Compensation

Why You Should Charge Clients

Than You Think You’re Worth More
by Dorie Clark
October 16, 2017

Summary.   Setting your rates is one of the most stressful decisions professionals

face. While you might worry about scaring off customers by overcharging,
undervaluing yourself is equally problematic. Price is often a proxy for quality, and
when you put yourself at the low end, it signals that you’re unsure of your value —

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One of the most challenging decisions freelancers, solopreneurs, and
independent consultants face is how much to charge for their time
and expertise. What if people complain that you’re overpriced — or,
even worse, walk away from a deal with you entirely? But the answer
isn’t swinging to the other extreme and asking a fee so modest you’ll
ultimately resent it.
As I discuss in my book Entrepreneurial You, you can’t do good work
for others if you can’t keep yourself in business. Charging a fair price
is what allows you to create long-term value. Here are four things to
keep in mind to become more comfortable charging what you’re
worth.
Underpricing sends a bad signal. We all know the danger of
overpricing: You lose the deal. But underpricing can be just as
perilous. Author Kevin Kruse learned a lesson about understanding
one’s value a number of years ago from an unexpected source:
someone he was trying to hire as a speaker. At the time, Kruse was
running a nonprofit life sciences association, and his job was to
organize the annual convention. The board had a specific person in
mind for the keynote speaker, and even though Kruse had a budget of
$30,000, he wasn’t sure he could land the speaker, who was a New
York Times best-selling author with an Ivy League doctorate and a
heavy media presence.
But when Kruse called, the author quoted a shockingly low fee:
$3,000. “From the outside,” Kruse says, “it looked like he had all the
signs of success and credibility, and we would have gladly paid
literally 10 times his asking price.” As it was, Kruse wondered if the
author’s low fee scared a lot of people away, thinking he must be an
inexperienced beginner onstage. Price is often a proxy for quality, and
when you put yourself at the low end, it signals that you’re unsure of
your value — or the value just isn’t there. Either can be alarming for
prospective clients.

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Develop a network of trusted peers. Those who make purchasing
decisions usually aren’t keen to reveal their standard rates, because
they possess an informational advantage. If you don’t know that the
going rate for a given contract is $10,000, and you ask for $5,000, in
their mind it’s a win-win. You’ve gotten a number that makes you
happy, and they saved money. But if you later find out that you’re
earning less than others, it’s a bitter disappointment. The antidote is
to develop a trusted peer network that can provide you with honest
information about going rates and terms. You might feel nervous
raising your fees — but if you discover that everyone else is getting
$10,000, it’s a lot more comfortable.
You can’t think your way into being comfortable — you have to
act. Michael Bungay Stanier, author of The Coaching Habit and the
proprietor of a successful training firm, recalls that in his early days,
“I was charging people around $200 for four one-hour calls per
month.” He quickly found himself exhausted and decided to raise his
rates to avoid burnout. How did he get comfortable asking? “At a
really tactical level, it’s just practice,” he says. “Somebody once said to
me, ‘Your going rate should be fear plus 10%.’” I love that, because it’s
like, what’s the level you’re comfortable saying, $1,000? All right, add
10%, so it’s $1,100. Now, go say that in front of a mirror 20 times.
You’ll feel like an idiot, but what happens is the phrase loses some of
its power.”
You can slowly test market demand. This strategy doesn’t work for
negotiating a job salary, which happens once and then benchmarks
you for as long as you’re with that employer. But if your business
model entails working with multiple clients, you have more flexibility
to experiment with pricing, steadily and incrementally increasing
your rates until you feel you’re earning what you deserve. “I still have
one client paying me $500 a month because he’s grandfathered in
after years of working together,” says Jenny Blake, author of Pivot.
“But the next time you pitch to a client, it’s $850, and the next time,
$1,000.” If you hit a level where clients start to resist, you can
consider freezing or reducing your rates until you’ve built up other
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income streams or increased your reputation in some other way
(landing a marquee client, or starting to write for a prominent
publication) that may justify a higher fee.
Setting your rates is one of the most stressful decisions professionals
face. It directly affects your ability to attract clients and create a
meaningful quality of life for yourself. Plus, it hits at core insecurities
we might harbor: What’s so different about my product or service? Am I
actually worth that amount?
Those doubts might prompt us to lower our rates and ask for less.
But, if you have a good sense of market norms and you’re not
requesting something outlandish, that’s a mistake. As Kruse’s
experience hiring the underpriced speaker shows, price is often a
perceived proxy for quality. If your skills and abilities can justify it,
ask for what you deserve. In the end, you may well get it — along
with more respect.

Dorie Clark is a marketing strategist and

professional speaker who teaches at Duke
University’s Fuqua School of Business. She is the
author of Entrepreneurial You, Reinventing
You, and Stand Out. You can receive her
free Recognized Expert self-assessment.