It can be so hard to set pricing for your work, whether you provide a service or sell products. You want to charge what seems “fair,” you want to position yourself correctly among your competitors, you want customers to continue to purchase from you, and of course you want to earn a living. I think that many small creative businesses are undervaluing their work, which I’m sure is not news to you. It’s funny, because if you’re like me, and call yourself “boss,” you’re in an enviable position where you can decide how much money you make – so why are we so hesitant to give ourselves a raise after years of dedicated work?
This information will apply best to you if you’ve been in the same line of work for a while, provide a very high quality service or product, and enjoy a steady stream of customers. If you’re just starting out or struggling to attract interest in your work, your efforts may be better focused on improving what you do and adjusting how you attract people who want to buy it. If you feel like you’re fairly successful right now, and would like to expand on that by positioning yourself as an expert in your field and being paid like one, I have got some ideas for you! And those of you just getting started, there will be some goodies in here for you, too. You will find that you have a hard time growing your business if you are undercharging from the start.
Why undercharging is harmful:
I’m sure you’ve heard this before, but as a refresher, here are some reasons why undercharging is an all-around terrible strategy for a small business:
It makes your prospective customers undervalue your work. They assume you are not very good at what you do, are inexperienced, or are not in it for the long haul if you aren’t charging enough.
It devalues the type of work you do in general. If many people are undercharging in your industry, that makes it harder for people who are charging fairly to continue to do so, and will be bad for your industry as a whole.
You’ll be forced to cut corners. If you aren’t making enough on each product or project you work on, you won’t have any extra time to make it truly valuable to your customer. You’ll need to do some “eh – good enough” type work so that you are able to make a living.
You’ll overwork yourself. If your profit margins are low, you’ll find yourself up late at night and on weekends, plugging away at your job. Wouldn’t you prefer to work less, earn more, and spend more time with your family or doing your own extracurricular activities?
Bargain hunters tend to be truly awful customers. They don’t respect you, they don’t value your work, they complain about everything, and they will continue to try to pinch pennies every step of the way. They also have no loyalty and will quickly sign up with any cheaper option that comes along. I mean no disrespect to people who are on a budget – it’s just that these potential customers are not where you want to concentrate your efforts.
Why charging what you’re worth is vital:
Your customers will perceive you as a skilled worker with a valuable product. Cost pretty much always increases perceived value. You’d rather be viewed as Anthropologie than as Ross Dress For Less, right?
You’ll be able to make more money doing less work. Say what? It only makes sense. If you don’t like the sound of that, you could instead hire a gang of wonderful people to work with you to make your business even bigger!
Your customers will be much more invested in working with you at your higher rate. They don’t want to waste their money! That means less late payments, less missed deadlines, and have less objections each step of the way. The customers who sign on at your new rate will trust your authority more, and be more committed to the project.
You’ll be forced to deliver your best work. Anxiety about being “worth it” and the money/time to spare will motivate you to throw in extras, polish things to a high shine, go faster, and make something you can truly be proud of. This is a completely non-vicious cycle of becoming better, then raising rates only to become better. This all makes sense, right?
Stay tuned for part 2! Next Monday, we will take this knowledge and apply it to your business! Be sure to let us know in the comments: How do you feel about your pricing? What are your worries? Have you ever struggled with pricing happiness?