When you think about making more money out of your freelance business, getting new clients probably springs to mind, but another often overlooked strategy is to increase your rates.
I say overlooked because underpricing is a common trap for freelancers and consultants. Setting fees is a tricky business and we’re often our own worst enemy when it comes to understanding the value we bring to our clients and setting our pricing accordingly.
The majority of freelancers are paid by the hour and it’s a methodology you need to try and put behind you. Why? It’s not sustainable – there are only so many hours in the day, how can you ever grow your bottom line if your price is fixed and dictated by time constraints?
But why is pricing your services as a freelance or consultant so tricky? Here are a few reasons:
- No one else does exactly what you do for whom you do it. You’re not selling a loaf of bread or a gallon of gas; there’s no benchmark metric that dictates what your price should be (based on your niche, skill, experience, and value).
- You’re not trained to sell yourself or price your services. Perhaps you’ve come from an employed role and are now out on your own – all of a sudden you need to master new business skills, including pricing.
- Fear of famine – Last, but by no means least, you’re terrified of losing existing or new work, so you underprice yourself.
Now, let’s take a look at four things you can do to become more pricing proficient and stop underpricing your services:
1. Understand Your Value to Your Clients
Do you ever get the sense that your clients have locked you in as being worth a certain amount? If you price by the hour, then there’s a good chance that they do.
A better approach is to think about what you do in terms of the value delivered. Your value is the “so what” of what you do. It could be solution that has a direct impact on your client’s bottom line or a task-based service that frees them up to focus on their priorities.
The best cure for underpricing is not an indiscriminate rate hike; instead think about the problems you solve and the impact you bring.
For example, if you provide accounting services, you probably do a lot more than just keeping your client’s books in order. Perhaps you help them avoid cash flow issues, steer clear of tax audits, understand when the right time to make big purchases is, and so on. As such, you’re far more than a task-based CPA, you’re a trusted advisor who saves them time and money. That’s it right there; that’s your value. That’s what they pay for and may be willing to pay a little more for.
Here’s another example. A writer is commissioned to write a data sheet, but the writer isn’t just producing a piece of collateral, they are creating something that the client didn’t have time to do. They’re equipping their client’s sales force with tools that will help them sell more. And, if they know the industry well, the writer is probably going to turn that work around with a high degree of accuracy and speed.
The point is, what you do is far more valuable to your clients than the time you spend doing it.
2. Be Flexible in Your Value Pricing
As you think about what your value-based price will be, don’t just come up with a “one rate fits all” pricing policy. One client may happily pay $500 for what only takes you three hours while another client may only be willing to pay $250 for the same project. It all depends on the value you’re bringing to them at that point in time. For example, if a new client comes to you asking for help with their tax return two days before the filing deadline, you can bet your bottom dollar they’ll be willing to pay more for your service!
3. Build Your Brand Perception
A great way to avoid underpricing yourself and introduce value-based pricing into your business is to focus on building your brand around what you do well and how your clients perceive you (note my point above about being perceived as an industry expert). Try to take on clients who recognize your value and grow your network from there. By positioning yourself as something more than just another freelancer for hire, you’ll be able to position yourself much higher on the pricing totem pole.
4. In Most Cases, Clients Will Buy It!
Unless you’re deluding yourself, most clients will be willing to pay more the value you bring – just as you’d happily pay more for a nice meal that no other restaurant in your neighborhood can deliver.
Finding someone else to do what you do is a cost in itself. If they see that value too, then it’s unlikely that they’ll throw in the towel on the relationship now.
The Bottom Line
Freelancing as a career is finally gaining the respect it deserves and the potential for earning is increasing. Keep telling yourself that low prices don’t always hold value in the freelance world – the client gets what they pay for. They know that, make sure you know that too!