I keep seeing the topic of pricing come up and felt it was in need of revisiting. In this fiery episode, you’ll hear how to set your baseline price and why you don’t stop there. I explain the reason I never ask for budgets, and why it doesn’t matter that other people charge less than you.
You’re going to hear me give specific numbers and real prices in this episode. If you’re ready to stop being a commodity and get paid what you deserve, this show is for you.
Show Notes Pricing On Value 02:59 Turning constructive knowledge on value-based pricing into experiential knowledge. 04:14 Value-based pricing is taking into consideration what the project is worth to the client. Start With Your Baseline Price 04:31 “Do you have a baseline price or do you go purely off of value to the client or is it a combination of both?” 04:45 I have a baseline price for each of the different types of projects that I do. 05:43 “Can your baseline price different from project to project within the same category?” 05:51 Your baseline price is the minimum amount you would do a certain type of job for. This baseline price is then the springboard from which you increase according to the value of the project to the client. 06:35 The 3 Factors of Value-Based Pricing Expenses Time Value 08:00 You are responsible for the first two: Expenses & Time. The client determines the value. 10:14 Most people stop at the Baseline Price. They cover just enough to break even and cover their time and expenses. 10:42 The problem is that there is no accounting for the value that the project brings to the client. 12:02 The client is the one that is determining the value—and they’re not going to automatically be communicating this kind of information to you. You are responsible for facilitating these conversations to discover this information. 12:13 Focusing the conversation around value is what will distinguish you from a technician. This will position you as a consultant and as an investment rather than an expense. 12:46 “Do you formulaically approach the client with a percentage-based investment amount that is proportional to their expected return?” 14:56 “Are you the one who proposes the investment or should the client be the one who comes to that number?” 20:44 Expenses are only for your internal calculation. You don’t talk to the client about your expenses, you only factor them into the price that you provide in your proposal. The price reflects the three factors of expenses, time, and value. Budgets 21:58 A budget is never set in stone. 22:45 “Do you have a percentage range in mind that you’d be willing to accept if they haven’t presented a budget?” 24:18 “Should the designer ever ask for the budget?” 24:24 I don’t ask for a budget on my quote request form. It does not focus the client on value. Everything comes down to providing value. When your first question is “How much money are you going to give me?” That does not communicate that you are focused on value. 25:04 The message you want to communicate is: What can I do for you? What kind of value can I create for you? What kind of problem can I solve for you? What kind of returns can I generate for you? Approach it as a conversation. Approach it as building a relationship and establishing trust. 25:58 When you ask for a budget right off the bat, you are contributing to yourself being seen as an expense instead of an investment. 26:11 Here’s an excerpt from my quote request form: There is no budget field on this form, nor do I display any rates. In our preliminary discussions, I want us to concentrate on the project goals and what will enable excellent results. I do extremely good work, so that’s what I focus on—meaning that what I charge is not meant in any way to be competitive.
Because of the volume of inquiries I receive, I’m necessarily very selective about the clients I take on. If your budget is minimal, we won’t be a good fit. If you don’t know whether your budget is minimal or not, we probably won’t be a good fit.
If your focus is on having someone with experience dedicate themselves towards crafting something that will be effective for your needs, and that is something you’re willing to invest in, we will likely be an excellent fit.
28:04 Many designers are too afraid to say something like this because they’re scared that they’ll lose clients. Of course you’ll lose clients over this. But you’ll lose the wrong type of clients—which is what you want. Won’t Other People Just Charge Less? 28:41 “What is to keep potential clients from going with someone who offers a lower, non-value based price?” 28:58 There will always be someone charging less. You have to position yourself differently than a commodity if you expect to be paid as a professional. By focusing the conversation on value, you position yourself as a consultant rather than a technician. 29:18 You have to be able to convey the unique value that you are able to provide and back that up with a proven track record. Why is this client coming to you anyway? You should know that. You should have discerned that based on the preliminary questions you asked. Ideally, they’re coming to you for a specific reason—likely having to do with your existing portfolio and case studies. 29:44 How to tell when a client is just shopping around for the lowest price. 30:11 My clients come to me because they recognize the quality of my work specifically and that’s something that they want for their project. I ignore the rest. 30:40 “What if you don’t have clients banging down your door? What if the kind of clients you want to work with aren’t yet coming to you?” 31:07 You have to have diversified sources of income. You can’t be operating out of a scarcity mindset. You need to allow your professionalism to grow organically, else you will compromise on your professionalism to pay bills. 32:13 “How do you get that first paying professional client?” 32:46 e024 Finding Clients While Maintaining Professionalism 33:54 “Do you go through the same value-based pricing process with pro-bono clients?” A Story 37:34 Paul Rand. When asked in an interview as to whether Rand was the first designer they approached, Steve Jobs said, “He was the ONLY designer we approached.”
