Hey and welcome to episode 20 of the Free and Fearless podcast. Today I want to talk about something that almost anyone in business can resonate with – not charging what we are worth.
I will explain why this happens, what the consequences are if we keep doing it, why you should increase your rates NOW, and how to price your products and services based on the value you provide not on the time you invest, what your customers can afford or any other factor.
This will hit home with many freelancers, bloggers, coaches and anyone selling a product.
With this episode, I want to show you that you can take your power back, that you don’t need to follow what others in your niche are doing or telling you to do, that you can give yourself permission to raise your rate and that this one step can lead to reaching your income goals sooner than you thought was possible.
Tune into the episode below:
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- [1:46] Why we underprice our products and services
- [3:12] The consequences of charging less than what we’re worth
- [5:22] What I did to increase my rates & double my income
- [8:24] Removing the barriers to charging more
- [9:34] What’s wrong with the hourly based pricing model
- [11:15] 3 tips for pricing your offers
- [13:28] 7 reasons to raise your rates NOW
We all do work we love, we put in the time and effort, and have the expertise. And when it comes to asking what we think we and our work are worth, we get it wrong.
Here’s why that happens;
- we compare ourselves to the big names in the niche, think we’re nowhere near their quality work and reputation, and charge much less than they do;
- we still aren’t sure we’ll make it on our own;
- we don’t believe in our products or services as much as we should;
- we aren’t sure about the ‘why’ behind the work we do;
- we don’t feel comfortable taking people’s money;
- we still think like an employee;
- we think a higher price will raise customers’ expectations so much that we won’t be able to answer that with our offers;
- we base what we charge per hour, or per item, or else. Basically, anything else but the value we provide and the transformation we help the person achieve;
- we keep in mind the clients’ budget and don’t want to make them take big financial decisions, so we decide that a much lower price would be a no-brainer.
If you look closely at all those reasons why we underprice our products and services, even though we’re answering a need in a specific market and care about the work we do for clients, you’ll see that the underlying problem is that we aren’t confident enough.
That can be crucial for our business. Here’s why.
The Consequences of Underpricing
1. A proof for low quality.
The first consequence of underpricing is that we are basically telling people what we have is low quality.
One of the common rules in any business is that the customer gets what they pay for. And when you charge less, you are directly telling each and every potential client of yours that you’re offering them lower quality.
Underpricing means undervaluing your work and your abilities.
2. A negative perception of your brand.
If you, the owner of the business and the provider of the product/service, undervalue what you have to offer to people, you’re ruining your brand reputation.
3. You won’t attract high-value clients.
Most service providers and coaches dream of having a few big, loyal clients who come back with new projects on a consistent basis or sign up for their program again and thus provide security, a recurring income, and even help with word of mouth marketing.
But to do that, you need to build a name for yourself and to be confident enough to position yourself in a way that will attract your dream clients, those who are sure they want to work with you and who are ready to pay right away, without asking too many questions and definitely without negotiating.
4. You won’t grow.
Pricing higher is a challenge and challenges help us grow, both in life and in business.
If you keep your prices low, you’ll stay small, attract low-quality clients, and never live up to your potential.
Charging more, though, will help you get out of your comfort zone, see where your work can take you, and let you create the ‘learn and optimize’ mindset so that you can always be innovating and making a better offer with your products and services.
Now that you know why undercharging is bad for our business and what makes us do it, let’s see what we can do about that.
The Solution to Underpricing Your Products: Value-Based Pricing
The pricing models most service- and product-based businesses are using today are broken because they are based on anything else but real value.
And that’s exactly what you should charge based on – the value you’re providing, which has little to do with any formulas or stats or numbers.
It all begins with defining the value – that’s the starting point. So think about how you’re helping your client with your work and how this could potentially drastically improve their life, how this can save them time or money in the next years, and what all that is worth over the course of their whole life.
Then, remove anything that is making you question your worthiness.
Confidence is the underlying connection, but there must be more.
Maybe you’ve got people in your surroundings killing your self-esteem. Maybe your lack of diploma or special training makes you insecure, or it might be that you’re terrified of expressing how much your work is worth in numbers.
Whatever the reason, you need to get clear about it so that you can define your value, and then ask to be paid accordingly.
No more underpricing, just value-based pricing.
What’s wrong with the hourly based pricing model
Here’s an example. In the beginning of your freelancing or coaching career, you might be charing per hour.
That makes sense as it’s a solid way to follow what others are doing, calculate your earnings, give one price to all clients, and know exactly how many hours you’ll invest in each project.
But if you stick to this approach long enough, you start noticing a few things.
Some of the work you do requires more effort and energy, although it takes the same amount of time, but you’re still receiving the same amount of money for it.
You often feel like you aren’t fulfilling your earning potential.
