Perhaps you have some great clients who agree to your fees, respect your time, and love the results you deliver (we love those ones!). Or, maybe you have clients you love, but can’t really afford you and consistently push back against your rates (that one’s a bit tougher). And you probably have had the awful clients that nickel and dime you, torture you every step of the way, and are never happy (I give you full permission to let those folks go).
As a business owner, the type of clients we attract may feel like a crap shoot, but I can assure you it’s not. Here’s how I know:
Before I was a coach for creative entrepreneurs and freelancers, I was an agent for 15 years – working with top-level creative talent including illustrators Megan Hess and Anja Kroencke, and industry veteran (and hilarious) copywriter, Mark Welsh. As their rep, it was my job – among other things – to ensure they were compensated well for the immense value and results they delivered. I’ll admit that quoting those high numbers, especially in the earlier days of my career, had me shaking in my boots. But what got me over the hump was the confidence I had in the results they delivered every single time, and the unshakeable belief that they were worth every penny.
The more I did it, the easier quoting – and getting – top dollar became. Before I knew it was even a thing, I was practicing value-based pricing.
Like most things, value-based pricing is part mindset, part science, and part art, so it takes intention, a bit of swagger, and practice. If you’re up for trying out, know that you’ll have to adopt a growth mindset and be willing to play around with it a little.
If you’re ready to price your services (and likely raising or re-configuring your rates) based upon your value, not your time read on…
Shifting from an hourly or project-based pricing structure to a value-based one is a process. Any number of things can make you lose confidence, so I’m going to break it down into two parts:
(1) What you need to know
(2) How to do it
In this blog post, I’m going to address number 1 – what you need to know. Because without this, the “how” just won’t work. You ready?
What you need to know
If pricing your services based upon value rather than an hourly or day rate (likely set by someone else) were easy, everyone would do it. If you don’t have a partner, coach, or mentor to bounce ideas off, you’re going to need to ask yourself some clarifying questions. Here are a few to get you going:
Why do I want to raise my rates?
This sounds like a “duh” question, but your motivations are important because they impact how confidently you approach the process. Do you want to raise your rates because:
- You want to work with fewer better clients.
- It’s long overdue. You’ve been honing your craft, buttoning up your processes and procedures, and improving your client experience, but your pricing doesn’t reflect that value.
- You don’t want to scale or build an agency, but you do want to be more profitable.
- The comparison gremlin keeps reminding you that everyone else is doing much better and making waaay more than you.
It’ll probably come as no surprise that the first three are reasons are excellent and aligned with successfully raising your rates. The last, while something we all contend with, won’t support your efforts.
Can I substantiate my rate increase to clients?
No one wants to feel like the chump who’s paying over market price. And even if that’s not the case, without context, a rate hike can feel jarring and trigger negative responses in your clients. Especially if they feel blindsided. Here’s how to avoid unnecessary friction.
- Give your clients a heads up via email explaining why you’re raising your rates and when it’s going to happen. I recommend giving people at least 2-3 months’ notice. Share your new pricing and if it feels comfortable with you, offer them a “happy medium” rate as a thank you for being a loyal customer.
- If you’re making the change because you want to work with fewer, better clients say so. People will appreciate that they’re not one of many and will likely be more willing to invest in someone who’s really paying attention to their business.
- Share tangible results or outcomes that support this investment. For example, if you know you will nail the brief, consistently exceed expectations, reduce risk, and reliably deliver on-target, on-budget, and on-time, a client will likely appreciate why this is an investment worth making.
- Provide social proof in the form of testimonials or case studies that showcase the results other clients have got from working with you. This is SO much more powerful than simply saying it yourself.
- This is my personal approach, so feel free to take it or leave it, be generous, kind, and give people a graceful out if people can’t afford your new rates or simply don’t want to proceed. As Maya Angelou said, people won’t remember what you said, but they will always remember how you made them feel.
Does my new pricing align with my business model?
Simply put, your business model is the structure and process by which you get work, do work, and make money.
In my experience, creative entrepreneurs and freelancers have varying levels of confidence talking about business models, but ultimately, your pricing needs to support your model if you’re going to have a consistently profitable creative business. Whether this is well worn territory or brand new to you, here are a couple of simple questions to help you find your pricing strategy:
- Is my business high-touch and low volume? e.g. you work with fewer clients in a more hands-on way.
- Is my business low-touch and high volume? g. subscriptions, communities, templates, or products where you can service many more people at a much lower price point.
- Is my business a mix? If so, how many of each do you want and need to reach your financial goals?
Now, if this all makes sense, but it feels overwhelming to tackle alone, I’ve got you. Click here to share a bit more about your situation and let’s chat.
And if you want to tune in for part two of this game-changing pricing strategy and learn how to raise your rates join me next Tuesday, May 18th at 12.30 p.m. EST for my free virtual Creative Mornings Field Trip: 3 Steps to Build a Profitable Creative Business.
I know it’s going to be a lively discussion, where you’ll not only benefit from my expertise and experience, but you’ll also get to connect with and learn what works for the Creative Mornings Community.
Click here to register and I’ll see you there!