Many freelancers fantasise about earning a six-figure income. We sense it’s possible, but the financial responsibility that comes with running a business often means we pay ourselves last, once all the expenses have been covered. Usually, the only way to earn significantly more is to charge a lot more.
In my last post, I talked you through how to decide what you want to earn from your business. Hopefully, you now have your Happy Rate. How did that feel? Is the Happy Rate a long way from what you’re currently charging clients? Do you need to increase your fees? If so, you should start communicating your value. Here’s how.
What will you pay for?
First, I’d like you to think about the last expensive professional you paid. Make sure it’s a situation in which you were obliged to part with an uncomfortably large sum of money, more than you would normally spend. What made you decide to spend this sum? What convinced you this was a worthwhile expenditure?
When I facilitated this exercise at a workshop recently, some of the examples cited included a hairdresser, a structural engineer, and a physical therapist. In the case of the hairdresser, the attendee had very precise requirements and she wanted to feel sure they would be carried out. Her hair was very important to her, so it was worth paying someone who would do it properly. The structural engineer was by far the most expensive professional. He convinced this attendee to pay a lot of money because his website clearly showed he had extensive experience. This reassured her that the house wouldn’t collapse. Indeed, this was a situation where low prices would have created distrust. The physical therapist was chosen because his personal warmth and genuine caring nature convinced the attendee to entrust him with her ailments.
Although these example businesses might be very different from your own, hopefully it gives you an idea of how we make these decisions. And if you also consider your own recent decisions, you’ll start to see what makes us say yes, and, of course, what makes us hesitate.
What are you worth?
How did you set your current fees? Perhaps you just looked around to see what everyone else was charging. Or maybe you plucked a figure out of the air – one that seemed a good number, but wasn’t too cheeky. This is what we tend to do when we feel uncomfortable or lack confidence. Instead, I’d like you to think about your business and what you are offering. Ask yourself these questions:
- What do you do?
- Who do you do it for?
- Who else does the same?
- How are you different from them?
- Are you selling time or results/solutions?
- What difference are you making?
It’s unlikely you’re simply selling time. If you’re a therapist, a client doesn’t book a session because he wants to spend an hour with you. He wants you to solve his problem and to make a difference. This is what you are charging for.
Your experience and approach won’t be exactly the same as anyone else’s, so don’t use their charging model. And in this type of business, you are not competing. Your business isn’t directly comparable with anyone else’s. Instead of competing on price, communicate your value and the difference you are making. You never want to compete on price as it’s a race to the bottom.
So, decide on a fee that allows you to cover your costs, pay yourself a decent income, and one that conveys the difference you’re making.
Here are some tips on communicating value:
- Deliver good work, consistently
- Gather feedback and testimonials and make them visible
- Present yourself appropriately – if you charge £500 per day, you want a proper website, not a Tumblr page
Getting the price right
As I said a moment ago, you don’t want to compete on price. However, you still need to be realistic – it’s about achieving a balance. Remember, you can’t serve everyone (unless you have a truly scalable business), so pricing can be an effective way of restricting demand. You never know how much money potential clients have, or what type of spending they are prepared to prioritise. Consequently, it’s important not to set your prices too low out of fear.
One effective technique is to offer different price points in the form of packages:
- Basic – a cheap package that’s affordable to most people and easy to deliver. Once they’re through the door, they might upgrade to a more expensive option.
- Medium – this package is a bit more expensive and has many more features. This is likely to be the most popular choice.
- Premium – this includes absolutely everything. Not many people buy the premium package, but when they do it’s a big chunk of income for you.
If you want to learn more about pricing strategies, I heartily recommend Sweetspot Pricing by Julia Chanteray. This short book includes tonnes of valuable information for small business owners.
Nobody likes having the ‘money’ conversation with clients. It feels grubby and graspy. Here are a few hints on how to handle it:
- Have the conversation as early as possible! Don’t leave the fees to your client’s imagination (or, worse, let them think you’re working for free).
- Never haggle. Use the exercises in this series to be clear on what’s a fair price.
- Talk about price at the beginning, then focus on your value.
It’s not your responsibility to be affordable – it’s up to them to decide whether the problem you’re solving is a priority.
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