Pricing your services can be a tricky business, especially when you’re starting out. But at Dollars + Sense, one trap we see freelancers falling into repeatedly is pricing themselves too low.
How low is too low? Let’s take a client of ours as an example:
Joe was a freelance graphic designer who had started up his business on the side, while still working in his corporate job part-time. He was keen to build his client list and start to fill his schedule before he made the big leap into being a full-time freelancer. Not wanting to scare off potential clients, Joe set his prices super low to start with.
The great thing was that he got a lot of responses to his proposals, and booked in several projects. The challenge was that his income from that work wasn’t enough to cover his everyday living expenses, so he had to keep at his corporate job too. So Joe was working 60 hours a week, and only just scraping by.
Joe felt trapped in a cycle of ‘busy’, and unable to escape. He didn’t want to raise his rates on his existing clients, and was worried higher prices would scare off potential new clients.
What we told him, as his outsourced bookkeeping service, is that it was of course okay to raise his rates and expect to be paid well for his services. Not only that, but it was also okay to contact his existing clients and tell them his rates would be going up for future projects as well.
Sure, there will be some who don’t want to pay the higher rates, but there will be those who will. It is a universal truth that you will always be too expensive for someone, and too cheap for someone else – but there will always be clients who value what you have to offer, and who will be happy to pay you for what you can deliver. You could charge the lowest rates in your industry and there would still be people who say they can’t afford you. They are not your target market.
So it’s important to work out what your break even point is, and how much you have to charge in order to reach that. And then add a bit more to give you a healthy buffer, and to ensure you cover costs of things like outsourced bookkeeping and other services, equipment, bills, etc.
When you have a solid value proposition, in our experience, you attract the right clients for you. When you offer the lowest prices, you can often attract clients who value cheap over quality, and who might not pay their bills on time, or will constantly haggle over price.
When you know you deserve a higher price, the clients you attract will see your value and be happy to pay for your expertise, and you will feel less resentful about your work.
And, like Joe managed to do after he raised his rates, you can make a comfortable full-time living out of being a freelancer.
Want to know how to get the best value from your outsourced bookkeeping? Join our free webinar.