One of the most common business discussions I see online is about rates – how to price your services, how to get clients to pay what you’re worth, and why sometimes you have to say no and walk away.
This especially happens with those who are just starting out. There seems to be an inherent fear that if you charge too much, you won’t get any clients and your business will fail. But it’s so much harder to sustain a business when you’re undervaluing your services. You have to work twice as hard, and who wants to do that?
Don’t let imposter syndrome hold you back.
I find that usually these thoughts of “I can’t charge that much” is more about imposter syndrome – a personal insecurity where someone essentially feels like a fraud – that their talent and abilities don’t justify their achievements. They think they haven’t earned the right to charge a proper rate, which ends up holding them back even further than that self-doubt. You have to know your worth and understand the value of your services. You are helping the client succeed. You have expertise in areas they do not, so they need you to keep their business going. You have dedicated so much time developing your skills, and that time is worth something.
To put it bluntly, the right client is not going to trust someone whose rates are too low. I’ve said this many times, but the lowest paying clients almost always have the highest expectations and the most demands. The ones who pay full rate are usually more organized, professional, and they understand the value of what you’re doing.
I can also tell you this from my personal experience with hiring others. If I am getting estimates or rates for a project, the first thing I do is compare the numbers and throw out any that are too high, OR TOO LOW. That’s right, I don’t just go for the lowest price because that would be the best for my budget. When I see a rate that’s not in that mid-range, I wonder why. To me, it signifies that person or company isn’t experienced enough or there’s some other issue. It’s a big red flag to me. Conversely, if a number is way higher than average, I think they’re price gouging and I don’t want to deal with that either. You have to know what’s reasonable.
It’s harmful to underprice your services.
If you’re thinking about what to charge, consider a few points with regards to low rates.
- Once you offer a low rate, it’s going to be very difficult to get that same client to pay more in the future. It’s much easier to offer a discount than an increase.
- If you’re spending too many hours on a project for not enough pay, it can be harmful to your mental health. You’ll be stressed out and more likely to burn yourself out.
- Offering a low rate can hurt your entire industry – it brings down the market value for what you do. That’s why so many of us cringe when we hear people say things like, “I can get this done really cheap on Fiver” or “so and so will do it for this rate, so why should I pay you more?” “You get what you pay for” is a common phrase for a reason. Don’t be tricked into lowering your rate just because someone else doesn’t know how to charge properly. If you don’t value your work, why should your clients trust you to do the best job?
“You owe me for the years, not the minutes.”
There’s a meme out there – if my Googling is accurate, it originated from Davy Greenberg – that says, “If I do a job in 30 minutes, it’s because I spent 10 years learning how to do that in 30 minutes. You owe me for the years, not the minutes.” That resonates with a lot of us because it’s absolutely true. If someone new to a job charges $35/hr but it takes her 5 hours to complete it, the client would pay $175. But someone more experienced might charge $75/hr but only take 2 hours to do the job, which would be $150. So the higher rate actually saves the client money – they get better quality faster. Don’t be tricked by a low hourly rate – sometimes it comes with a much higher overall price tag.
That is also the reason many of us prefer to charge a project rate versus hourly. When you’re first starting a job, hourly might seem the way to go. You’re not entirely sure how long something will take you to complete, and you don’t want to estimate too low. But, once you’ve been doing it, you become much more efficient and end up losing out on money. I think we’ve all learned this the hard way. I had a client offer me a flat monthly rate and, at the time, hourly seemed better for me. But I’m pretty sure it ended up costing me quite a bit in the long run. Fortunately, it’s a good client, so I don’t mind too much. But, I haven’t done it again since.
On that note, if you are working on a monthly retainer or a project rate, track your hours as if you were getting paid hourly. You want to make sure the deal is working to your benefit. If you based a rate on 20 hours per month, and your efficiency has gotten you to a point where you’re only working 15, that’s great. You’re winning and should leave it alone. But, if you are spending closer to 30 hours per month, you should consider having a discussion with your client about increasing your pay, or decreasing the scope, so it continues to make sense. I know a lot of people find it a hassle to track hours, but without doing it, you don’t really know if the numbers are working for you.
How do you set your rates?
How do you even set your rates in the first place? It can be based on a number of factors from your years of experience, skill level, expertise in a specific industry, etc. It’s also based on market value, so it’s important to do your research. If the market dictates an average rate of $50/hr for a service, you’re going to have a hard time charging much more than that.
One concept I personally take issue with is one that I see more in the coaching space, where the common advice is to take the amount you want to make each year, divide that by how many hours you want to work, and that should be your rate. While that’s great in theory, that’s not how markets work. Also, why would you put a limit on how much you want to make each year? If that really worked, people would be charging $1000s of dollars per hour. It’s just not practical. We can’t ignore general economics just because we want to make a lot of money.
That being said, I do believe in setting a rate floor, meaning you should know your threshold in terms of what is the lowest hourly rate you’ll take. In general, I won’t take any job below that number because it’s just not worth my time. Of course, I’ll make exceptions if I really like a client, if I truly connect with the project, or if I just want to help. I do make it very clear in all communications when I’m offering that discount, however, that it is a one-time exception and not the norm. You never want to set the discounted rate as precedent for future jobs.
Don’t underestimate the value of your time.
Also, don’t underestimate the value of your time. When you’re creating estimates, make sure to include your time for meetings, emails, and driving to and from the client’s office if that’s part of your work. Include fees for accepting credit card payments in your rate instead of charging additionally for them – it’s a psychological thing. And hey, if the client is still old school and pays via check, you just made a little extra. Regardless, be very clear in your estimates, contracts, or whatever communication you have, so you and your client are on the same page about what they are paying for and what you are delivering.
I’ve heard so many people talk about feeling trapped by their rates. They know they’re not charging enough, but they don’t think the client will pay more. And there’s always that fear that if you let one client go, your income will suffer. But, ridding yourself of a toxic client, or one who leaves you feeling frustrated, frees up more time you can spend on the right client. So let the bad one go and use that time to find the good ones. You don’t want to miss an opportunity to work with someone who values your talent because you’re too busy dealing with someone who doesn’t. It’s okay to say no if they’re not willing to pay what you’re worth. Be confident that you are worth it and you will connect with the people who understand and appreciate you for what you have to offer.