Do you ever see people who are doing “the same thing” as you, but somehow are living out a much more successful lifestyle? They seem less stressed. They charge more for their services, or products, and sell more of them too. How are they charging more for their work AND selling more? What the heck?
I’m willing to bet that there’s a good chance you’re undercharging for your products or services. Why? Well, most people on my email list are women, for starters. And in general it seems that women tend to undervalue their work and according to a recent study are more likely to accept less money than men.
Add on to that the ambiguity and variation of hourly rates plus competition, and I’d say a vast majority of female creatives don’t make as much money as they’d prefer.
Here’s how to charge more for your creative work.
A couple years ago, I found that one of the biggest reasons I wasn’t making the kind of money I wanted to be is that I was undercharging without realizing it. I’d like to share some of those concepts with you today.
There are various ways to increase your income, of course. But this week I’d like to give you a practical roadmap on how to increase what you charge for your services. While your approach may be different depending on whether you sell a service or product or both, the basic principles of how to set pricing are very similar. And once you know the formula, it gets a lot easier.
In order to be able to charge more, you’ll need to figure out 3 Things:
Step 1: Get to Know Your Numbers. Figure out what you want to make hourly and how much work/supplies/etc. cuts into your profits.
Step 2: Map the Customer Journey. You need to understand not only the problems you’re solving, but what psychological journey your customers go on when they decipher whether they should buy from you. To map this engagement with your digital products, utilizing the services of marketing analytics companies could provide a great deal of insight.
Step 3: Match it Up. Taking a look at your numbers as well as your customer’s journey will help you figure out the best way to frame and communicate your value, in a way that makes it irresistible to your customers.
So, let’s get started with Step 1 this week. Next week I’ll give you Step 2, and then Step 3, the following week.
Getting to Know Your Numbers.
If you’re anything like me, you have this love-hate relationship with your financials. It’s great when the money’s rolling in, but do you ever want to bury your head in the sand when you know things are tight and the bills continue to come in? I get it.
The good news is that you can get as detailed or as simple as you’d like with this exercise. I’m not forcing you to do a full year’s accounting here. However of course, the more detailed you get, the more accurate and tangible your plans will be. Just sayin’.
Let’s do this! And remember, this is a purely self-centered exercise (but in a good way). So suspend your disbelief about whether or not you’ll actually be able to charge these numbers. For now, DREAM BIG.
Part 1: How much do you want to make per hour of work? And how many hours per week do you want to work?
Again, you could do a full budget for your ideal life and break down the numbers, or you could just name a number that sounds good. It’s up to you here. But for the sake of working with a good ol’ round number, let’s say you want to make $100/hr. And then let’s say you want to work 30 hours per week.
So that’s, $100/hr x 30 hrs = $3,000/week (gross)
Part 2: Calculate how many hours your projects usually take to complete (by line item).
So let’s say you draw children’s portraits from photos. You know that the average portrait takes ~4 hours to finish drawing. But are you also calculating in the time it takes to talk to the client, get the digital photo, and frame the portrait? Be sure to list each and EVERY step of your process for your services and/or product making.
Using our portrait-maker model, here’s how it would look.
Initial phone call with client: .25 hours
Emails back and forth to decide on photo: 1 hr
Drawing time: 4 hours
Finishing & Framing time: .5 hours
Total hours per portrait: 5.75 hours
So, right there, even if you used to charge $100 hour for the usual 4 hours to draw, you’ve now realized if you truly want to make $100/hour you’ll need to charge $575 flat rate, or charge hourly and include those other admin tasks in your fee.
Part 3: What other expenses do you incur that might eat up your profit?
Maybe you have to keep software subscriptions up, or replace pens, pencils, paint, pay for website hosting, or credit card processing fees, or keep upon on some type of certification. List those out like this:
Expense Purpose Cost Frequency
Pencils sketching $10 monthly
Frames framing portraits $35 per project
Next, break this down by weekly, or monthly expense so you have a clearer picture of how it cuts in to your profits.
Part 4: Reassess for Reality. Then settle on a number.
Now that you know your hourly rate, how many hours you want to work, how much time it actually takes to do your work, and what other expenses may cut into your profit, how is that original hourly rate working out for ya? Is it enough? Too much?
Don’t worry right now about whether you deserve to make this much or not, we’ll tackle quantifying value later, but for now, settle on a target number here.
Hourly Rate + Weekly paid hours = Weekly projected revenue (gross)
Deduct weekly expenses (or average weekly expenses broken down from Step 4).
Weekly projected revenue – weekly expenses = weekly income
Now obviously, it’s also best to calculate in taxes (sales and/or income, where applicable) but at a minimum do the above breakdowns.
If these numbers look good you’re done for the week. If not, go back through and recalculate to get to a number that feels equitable for what you’re providing.
In my second installment of How to Charge More for Your Work, we’ll take a closer look at what your customers want and what kind of psychological journey they go on before buying and you’ll begin to see new opportunities arise. Read that post here.
If you have any questions on this week’s action items, feel free post a comment below and I’ll respond.