How do you set your rates for your services?
There are more books than you’d ever want to read about this topic. I’m sure there’s good advice out there, but there’s also a ton of bad advice mixed in–especially the advice you hear for white collar service professionals (like you).
The reason I call it “bad” advice is because so much of it seems to be focused on playing “not to lose” instead of playing to win.
For example, a tax professional might hear the advice to look at his competition and charge rates in line with that. Even a little less if he has little experience. Or maybe he’ll be advised to set his rates based on what he thinks the client will pay instead of what his services are worth.
By far, the worst advice I’ve seen is that awful exercise where you figure out how much you want to make, then work backwards to figure out what you have to charge per hour to get there.
What you’re basically doing there is figuring out where you want to cap your income. You’re building your own nice little box that will keep you (and your bank account) small.
With that thinking in mind, want to earn more? WORK MORE.
Yikes. If you charge for time, that’s basically the proposition. Does that sound smart?
If you want to get out of the rat race, stop charging for your time. Stop charging “pennies” for what is, by far, the most valuable asset you have.
As advertising great, Michael Masterson says: “Trading your time for money is a devil’s bargain.” I’d definitely agree.
The truth is, no one can afford you if you actually charge for the value of your time! And quoting fees that high will just make you look silly and it will probably annoy your prospects.
Even worse, most people undervalue their time to such a degree that they’re willing to trade it for pennies.
So here’s a little exercise:
A potential client approaches you and says she needs your help. After a few moments describing what she wants done, she asks you “the question”: So how much do you charge?
What would your answer be?
Well, the best response is this one: “It depends.”
Once you say, “it depends,” then you get to take control of the conversation and show them why it depends.
And…the bigger problem:
At this point in the conversation, you have to ask yourself a simple question:
Do I believe that I am worth the fee/price that I am asking?
I’m not talking about your worth as a person here, I’m talking about the value of your work to the client. Is it truly worth what you’re asking?
In your heart, mind and soul, the answer to that question must be a resounding YES.
Because if it isn’t … if you can’t believe wholeheartedly that you deserve that amount of money for your work, there’s little chance that your client will either.
Look, if you don’t believe in yourself, fix that first! Do whatever you have to do to resolve this. Smoking might kill a ton of people every year, but a human’s lack of confidence in their own self-worth “kills” far more.
It just kills you slowly and quietly, from the inside.
Your belief in your own worth will have more impact on your income than just about anything else. Certainly it will have far more impact than however well you perform your service.
How to Talk About Price…
First, understand that price is not something that lives in its own isolated universe, cordoned off from everything else.
Price is (and always will be) a function of value.
In a tax or accounting business, the challenge isn’t to find clients who will pay your rates. The challenge is to find clients who fully believe in your value.
Deliver enough value, and price becomes a non-issue … provided you are talking to a client who actually has the money.
The key thing to remember in your conversations with clients is that you don’t just spit out a number when you are asked, “What do you charge?”
So how do you talk about price? You don’t … at least not right away. If you lead with price, you are toast.
And I’d certainly recommend that you DON’T take the suggestion of some who say to post your prices clearly in your office, so that potential clients can get a feel for what you charge.
That’s horrible advice.
Here’s the simple reason you don’t want to post your prices clearly:
MENUS HAVE PRICES, PROFESSIONALS DO NOT.
If you set yourself up like an establishment that takes orders from customers, well … that’s exactly what you will get.
“I’d like 5 tax returns, over easy please … light on the butter.”
Further, this is not about playing games, this is about communicating an idea. The idea is that what you do is not something that can simply be pulled off the shelf and taken home.
What you do (a professional service) is the response to a specific problem your client has or a goal they want to achieve (pay less to the IRS, keep more in their business’ bottom line).
Price has little to do with that.
But if you act like it does, then it will. Simple, right?
If you give your potential client reasons to focus the discussion around price, then you should stop. Because if the discussion is focused around price from the get-go, that’s a sure sign that you are losing control.
Your ability to charge high fees will expand with your ability to show your clients that those fees do in fact represent a “good value.”
No client that you want to work with ultimately cares about price. They care about what they get for the price. And that, my friend, is called value.
So talk about that value. And pricing becomes irrelevant.
How do you set your rates for your services?