You sometimes feel like negotiating a different price for your services or products, but don’t feel comfortable asking the client and fear you might lose them. So you settle for what you’ve always been paid.
You compare yourself and your work to what others in the market are charging, although you might have more experience, a more creative approach, a bigger desire to do meaningful work and help your clients with what you do.
All these are signs that you’re not charging what you’re worth.
And I’m here to tell you that you could be charging more.
What you need to do to take your business to the next step is to start pricing on value.
Here’s what that will change for you:
- you’ll enjoy your work more;
- your clients will take you more seriously – higher rates mean you’re showing confidence in what you can offer;
- you’ll earn more;
- your pricing process won’t be a guessing game anymore;
- you’ll also attract better clients and that will save you a lot of trouble.
Here are some tips from me on how to price your products and services better and take your work to higher levels:
How to Price Your Products and Services
1. Quality over quantity.
Begin paying attention to value for a start.
Ask yourself how much you’re investing in each project, whether it’s on your mind when you’re not behind the screen too, whether you believe you’re contributing to the client and their business in some great ways.
If you do believe you’re giving it your all, then price what feels right for you. Not what the average prices in the market are, not what you’ve charged before for that same thing, not what the client expects you, and not what others advise you to.
2. Start saying no.
If you keep saying ‘yes’ one more time to old clients, or new ones who are on a budget or just don’t want to pay more knowing there are cheaper workers out there, then you won’t really make it to the next level.
You should let go of the mindset that makes you settle down for less if you want to scale.
It’s all about freedom here and hourly pricing is like a prison for you, that limits your creativity, satisfaction, and profits.
3. It’s all about the result of the work.
Stop calculating what your current expenses are, letting the client give you a price first, comparing yourself with freelancers charging less, or trying to fit in as many working hours in a day as possible.
That will drive you crazy and it will definitely affect how you work.
Instead, find the value in what you’re doing. Look for it in the end result.
When a potential client shares with you what they want, create a vision in your mind of what you’ll do and how exactly it can make them happier, or make their brand and business more successful, or find leads because of an aspect you’ll take care of.
Sometimes they can’t think of all the possible benefits. So you’re there to tell them. Once they can calculate the long-term advantages of the work you’ll do for them, they’ll gladly pay more.
But for that to happen, you need to know what you can do, to believe it will get your client there, and to express this vision in an understandable way.
That’s where you start – by letting go of the hourly pricing mentality and finding the confidence to price on value.
Let me finish this with a dose of encouragement. Here are some really good reasons to increase your rates right now and even double them if you feel like.
7 reasons to raise your rates NOW
1. Most people underprice themselves.
They wait till they have more experience, more revenue, more certifications, more products or else until they can charge more.
But all it takes is to give yourself permission. And you might as well do it now.
2. This is an amazing exercise.
You will feel uncomfortable doing it. That’s why I suggest you just go ahead and do it (you can always change the rates back) and journal on this.
Write down what you feel and why you think that is.
Chances are you’ll uncover limiting beliefs related to unworthiness. This has nothing to do with rates, business, your niche or any other external factor.
It’s between your Ego and your Higher Self. But you’ll only learn more about yourself and what’s going on in your subconscious mind if you actually do this.
3. You’ll attract better clients.
Higher-priced products or services attract people who are ready to invest and do the work. There are fewer refunds and problems (assuming you’re good at what you do and can deliver on your promise).
4. Future you.
There’s a version of you in the future that already is a successful business owner and earns your big income goal easily.
You might as well start acting as them now to get closer to it (energetically first, before changes start happening in your reality).
What’s one thing you can do to live AS IF? Raise your rates! The CEO you are a year or a few from now definitely isn’t undercharging, so why do it now?
5. You’re declaring to the universe, to your clients, and to everyone else (most importantly, to yourself) that you’re serious about making an impact and growing that business.
You know that what you offer is priceless so the result/transformation you’re offering must cost AT LEAST double what you’re charging now.
The next reason is my favorite:
6. Because you can!
7. The moment you start charging more is the moment you begin valuing your time more.
It’s when you take responsibility to better serve your people, let go of the activities in your business with lower impact and focus on the other 5% instead.
At the end of the day, you don’t even need a reason. It can be an experiment, an act of self-love, a quantum leap, a step towards your income goals.
If this got your attention, it means you know deep within you gotta raise those prices. There probably won’t be a moment when you feel ready and have no doubts. That’s why it’s just one of those things that we have to do and see how it feels and what it leads to after that.
Thanks for joining me today and if you stayed till the end, I’m curious what you loved learning about the most and what your next step will be.
If you’re feeling bold and are ready to stop underpricing yourself, share this post/episode on Instagram, tag me @letsreachsuccess and let’s inspire many other business owners to also start charging more right now.