Money is a funny thing… no wonder we struggle.
Talking about money is the awkward, but necessary, part of business. At some point in every sales conversation, the issue of money always comes up. Clients ask about pricing, ask what’s included, and start wondering about payment arrangements or terms. They evaluate our offers and think about the budget they had in mind for the work.
Things get awkward. We struggle, stammer, and start trying to justify our pricing. We all do that, right? It’s not just me… 😉
Over the last year, I’ve changed my pricing structure significantly and increased the investment required for the work I do. As a result, I’ve made more money… but I’ve also bumped up against my own discomfort with talking about pricing. Rather than avoid the conversation or mumble something apologetic as I quote a price, I’ve been forced to project confidence about the amount I bill so that I could actually win the deal.
It’s been an interesting year… and I’ve learned a lot about the perceived value of money. Do you struggle with quoting pricing or negotiating with clients? You will want to keep reading. 🙂
The value of money is variable, and I’m not talking about exchange rates. I’m talking about the way we feel spending it.
My family is known for being frugal. My ancestors were farmers who were accustomed to saving, making do with less, and finding creative ways to meet needs without cash. Before we spent any money, my family looked for ways to barter or bootstrap. I was taught to avoid borrowing, look for a good deal, and do things DIY.
This perspective has impacted the way I manage money in my business and the way I’ve historically charged for my work. Some of my clients share my perspective. But others have a different way of looking at things.
Consider the client who comes from a family of successful entrepreneurs. She knows that “it takes money to make money” and is willing to invest in courses, mentoring experiences, or services that she believes will make her more profitable in the long term. In her mind, the return she gets on her investment is more important than the ticket price.
The way I feel about money impacts how I price my work. The way my prospective client feels about money impacts how they respond to my pricing. Awkward moments happen when our feelings are out of alignment.
Here’s a little story that illustrates my point…
Two years ago I took a road trip with a group of ladies. We drove from Michigan to Minnesota for a quilt retreat. Now, if you look at a road map it becomes obvious that we needed to drive through the Chicago area. Basically, this means we had two options – (1) drive through Chicago and deal with the stress of heavy traffic and congestion or (2) pay $35 in tolls to avoid the mess.
On the way to Minnesota, we took the toll roads. Each of the women in the car chipped in to pay the tolls. We had a pot of coins and bills in the center console and the driver dipped into it each time we passed a toll booth. It was a simple system and most of us didn’t mind it at all.
But one of us did. One of the ladies in the car was pretty shocked at how expensive the tolls were. She bristled inside at each booth, and she struggled with the “waste” of all that money. She did not complain or argue, but she struggled all the same.
On the ride home, this woman made sure she was driving at the crucial point where we committed to the toll roads. She quietly – without mentioning it to the rest of us – took the exit that directed it us right through Chicago. By the time the rest of us noticed, it was too late. We saved $35… but we spent an extra 3 hours sitting in traffic due to the snarls and congestion.
When we asked her why she did it, she told us she simple couldn’t tolerate the waste. She valued her share of $35 much higher than we did. To the rest of us, the money was minor compared to the time and stress associated with the downtown drive.
We had a different perceived value of money.
Raising my prices meant confronting my own ideas about money.
Have you ever gone to a craft show or a flea market and asked how much? Some vendors confidently quote a price with a smile. Others quote the price hesitantly and almost make it a question. Still others answer with, “what will you give me for it?” I think the confident ones probably make the most money.
In early 2017, I raised my pricing significantly. I actually doubled my pricing across the board and then tacked on a bit more to some packages and offers. I did this so I could maintain a certain level of income while scaling back my workload because of health issues. You can read my story here if you like.
At first, I was like the hesitant flea market vendor. I apologized for my pricing and over-explained the value I delivered. As you can imagine, potential clients were hesitant too. It wasn’t overly successful. 😉
One day my adult daughter asked me a pretty insightful question. She asked, “What would YOU pay for the work you do if you had to hire someone like you to do it?” Smart cookie. Without realizing it, she got right to the heart of the issue. My new pricing didn’t fit my perception of my own value.
At that moment, I realized I had two choices. I would drop my prices back down OR I could adjust my own understanding of the value my work provides.
Dropping my prices to their previous level wasn’t an option for me because I needed the revenue and I hate looking stupid. So, I had to take a deep look at the value my work gives to my clients – and not just how they feel about it. I needed to evaluate the real, measurable results my work delivers.
I took a look at…
- Revenue my clients generated after our projects were completed
- Efficiencies my work created in their businesses
- Savings they realized after I solved problems for them
- Growth in their list, client base, and impact
Then I asked my clients to share their thoughts on the value my work provided. I even took the humbling step of asking a few of my previous clients to share their thoughts on my new pricing. Did they feel confident I could provide value at a level to justify the rate? This research helped me really get an understanding of the value my work provides.
I also took a look at my place in the market. I quickly discovered that while some copywriters charge a lot less than I do, others charged quite a bit more. Those with higher rates were not always more experienced than me… but they were all confident and clear about the value they provide to their clients.
That’s when I realized something…
Raising my prices means raising the perceived value of my work.
When a prospective client objects to my prices, the problem is almost never budget. When I’ve properly demonstrated the value my work provides – when I’ve made the benefits real in the mind of my prospective client – they find a way to move forward with the project.
Did you catch that? Clients don’t usually have a budget problem. We have a marketing problem.
- Why do thirsty people pay for bottled water when tap water is free? Marketing.
- Why does designer clothing cost more than generic stuff? Marketing.
- Why are diamonds expensive even though they are plentiful? Marketing.
- Why does one copywriter make more than another? Marketing.
- Why does one designer/developer/freelancer make more than another? Marketing.
Effective marketing raises the perceived value of our work. When the perceived value of the work exceeds the perceived value of money, everything gets easier.
When you increase your pricing AND increase the effectiveness of your marketing, you attract higher level clients.
It might seem strange at first, but raising your prices (and upleveling your portfolio accordingly) aligns your business with higher level clients – the ones who have a different perception of money. You’ll start talking to people who understand investment and are ready to pay more in order to get bigger results. They will understand the value of your work… and more importantly… they won’t even blink when you quote your pricing.
If you struggle with pricing, I recommend you start by exploring your own perceived value of money. What would YOU pay for the work you do? Let your answer guide you to explore the value you provide to your clients.
Head on over to the Drama-Free Design group on Facebook, tag me, and tell me about your own perceptions around the value of money. I’d love to help you get unstuck.