38:23 You want to bid on price? You want to throw your proposal into the proverbial hat? You will always continue to be a commodity. 38:55 Confidence is what will set you apart from the other options. It’s what your clients come to your for, and it’s why you don’t care that other people charge less than you. 39:06 The quiet, underlying implication—Step 1: Be good. 39:36 You need to know what you’re doing. You need to have the competence and business acumen. You have to know what you’re doing in order to be able to take this kind of approach or command these kinds of rates. 39:56 With where I’m positioning myself, it will never matter that other people charge less because the kind of clients I’m attracting aren’t even looking for that—money isn’t even a factor, it’s all about effectiveness. They come to me and they say, “Oh, you know what you’re doing? You’re actually going to give me the best possible solution based on your expertise? You’re hired sir! What do I owe you?” They don’t want these lowballing, hourly-priced designers that are competing on rates and bidding as low as possible. That just reeks of incompetence. That just says “I will take whatever you can give me and I’ll make whatever you want.” You know what that really communicates? It says “I need to be managed.”
That is the antithesis of a professional. Where else do you hire a professional and then have to manage them? Imagine if you had to do that with your plumber, or mechanic, or doctor—it’s ridiculous. If you actually care about your house, or your car, or your body, you’ll pay someone that knows what their doing and expect them to solve the problem in the best possible manner. Talking Specific Numbers 41:21 I always shied away from talking specific numbers. It feels awkward. Because people tend to make assumptions about your annual salary, and it’s socially taboo to talk about what you make. People hear that you charge a certain amount for a certain project, and then extrapolate based on how long they think it takes you to do the project and how many of those projects you can do in a year. But we all know that’s just a very rough estimate. For the most part, freelance work isn’t regular, and work isn’t always coming in consistently, or some projects simply make less money, so it’s really silly to assume you know anything about what someone makes in a year based on a single project. I’m going to talk specific numbers here for a minute, and then I’m going to tell you why I think it’s beneficial. 42:43 The story of the unused, underpriced logo. Why I think it’s beneficial to talk specific numbers 49:40 Mentioning figures specifically—especially large ones, I’ve found, makes people feel more confident about charging more. 49:56 Many of you feel like you can’t charge more because you think it would be silly. “I can’t imagine anyone paying THAT much,” or “I don’t know anyone who is charging that kind of rate.” 50:22 there are those of us who are charging more right now, even though you charge less. The problem is, we don’t talk about it. Why? Because there’s nothing in it for us. We’ve got it figured out, and we’re charging what we want and getting paid for the value we provide, so there’s nothing left for us to worry about. 50:49 So why am I talking about this? Why am I providing specific answers? 50:59 This show is about providing value. I want you to recognize the true potential you have and I want you to realize the returns from the value you create. This is purely about me wanting to see you succeed. I want you to get paid what you deserve, I want you to have the confidence you need in the services that you provide, and I want you to be able to do this without hesitation and without worrying about paying your bills. 51:31 So let me be truly transparent. Why am I really doing this? Why am I spending 18 to 24 hours a week producing two, high quality podcast episodes with my very expensive audio equipment on my costly servers and hosting to you free of charge? Well there’s two answers: In getting to a place in my life and career after thousands of hours of work and investment and years of effort where I’ve reached the point where I’ve been able to do what I love and make a living from it, I found something even bigger than myself: I found a fervency for enabling people to pursue THEIR passions. This is the reason I’m launching the Community. This is a paid membership. Like I said, I’ve invested my time and money for over half a year now (well into the 5 figures). This Community is for Freelancers & Entrepreneurs who are serious about growing their business. It’s everything we talk about on the podcast, but going deeper. It’s discussion forums, it’s live chat and real-time interaction with us during the show. It’s getting my new weekly video show, Recharge. It’s being able to participate in our monthly member hangouts. This what I want to be my biggest place of investment. Yes, I’m working on Learn Lettering, and honestly 6 months ago, I thought that was going to be my biggest thing. And maybe it will be monetarily, but as far as passion? The Community is what I’m passionate about. I want to go deeper on the topic of business and professionalism and help people through direct consultation on the discussion forums and in the Project Accountability section to be successful with their projects and their Business.