When I got my first project, I mocked up some docs and said to myself, “I’m going to do this for four grand.” It just felt right. And I got the job.
It’s easy for me to tell you, “Have confidence in yourself!” when setting rates, but that’s probably not helpful. You may not be as confident as I was.
So, despite knowing you need confidence, the question remains: “How do you know how much to charge?”
“I’m Better Than That Guy”
When I started out, there was a billboard on one of the main roads in Sydney advertising websites for $800. I had a lot of design experience and some personal skills that allowed me to talk to people easily, but that’s about as far as it went.
I never learned sales, so all I had to go on was, “I’m better than that guy.” I went with my gut and doubled the billboard’s rate to $1600.
Most people have no idea about sales, marketing, or project management when they start out (me included). You’re meant to pick these up along the way, which can be challenging.
But having a load of confidence and a gut feeling is no way to run your business. You might get it right from time to time, but you’ll never build a system that allows you to grow.
Even though we’re all doing the best we can, it helps to have a reason for setting your rates. This is where you can learn from the pros.
In my early days, I met a friend at a pub for a beer. He had been a salesman his entire life.
People had been paying my rate, and I had lots of work, so when he asked me how my business was going, I said, “Really well.”
“How do you find sales and leads?” he asked. “Do you get much pushback or negotiation?”
I proudly answered, “No, I’ve got a conversion rate of 90-100 percent. Everything I put forward sells.”
He didn’t look impressed.
“Don’t you think you should put your prices up? No one is negotiating with you, so you’re clearly the cheapest.”
I didn’t know what to say. I thought my rates were already high (compared to that billboard).
He was right, of course, so I had to ask myself, “What am I actually doing? What is my actual process? What am I actually worth?”
Defining Your Rate
The best way to start understanding your worth is to put it all down on paper.
You must break down everything you do. Detail your entire process from start to finish, so that you can account for every minute.
Don’t forget to charge for your mind as well as your hands. It’s easy to overlook the mental work involved with projects when the most tangible things are easier to measure. Once you’ve broken it all down, then you set your rate.
Your breakdown might look something like this:
- 1 hour – Online sourcing looking for connections and leads online
- 30 minutes – Emails
- 20 minutes – Discovery call
- 25 minutes – Another call
- 1 hour – Meeting + Travel
- 3 hours – Market Research
When you’re able to put a time figure on every part of your process, you begin to see how valuable your work is and think, “Holy cow! My $1600 websites are ripping me off!”
Self Reflection, Self Worth
Make sure you set an hourly rate that reflects your time and the value you bring to every project, considering the work you do with your hands and your mind. If you don’t go through this process now, you’re never going to make it to daylight.
I had to break down my process because my flat-rate fee wasn’t getting me anywhere. I couldn’t bring anyone on to help me, even though I needed to. I was doing too much at the rate I was getting.
After the conversation in the pub, I realized I was cheating myself.
Once I worked out all the time included for my hands and mind, I didn’t feel so bad about my rates and was able to raise them to a level that benefitted clients and me.
Pricing isn’t meant to be tricky.
There’s no magic formula other than understanding your time, costs, and efforts. Once you do that, those $10K projects won’t feel so daunting anymore.
So what are you waiting for? Sit down and document your process now. Then come back here and tell me about your awakening.