When I started freelancing full-time in 2016, figuring out how to charge clients fairly for my services at a rate that would allow me to live comfortably was a mental hurdle. It almost made me run back to my cushy corporate job, tail between my legs. If I started out too high, I’d risk alienating potential long-term clients and, if I went too low, I’d end up resentfully and slowly clawing my way back to what I thought I deserved, paying opportunity costs in the process.
According to Lisa Mullis, Freelance Austin’s January speaker – The Art of the Offer: Price your Services, Programs and Paid Resources for Profit – lots of freelancers struggle over what to charge clients. In fact, Lisa said the first time she packaged an offer, she cried when the client scoffed at the price because it was so low. Since that early experience, Lisa says she has learned that when “people get clear about the value of their work, that’s where the magic is.”
Why consider package pricing?
According to Lisa, package pricing – which is putting a clear structure around your offer with a defined start and stop, milestones, deliverables, and cost – is beneficial because it:
- Eliminates assumptions and clarifies expectations
- Creates a repeatable process that will help efficiency internally and externally
- Improves predictable cash flow
- Positions you as an expert
- Eliminates churn
- Minimizes scope creep
Clarify your service
Before packaging an offer, Lisa recommends completing these two steps to clarify your services:
- Answer these questions:
- Who is the service for?
- What do they need? What problem does it solve?
- How does it solve it? How does it work?
- What are their responsibilities? What are yours?
- What are they going to get?
- How long will it take?
- What does it cost?
- Consider the full value of what you do and what your client gets.
Employ the “Value Framework”
To develop a successful package for clients, Lisa suggested including what she calls “The Value Framework,” which comprises three parts:
- Features – tactical items such as number of deliverables, edit rounds, and meetings
- Benefits – short-term advantages that a client can have right away
- Outcomes – long-term gains, which often have emotional benefits, such as a sense of belonging, freedom of time, or freedom of money
The value of these three components is sequential: “because of these features, you get these benefits, and they lead to these outcomes,” Lisa explained. “When you know your value points and can connect them to client priorities, clients will understand what you offer.”
The challenges of pricing
There are many reasons that pricing is challenging, and Lisa surmises that one may stem from a feeling of unworthiness. While this feeling of “impostor syndrome” may not readily go away, Lisa suggests that you be aware of “scarcity thinking” – the unrealistic belief that there is a universal limit to everything and that what you earn is taking away from someone else.
Likewise, “People who already feel they are coming from a place of privilege, [the process of pricing] can put you in a place of feeling undeserving of more,” she explained.
Instead, she recommends focusing on “the clarity and confidence about what your offer is, who it is for, and what they will get from working with you and how to communicate that.”
The right price
When considering the price of your services, Lisa said that there are two types of values: objective and perceived. Objective value is your fixed and variable expenses.
Perceived value equals the perceived benefit minus the perceived cost, and it’s “all that matters to your customers,” she explained. The price should be objective value plus perceived value plus your profit mark-up. Before setting your prices, Lisa recommends:
- Considering your goals and business model and asking yourself some questions – for example, does your business require that you bring in a lot of high-volume clients? Or do you need fewer clients because your offers are higher priced? Is it a long-term or short-term engagement?
- Asking the target client for their budget… Lisa suggests softening that request by asking about a range, “Are you thinking $500, $1500 or $5000?”
The bottom line is: “How much do you need to sell to make your profitability goals? The right price is the right price for YOU. There will always be someone pricing higher than you and lower than you,” she says. As tempting as it is to think about what people can afford and build pricing around that, Lisa urges, “You have to think about what YOU want and need and base your price around THAT.”
Changing your prices
Despite internal pressure to get pricing right the first time, Lisa recommends not getting too hung up on the “right price” because changing your prices later is your prerogative as a business owner. She offered these strategies for raising prices:
- Accept you may have different rates for different clients
- You can grandfather a rate for current clients
- Give clients a heads up a few months in advance
- Book now for future work at the current rate before rate increases
Presenting your prices to clients
Lisa offered several techniques for communicating your price, either verbally or in writing via email:
- Language (Lisa uses words like “fee, rate or investment” vs “cost” because the latter can have a negative connotation.)
- Tiers (State your different levels of services, the fee, and what you get for all levels.)
- Anchoring (“Anchor” your offer against another package you have e.g., silver vs gold, which works well because you give your client a choice and it doesn’t require a yes or no.)
- Price comparison (Mention what else is available in the market vs. what you offer.)
- Value stack (Assign the value of all the components that comprise your program to demonstrate the total value vs. the actual cost to the client.)
- Opportunity cost (Mention what they will miss out on if they don’t buy your service.)
The final word
Lisa concluded the session with this wisdom: “The notion of pricing power is when you feel confident in your pricing, you have a handle on your expenses, and you have the freedom to delight your client.”
For more information
Lisa is offering a free download of her presentation for Freelance Austin members.
For more information about Lisa and her services, contact her at firstname.lastname@example.org or visit her on Instagram @paraphrasecommunications.
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