Are You Paying Yourself Enough? The Easiest Way Stop Trading Hours for Dollars
This week I had breakfast with a graphic designer colleague who’s struggling to find work. She’d just met with the owners of a boutique marketing firm who took one look at her portfolio and said, “Hon, you’re undercharging. For this quality of work, you should double your rates.”
She told me it brought tears to her eyes to hear them say that. Like so many entrepreneurs she’d had a hunch that she was undervaluing her services, but it felt so good to be validated!
Having received that feedback, she’s finally revising her rates to reflect her skill and mastery of her craft.
If you’re running your own business, have that same hunch, and are yet to meet any Fairy God-clients who insist that you’re undercharging, allow me to step in: You are almost certainly not paying yourself enough.
I hereby give you permission to RAISE YOUR RATES! And if you need more than a nudge from me to kickstart this change, here are 3 key signs that it’s time to give yourself a raise. (Or consider changing your pricing model. Or both!)
New here? I also have the following posts to help women entrepreneurs outsource their business tasks like a boss:
- Hire a Virtual Assistant to Help You Keep Your Funnel Filled With Clients
- Overwhelmed? Here Are 11 Tasks to Outsource to Your Virtual Assistant!
- Hire a Ghostwriter to Help You Create Your Online Course
- How Much Does a Virtual Assistant Cost?
- Want to Outsource Facebook Ads? Ask These 5 Questions First!
- 4 Things to Consider Before Hiring a VA to Help You Launch a Course
- Fun Time Management Activities to Try With Your Team
And of course, you should definitely take my free quiz to find out the #1 task that you need to outsource to not only free up your time – but to give you the space to focus on revenue-generating tasks in your business.
Undercharging Sign #1: Trading Hours for Dollars
This concept is a tricky one, since ALL work involves trading time for money in some way, shape, or form. The work we do as entrepreneurs takes time, and there are certain jobs that simply need to be billed hourly.
But since time is limited—only 24 hours in every day—that means that always linking it to pricing means we’re limiting our earning potential. Not to mention that we shouldn’t just be paid for time, we should also be paid for talent, expertise, creativity, and skill.
We need to think about trading value for money, not time, and price our services accordingly.
So if time is the only factor your consider when pricing your offerings, you’re probably undercharging.
Undercharging Sign #2: No Value-based Packages
While it’s perfectly fine to have a price list for services like short calls and in-depth coaching sessions, it’s essential to price those services based on their value in addition to time spent.
All entrepreneurs should offer bundled services to their clients, since packages allow us to sell more, build long-term relationships, and earn higher rates for less work.
I recommend bundling tailored, custom services with automated ones (like online classes and pre-existing downloadables) whenever possible. Also it can be helpful to plan and price a few value-based packages based on the services that the majority of your clients consistently want and buy. (Think value meals: What combos are requested most often? Group them.)
However, feel free to build custom packages for clients, too! Work with your client to create a list of services you’ll provide each month and charge a flat-rate.
A customer might be perfectly happy to pay an all-in bundled price, yet be turned off by a laundry list of charges that add up to the exact same dollar amount.
Plus value-based packages offer entrepreneurs a simple way to lift the limits on our earning potential by creating strategic, beneficial packages that our clients will love. Wins all around!
Undercharging Sign #3: All of Your Pricing Is Guesswork
- When you create a new offering, do you price it based solely on how many hours it took to create?
- Do you poke around to see how much your competitors are charging, and then just add or subtract a few bucks?
- When a client requests a brand new service, do you take a wild guess at how much it should cost?
If so, I can guarantee you’re not paying yourself enough! To price your offerings strategically, you need a formula.
Here’s what I suggest:
Run some calculations to make sure that every offering you sell will be worth the effort you’ve poured into them and that they reflect the expertise required to create them.
For instance, if you’re creating a course that you plan to sell for $197, think about how many you expect to sell. (Base your ballpark estimate on sales of your own past products, and current list size.)
Multiply that out and divide by the number of hours you anticipate spending on development. So if you expect to sell 150 courses at $197, you’ll make $29,950 total.
If it took you 35 hours to create it, each hour spent was worth $844.
How does that compare with the rates you charge for other services?
How does it compare with your internal beliefs about what your time is worth?
While this formula does ask you to consider time spent in creating an offering, it also forces you to consider the value of that time. If you’re just not sure how to put a price tag on your expertise, use my free online calculator to find out how much an hour of your time is really worth!
Giving yourself a giant raise can feel uncomfortable. It feels like bragging, like hubris, like getting “too big for our britches.” But I promise you it’s not;
In reality, it’s recognizing that what we offer to our clients goes well beyond hours spent with them.
We offer them insight and expertise we’ve spent years cultivating. And what we ask them to pay us should reflect that. Truly.
PS. Not sure what your time is actually worth?, Click here to get access to my free calculator to find out what your time is really worth.