When you’re starting a business, you’ll find in depth advice on everything from dealing with your taxes to how to devise a fool-proof marketing plan. But the one area where things get a bit hazy is your pricing. You scour competitors’ websites for their price packages, only to find that every one of them states, ‘Contact us for a custom quote’.
You go to networking events, find someone else from your industry and almost pluck up the courage to ask them about pricing…almost. Some things just don’t lend themselves to small talk.
So you turn to the internet, the font of all knowledge, and ask there —‘How much should I charge?’
Immediately, you’re hit with a barrage of comments, all saying the same thing:
‘Charge what you’re worth’.
Well, that clears that up, doesn’t it?
Only it really, really doesn’t. It doesn’t come close. And even if you could figure out exactly what it means, it’s actually really terrible advice for several reasons.
It’s highly subjective
How do you charge what you’re worth? What are the criteria? Is it down to your qualifications? Your work experience? Your natural talent?
And the guy or gal down the street who’s offering the same service as you…what’s their criterion for charging what they’re worth? Does it match yours?
It conflates your worth with your work
Picture Jane, a really talented web developer with a degree-level qualification and 5 years in-house experience. She’s just starting out in business.
She’s also crippled by imposter syndrome, convinced she’s a total fraud despite the fact that she’s fully qualified and has a proven track record of producing stellar work.
Now tell her to ‘charge what she’s worth’.
Her lack of confidence (that doesn’t impact on the quality of her work) will cause her to sell herself short every time. She’s now a chronic under-charger, struggling to bring in enough money to make a success of her business.
Now imagine an alternative Jane, one whose confidence far outstrips her actual talent. She produces mediocre work but charges over the odds because she was told, ‘charge what you’re worth’. And she has a high opinion of her worth.
Clients, who aren’t getting what they’ve paid for, are not amused. This Jane struggles to get repeat business or build a reputation and her business starts to flounder too.
Neither option is advisable, and it should go without saying that your worth should, in no way, be tied to the job you do and the money you make.
Beware the ulterior motive
Often professionals shout ‘charge what you’re worth’ as part of a tirade against low-charging freelance professionals. In this scenario, what they actually mean is, ‘charge what I’m worth’. More experienced folks are fed up of newbies coming along and undercutting their own prices.
You see their point so you up your prices in line with their recommendations. Which may work. But, if you have a limited portfolio, no reputation, and aren’t delivering the same level of quality as them, you may find yourself in trouble.
Besides, if you’re charging £500, and they’re charging £5,000, you’re not really in competition anyway. Their clients are not your clients so take their advice with the proverbial pinch of salt.
Danger of analysis paralysis
Being told to ‘charge what you’re worth’ can be downright debilitating to someone just starting out in business. It can completely stall your progress as you get stuck in analysis paralysis — you consider your ‘worth’ and decide it’s too low so you throw yourself into doing more courses, more research, more reading until you finally feel that you’re worthy of charging x amount. Of course there’s nothing wrong with doing additional CPD but nothing can beat on-the-job training. And if you want to raise your prices in the future, getting stuck in and improving your work now is the best way to go about it.
What to do instead
Charging what you’re worth is such a subjective, emotional response, it’s not a great basis for deciding something as fundamental to your business success as setting your prices. A mindset shift based on solid business strategy and practicalities is a much better approach.
Consider market economics
Your personal trainer may be worth their weight in gold — great qualifications, great personality, helping you get great results…the hour you spend in their company may be the only thing helping you cling to your sanity.
If they decide to ‘charge what they’re worth’, you might just find your £80 an hour session shoots up to £500. They’re worth that, right? Well, they might be, but are you going to pay £500 for the hour? No! And neither will anyone else because the market just won’t bear it. At least the market you’re in won’t.
But if your PT switches markets, changes location, or finds a new niche (celebrity personal training? Exclusive personal training for City workers?) and they might get away with such a price increase.
And that’s what you need to consider when you’re setting your own prices too. Can you find out average pricing for your industry (professional associations often share this kind of information)? Does the average pricing differ by area? Do your customers live in big cities or cheaper suburbs? Do you work within a highly-sought-after, under-represented niche within your industry? Each of these factors should come into play when setting your prices and none of them inherently come down to you as an individual or your ‘worth’.
What do you need to charge?
What are your overheads like? How many hours a week can you/do you want to work? What’s the bare minimum you need to survive and how much do you realistically need on top of that to maintain your hobbies, your social life and have enough left over to save for a rainy day (or business dry spell)?
What is the work worth?
Never mind what you’re ‘worth’, what is the work ‘worth’ to your client? Are you designing a logo that they’ll be able to carry across all of their branding for the next 10 years? Then it’s probably worth more than £50 to the client. Are you writing a sales letter with the potential to bring in 6-figure sums? Then it’s worth way more than £150 — and you owe it to yourself to charge accordingly.
Your pricing sweet spot lies squarely in the middle of what the market will bear, what you need to charge to run a profitable business, and the value you bring to your clients.
Ultimately, focusing on your own value places too much emphasis on the wrong side of the transaction. Your focus should remain on the value and results you bring your clients. Doing so will allow you to set a price point that is fair to everyone involved, improving your job satisfaction and your business viability along the way.
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