The unconventional pricing strategy that tripled my income
One of the biggest problems for creatives is figuring out how much do I charge?
Often they end up charging basic hourly rates or trying to compare themselves to the rates of others.
But here is the deal, there are no rules to pricing.
In this post I am going to break down the traditional guidance about pricing and teach you a non-conventional pricing strategy that will rock your bank account.
The age old question of “How much do I charge?”
Properly pricing your services can significantly impact your bottom line. - Photo used under creative commons courtesy of 401 Calculator
When most creative's start their career, they keep their pricing pretty simple. They pick an hourly rate, and charge based on that.
Honestly, this is not a bad way to go when you are just starting out.
For a long time I charged hourly because it meant I would always be compensated fairly for my time.
The problem with hourly pricing is that as you become more efficient, you make less money...
Project based pricing
Here is the thing, if you are charging hourly then you will always be limited to making only as much as the number of hours that you work.
Yet with project based fees, there is much less correlation between the hours worked and the end product delivered.
With project based fees, your pricing is based on a clear deliverable, not on how many hours you work.
But how much do you charge for these packages?
The unconventional pricing strategy that tripled my income
The face of a shocked creative who believes making up your pricing is 'unethical'. - Photo used under creative commons by Louis Crusoe
Figuring out how much to charge for packages is actually quite simple.
You are going to think I am crazy here, but hear me out.
Make it up.
Make up the price based on whatever you feel like charging the client.
"What! Woah! That’s crazy and unethical." - Said every struggling freelancer.
But hear me out.
Pricing has no rules.
Just because you submit a proposal to a client, doesn't mean they have to accept it.
You are not stealing from them if you charge a higher rate than another client.
You choose your rates, and the client has the choice on if they want to accept it.
But how do you make up this number?
Not exactly, I do have some rhyme or reason. Here are just a few of the criteria that I use to determine my pricing.
Criteria to base your pricing on
1) Do I like this client?
Does this prospect seem like a good person and someone I will enjoy working with?
If they seem like a jerk, or like they are going to be a pain in the ass, then either don't submit a proposal or submit one with what I call 'asswhole pricing'.
Asswhole pricing is just what it sounds like. If this client seems like an asswhole then they are going to pay a premium.
Remember, there is nothing unethical about this, the client chooses if they want to accept the proposal and if they do, you want to be certain to be compensated for the headache they cause you.
2) How much do I expect this client to be willing to pay?
Based off my initial conversations with the client I can typically get a rough idea of how much the client is willing to pay. The number I end up submitting is largely based off what I expect them to be willing to pay for the project.
Believe it or not, if a client has a high budget in mind for their project and you come in with a low number this will actually lower your chances of winning the project. When your budget comes in lower than the clients expectations it often makes them second guess the quality of your work.
3) Do they sound picky?
Some clients can be great people and enjoyable to work with, but I always try to look out for the nitpicky type during the initial conversations. If I get the feeling that there is going to be a lot of rounds of revisions with this client then I will charge accordingly.
4) Is the project going to be a good portfolio piece?
This is actually a situation where sometimes I charge less. Occasionally a client comes across (typically an arts or entertainment client), and I can tell they don’t have a huge budget but the assets that they have to work with are incredible.
If I know that this project could turn out to be an incredible portfolio piece, then I may charge less so that the client can afford the project and we can work together.
5) How much value am I providing to the client?
This is the single most important criteria to determining pricing. In Alan Weiss's book 'Million Dollar Consulting' he refers to this as value based pricing.
As a freelance web designer, I know that for many of my clients their website is extremely important to them and their business. Thus, there is a ton of value that I am providing by putting together a professional and functional site for them.
When I know the project I am doing is going to largely impact that clients bottom line, then I set my rates accordingly.
6) How busy am I?
If I am swamped with projects, then I am going to start putting out proposals for higher dollar amounts. I simply have to in order to justify working on the project.
When my schedule gets busy, my rates go up, when things slow down a bit, I may be willing to take on some slightly lower budget projects.
See, the number isn't pulled completely out of thin air, but there is really no formula.
Instead I evaluate the situation on a series of loosely defined criteria and then make a number based off of these areas.
The one criteria that I never base my pricing on
Pricing should never be based on the time that the project is going to take you. Photo used under creative commons by foeock
There is one criteria that I explicitly want to make sure you understand was not mentioned in my pricing strategy.
The criteria that I never base my pricing on
How long I expect the project to take
This sounds crazy, but as long as you are providing value to the client, then it doesn’t matter how long you work and how much you charge.
I have sold websites for over $4,500 that took me less than six hours to build.
While that sounds wrong and unethical, here is the thing.
And at the end of the day, the client was ecstatic about their new site.
I delivered on the value I promised, and thus I earned every dollar I charged.
The client cares about the end result, they don’t care how long it takes you to get there.
Stop charging based on your time, and start charging based on the value that you provide.
The bottom line
You are a creative, and what you are selling is art in the form of a service.
Have you ever walked into an art gallery and seen a painting priced at an outrageously high number?
That is because the artist has created a perception of value with their pricing.
The artist does not price based on how much their paint costs, or how long they spent on the piece.
They make up a price based on perceived value.
Your creative services can be the same way.
No one can tell you how much to charge, and no one has to accept your proposal if you quote them too much.
So experiment with it.
Try making up your pricing and see how prospects react.
Remember, the worst that can happen is they say no.
What are your thoughts on this pricing strategy? Answer in the comments below