One of the questions I often get asked is how to price the work we do, especially when it comes to service-based businesses.
And one of the questions I ask in my pre-consultation questionnaire for prospective clients is:
“How much do you expect to charge for your service?”
The answer I get ranges from too low to just above average. I rarely come across anyone who would expect too much. In other words, we often undervalue our work.
When I question and challenge people on their low pricing, I get seemingly valid responses:
- That’s the going rate in my industry 1
- I don’t know if I’m any good (yet) 2
- I don’t know anyone who would pay more 3
Of course, there are many conventional industries where the going rate is pretty much set (e.g. medical appointments). However, we are not talking about those kinds of professions here, and you would know if you belong to that group. A lot of entrepreneurs, probably you included, don’t belong to that group.
So, here’s the rub:
- You’ll always find someone who charges more than you. You look at them and wonder why, because you feel that their work isn’t necessarily better than yours.
- If you’re talking to me (or following me), chances are pretty good that you know your stuff in your own domain of expertise, at least better than the general public. The yardstick of ‘any good’ is nondescript, which means not measurable in any meaningful way.
- You may not know anyone who would pay more yet but that does not mean they do not exist.
Typically, when I think about rates, I would consider the following:
- What kind of people do you want to work with? – the demographic and psychogeographical information of the chosen audience
- Quantifiable value at the end – when someone finishes working with me, what kind of value would the client derive from the work we did together?
- Lasting effect – will the service I provide give a temporary result or a long-lasting one?
- The image I portray – Does my brand remind people of something that is appropriate for the rate I’m charging?
From my experience of mentoring business/professional people in various industries, it is clear to me that people often have low rates when they are afraid. It acts as an emotional cushion for potential rejections: hoping for more yeses than nos.
What I have to often remind them is this:
You’re being selfish by focusing so much on your ‘emotional cushion’. What would your braver self do knowing what you know now (criteria above)?
As for me, after running the business for more than six years my rates regularly go up. The one single yardstick now is this:
- How busy am I? – when my diary is chockers that means the rate for particular work needs to go up as I have different rates for different types of work.
This means I get a lot fewer yeses. And when I do get a yes, I have more than enough emotional and physical energy to deliver what I promise to deliver. I’m not suggesting this is the way for everyone. This could be, and is, a way for some people though.
Knowing what you know now reading this, how do you feel about your rate?