“Understanding your value is the first step to charging what you are worth.”
– Denise Chilton, Business Coach[i]
Michael O’Brien had a near-fatal accident when an SUV hit his bicycle. He suffered a broken right femur, right tibia, and right shoulder. The experience also shifted his life perspective. Michael was on a hamster wheel and appeared to be fitting the mold cast for him, but he wasn’t happy. His recovery took months and all his mental strength. His mantra became, “Don’t let bad moments become bad days.”
Michael is now an executive business coach and author of Shift: Creating Better Tomorrows: Winning at Work and in Life. He has helped hundreds of executives change their mindsets. But when he sent his first proposal, Michael was full of self-doubt. He later told USAToday his thoughts, “‘She’s going to think I’m charging too much. Am I worth this? Did I make a mistake leaving my corporate gig?’ I was in a vicious loop of self-doubt as I sent my first proposal as an entrepreneur at 11:15 p.m. When there was no response at 5:30 a.m., I was devastated. But a few hours later, she accepted the proposal. I was elated, until I started kicking myself for not charging more.”[ii]
If you haven’t quit your day job yet, it is likely related to how much money you’re making. It would help if you charged what you’re worth to replace your day job’s income.
What is your number?
A good goal for beginning freelancers is 20-30% of their salary by moonlighting for 5-10 hours per week.
Pricing Strategy
Where are you personally comfortable? Do you want to be at the high end of the price spectrum, attracting high-end clients? Or would you prefer to compete on price? If your pricing strategy is to be a low-priced provider, you must understand your margins and offer high volumes. High volumes are preferable if you want to resell the business.
If you’d rather service a few select clients with high-touch service, your business may be easier to build and require less overhead.
Offer products at multiple price points. Because people gravitate toward a middle option, it is wise to have three choices. (Barebones, what you hope they’ll buy, and an over-the-top option will appeal to a refined audience.) A service provider can offer a low-cost training tool (book or webinar), create higher-priced consults or seminars, and provide a long-term option. The low-cost choice may be a stepping stone to the next level.
Your fee structure may look like this:
Book: $16.95
Seminar: $219
One-to-One Training: $529
Social Media Marketing Plan: $8995/6 months
How to Set Your Price
Many service providers set their initial prices according to their competition’s current rates. Freelance service providers usually charge by the hour or by the day. Their project rates are based on the number of hours it would take to complete a project multiplied by their hourly rate. When asked for a quote, you need to know the time it takes to fulfill a client’s specific needs.
If you edit copy and charge $60 per hour, you need to know how long it will take to complete the job. Calculate your average time to edit a page or how many words you edit in an hour. Do the math for the project in question. Add an extra hour of cushion for revisions.
You may present your price as an hourly rate with estimated hours or a project rate, sharing just the final price. The downside of charging by the hour or day is that it’s easy to price shop, and your clients control your time. This could be an unfair comparison if you work faster than other freelancers.
Many freelancers design, develop code, or write as a hobby. They enjoy it and don’t charge much because they aren’t relying on their side hustle as a primary income source. I know an artist who just tries to cover the cost of her materials. That’s fine for her, but not if you want to quit your day job! If you’re a full-time professional, you should charge like one!
Amy Zimmerman of Poppin Z’s learned a lesson in finance the hard way. She shares, “We partnered with a local group as a fundraising opportunity for them. The percentage the group earned was too high; consequently, I barely covered my costs. I probably didn’t price my product correctly, either.”
[i] Denise Chilton Coaching. 2020. Charge What You’re Worth | Denise Chilton Leadership Coaching. [online] Available at: <https://www.denisechilton.co.uk/how-to-charge-what-you-are-worth/> [Accessed 24 October 2020].
[ii] Usatoday.com. 2020. 10 Essential Pieces Of Advice For Anyone Who Wants To Leap From Employee To Entrepreneur. [online] Available at: <https://www.usatoday.com/story/money/2020/02/25/10-successful-people-making-leap-employee-entrepreneur/4818250002/> [Accessed 20 October 2020].
*This blog was taken from chapter 14 of Flex the Freelance. Buy the book now!