Set Your Rate Right

I was working with a client a few days ago. He was frustrated with not having enough time to market, write proposals and respond to client questions.

I asked him how many hours a day he needed to bill to make his income goals. The answer was “six.” No wonder he was frustrated! Needing to bill six hours a day definitely left him with little time for anything else.

So we discussed his rate. Did he have room to raise it? And the answer was “yes.” In fact, I wasn’t the first person to suggest he was underselling himself.

Look at this from a time management point of view. He has room to raise his rates by at least a third. That actually lowers his required billable hours by 2 each day! Two more hours to market his business and do all the other tasks he’s been putting off. Raising his rates makes sense there.

But what about from a perception of value view? When he told me his rate, my first thought was, “he’s pretty cheap.” Want to bet some of clients thought the same thing? Being thought of as “cheap” can be a selling point, but I don’t recommend it.

I had another client, several years ago, who was seeing about 5-7 clients a week. I urged her to raise her rate from $75 an hour to (eventually) $125 an hour. She was terrified that she’d lose clients by being too expensive.

What really happened? Her clients increased. Over the year we worked together, she increased her clients to 12-15 per week. She received most of her leads from an online profile, and she made only one change to that profile. Her hourly rate. I’d like to say she also did great networking, but I’d be lying. Most of the change in her clientele was a result of raising her rate.

Perceived value is huge. If something costs a little less than we expected to pay, we see a bargain. If it’s lots less, we see it as shoddy. When my client raised her rate to what people expected to pay for someone in her profession, with her experience, they believed she was competent.

See how it works? Doing a pricing analysis of your business is important. Charging the right amount will bring you more clients. Billing the right amount will bring you more time.

Anyone else want to share a pricing story?

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3 Responses to “Set Your Rate Right”

  1. [...] Monroe at 1to1discovery.com tells a story about how setting the right rate by raising your prices could actually lead to the path of business success. (Full disclosure: I may [...]

  2. Ari Herzog says:

    About 30 months ago when Chris Brogan ( http://chrisbrogan.com ) and I met at a bar for drinks, I asked him for advice on how much I should charge to speak at a media workshop. He responded with advice he’d received from Guy Kawasaki ( http://guykawasaki.com ) when Chris asked Guy.

    Add a zero to the end of your current rate.

    Which I did. And, organizations have paid me that.

  3. Juli Monroe says:

    @Ari. Excellent advice from two people who know what they are talking about! Pay attention, folks.