways. I’ve had to understand what the client is trying to accomplish and show them a path to achieve it.
There are folk in this world doing the exact same work as you for ten times what you sell it for. Hell, there are folk doing worse work than you for 100 times what you sell it for. They aren’t scamming people (most of the time). The difference is they know how to sell their work to their chosen audience and they don’t let their emotions do the decision making.
An example from the real world
I know a design agency that produces downright awful work. Like basic, boring, straight out of the 90s work. Poorly kerned text, clip art logos, ugly colour combinations, set it on fire and start again type work. Yet the agency hires a decent size team, has an office in the city centre and for over a decade has had a regular stream of clients.
Because they’re their clients’ idea of a design agency.
Carpet tiled office, strip lighting, shirt and tie combo with a few creative types in front of expensive computers. So when the client walks in, they’re primed for the sale because their expectations are being met.
The agency isn’t focused on your or my idea of quality because their client isn’t either. They want job done at an agreeable price. And, as the agency works with similar clients, they come well recommended by folk their clients know or have heard of.
They meet the client’s preexisting expectations. They’re focused on the client’s idea of a good outcome. They’re well recommended by similar businesses.
To you or me the agency cuts creative corners but the client isn’t focused on that at all. To them the value is focused on the bottom line. This business, for all their failings, understands their client in a way so many creative freelancers don’t.
But learning from their approach, actually understanding how our clients make a value judgement about our work, we can change how we present our service and begin to raise our prices.
What does your client truly value about your work?
So we know people aren’t just buying what you do, they’re buying an idea of value. So what do your clients value?
If you don’t know, ask them.
Why do you work with me? How do I help your company? How do I help you personally? What do I do that other people you’ve tried haven’t done? If you could improve one thing about my service, what would it be?
This will not only give you a wee confidence boost, but also an idea of what they value about you and your service.
In my experience, leading with the value of your service automatically makes your service sound more valuable leading to an expectation of higher prices.
A wonderful thing is, these things will be true no matter what you charge. So when you’re increasing your prices you don’t have to change your approach. In my experience, leading with the value of your service automatically makes your service sound more valuable leading to an expectation of higher prices.
As I noted earlier, if your price point changes, so will your audience. You can’t have a perceived higher value and still keep all of the same clients. So as your value changes, where and how you market yourself has to change with it. You can’t have a luxury brand selling 1€ microwave ready meals but you can have a high-end supermarket selling 10€ oven ready meal deals for a romantic night in.
Finally, the calculations you need
I have two calculations to help with your pricing:
Basic daily rate
This is the amount you should never go under for a days work.
That’s an easy calculation based on your needs. You don’t have to tell your client you have a daily rate but you can use this number as a guide for the minimum you should charge for a project.
If you charge less than your basic daily rate (or hourly rate if you work that way) you won’t earn the amount you want to earn, it’s that simple.
You need to know:
- How much you want to earn per year
- Number of weeks you want to work per year
- Number of days you want to work per week
1 ÷ 2 ÷ 3 = Basic daily rate
- 40 weeks
- 4 days per week
50,000 ÷ 40 ÷ 4 = 260.42 per day
I encourage you to charge more than your basic rate if your client has budget for it, but never below.
Client transition risk
When you up your prices not every client will come with you. This is the risk you’re taking. Knowing the number of projects you can lose without losing money will help you manage the risk with confidence.
You need to know:
- Current average daily rate
- New basic daily rate
- Average number of projects at any time
- Average length of a project in days
1 x 3 x 4 = Existing average income (5)
2 x 3 x 4 = New average income (6)
6 – 5 = The difference in income (7)
7 ÷ 4 ÷ 3 = The average number of projects you can lose without losing money
- 15 (90 hours at 6 hours per day)
100 x 5 x 15 = 7500
150 x 5 x 15 = 11250
11250 – 7500 = 3750
3750 ÷ 15 ÷ 5 = 1.6 projects
Pricing is emotion, understanding and logic
If you’ve ever struggled with increasing your pricing but haven’t known why, this is likely the answer. You were trying to overwhelm your emotions with logic.
No matter how hard you try, that ain’t gonna work. But by understanding the root of the problem and by applying some simple methodology, you can:
- Understand your obstruction to raising your prices
- Understand how your client perceives the value of what you do
- Improve your sales pitch based on their perception
- And actively manage the risk before you even raise your prices a cent
It ain’t easy but it is straightforward.
Have you struggled to up your prices? Message me and let me help you overcome your struggle.