Pricing is a challenging issue for many creatives. From deciding on hourly rates or all-inclusive prices, worrying it’s too high and you’re missing out on clients, or too low and you’re not earning what you should be - there’s plenty to try and figure out!
And perhaps the hardest part is that you are the only one who can make the final call.
But don’t worry - we’ve got you sorted with all the inside scoop on pricing (with some tips from the ever brilliant duo of Natalie Coombe and Hayden Burgess) from a recent Rocketspark webinar.
5 signs that you should increase your pricing
1. Your client’s ROI is between 3 and 10 times their investment
This can take a little time to get right, but gaining insight into how much value you’re bringing to your client’s business is a great way to qualify the impact your service has.
When you start working with someone, understand what is going on with their business right now, get clear on what they are looking to achieve (from what you’re specifically providing them), and then measure the difference after. Have you helped them to get more leads, increase conversion or allowed them to secure a better market share?
Whatever the result is, work out what this is in terms of their ROI. If a new website cost them $5,000, and within a few months they have been able to attract more business at a value of $30,000 - then that is a return of six times the initial investment. And you can use real world results like this to calculate the rates you can be charging clients.
Of course a lot of elements are outside of your control (how good their sales people are, what their selling process looks like) but don’t be afraid to ask for information that can help back up the work you carry out - like website visits, organic reach, Google search results, and whatever else is going on in their business after the fact.
2. You’re feeling resentful of your clients
This is quick and straight to the point. If you’re feeling like your clients are taking up more of your time than what you get paid for - then it is probably time to increase your prices.
3. You have a high quote acceptance rate
If you’re securing a majority of projects that you quote for, then it is a great indicator that your reputation is not only preceding you and the quality of work you provide is high, but that you’re in a position to be able to raise your prices.
Your quote acceptance rate may drop for a period of time - and this might be hard to deal with first - but on the flipside, it rids your workload of those who don’t value your worth (and who were only making a decision based on price, not skill or expertise).
4. You want to achieve a better work/life balance
If you have to work 50+ hour weeks to pay bills and cover costs, then you’re probably not charging enough and it’s time to put those prices up.
You’ve chosen to work for yourself for a reason, and if you want to live the lifestyle you planned to achieve when you started out (or that you have decided you want as you reassessed your goals), then you’re entirely within your rights to set the prices you need to gain a better work and life balance.
If you only want to work 20 hours a week, then what would you need to earn to make that work? It might be scary, but it could also put you in a position to take on less clients, with the ability to pick and choose the ones you really want to work with, and those who value and respect your charge rates.
5. You’ve done your numbers and it just makes sense
There’s a variety of pricing strategies you can use to arrive at the right prices for your services. The most powerful one is value-based pricing, which is no longer about how much time it takes but the value you provide. However, this can take a bit to get your head around, so often as freelancers/creatives we head back to the most common one of market-based pricing.
Which is okay, as long as it is used in conjunction with other pricing strategies to ensure you aren’t just basing your rates on what the ‘market’ is advertising. Because where market-based pricing falls down is that one; you have no idea if your competitors are actually making any money and are just too afraid to raise their own prices, and two; perhaps they are prepared to work 60 hours a week to earn what they need to - and if you only have 30 hours a week, it’s not going to be suitable for you.
However, market-based pricing does help you to provide context and will also enable you to position yourself to potential clients once you have worked out what you need to charge. Are you ‘middle-of-the-road’ or premium? And depending on where you are, it will assist with strategies around how to present yourself and provide your point of difference as to why someone would choose you over another creative.
So do your maths - what do you want to earn and how many hours do you want to work? Use cost-based to understand what you need to charge to make it work for you, then market-based to find out where you fit - then go out into the world and prove your worth with your value.
How to put your prices up
So, deep breathe, you’ve made the decision to put your prices up. And while it’s a completely responsible, acceptable thing to do, it can still feel hard and scary (but also exciting and powerful too).
Know what you need to earn
So as above, the first step before putting your prices up is to work out exactly what that looks like. Work back from what you need/want to earn, and then get clear on what it will take to get there.
Just do it
If you’ve done all of your calculations and know where you fit - then just do it. Remember when you took the leap to work for yourself? That was a big step! Have faith that this will work out too.
Give current clients special treatment
It’s always a good idea to give your current clients time to adjust to your new pricing. So this may mean giving them a grace period of a month or two at your ‘old’ rates (and could even result in an influx of work before prices go up). EVERY business puts prices up, you’re justified to do this too. And if you lose a client or two - they don’t understand your value.
Focus on your mindset
Mindset is often the hardest thing to get over when it comes to putting prices up. You may be worried about missing out on work, that you’re charging too much compared to competitors, or any variety of other anxious thoughts that come to mind when you’re responsible for your own paycheck every month.
But remind yourself why you’re doing this. That you’ve done the maths, and not only makes financial sense, but you’ve actually realised how much you have been undercharging for so long - and that is only doing a disservice to yourself.
Focus on your value
Continue to build on the real world impact you achieve for clients. You may come across some businesses who don’t want to discuss their revenue or other sensitive information, but if you position yourself as someone who cares - not just a creative but a consultant - there will be a way to get the information you need to prove your value. And this will always help you to feel confident about what you are charging.
- Don’t forget to include ‘thinking’ time in your prices. This is the most valuable part of what we do as creatives, yet we often only think of charging in terms of ‘doing’ time. But how many times have you’ve been kept up at night with an idea, or been out for a walk while also brainstorming?
- Quoting for a project should never be about a race to the bottom. No one wins.
- Hourly rates will often mean you ‘max out’ on what you’re able to earn. Value-based pricing is about understanding what you help clients to achieve, and charging appropriately for it.
- Be aware of clients who ask you to meet their budget - if it’s not enough for your services, that’s their issue, not yours.
A big thanks to these two for sharing their thoughts and expertise:
Natalie Coombe - www.nataliecoombe.com
Hayden Burgess - www.pitchr.biz