How value-based pricing revitalized my creative business and my self-worth

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Do you believe you and your work are valuable?

While most of us would respond with a resounding “yes,” the biggest roadblock creatives face when it comes to switching to value-based pricing is a lack of self-worth.

(Or at least it was for me.)

Now, you might say “my clients can’t afford that” or “no one will pay the price I’d love to make.”

Sidenote: Once you finish, read how 4 freelancers built recurring revenue models that changed their business. You'll love it.

That’s fear talking:

  • Fear that you’re not worth the price you wish you were.
  • Fear that you can’t sell your services – or deliver well enough – to charge a higher rate.
  • Fear of marketing in a new way to bring in higher-paying clients.

And those fears boil down to a lack of self-confidence / self-worth.

(Maybe rightfully so; it’s a gut check, but you have to take a good look at your output and capabilities to determine if you need to improve before you raise your rates.)

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But you CAN do it. And here’s why I know that:

Because I did.

(And so did another Millo reader-turned-author. Read her post here: How switching to value-based pricing transformed our small agency)

You see, I am mostly self-taught out of necessity. I had no degree. When I entered the world of freelance, I didn’t feel confident enough to charge more than $10 an hour.

Thinking it would be a good way to get experience, I committed the almost un-pardonable sin known as “spec work.” So I joined 99Designs.

Working on those contest-only projects further damaged my self-worth.

Fortunately it only took me a few months to figure out that I was wasting my time. I deleted my account and raised my prices to $20 per hour.

Then last year I went from doing a job or two here and there to buying a design business from a close friend.

My first year as a serious sole-proprietor business owner was hard. I had many lessons to learn.

I was charging $30 per hour with some per-project rates. But many times I would find myself racing a clock to get things done or having very uncomfortable conversations about money and billing with my customers.

So I began to research value-based pricing.

But I questioned my professionalism. Was I a professional designer or just some hack?

Make the mental shift

Through my research and reading, I learned the difference between an average freelancer and a professional freelancer is:

  • The average freelancer solves the problem presented and gets paid.
  • The professional freelancer looks at the bigger picture. The professional consults with the client and solves the original problem as well as others.

That’s when I realized that I was already doing this with my clients. And from that point forward I knew I could transition to value-based pricing.

Which one are you? Are you a professional? Then you’re ready for value-based pricing.

(Just starting out? Here’s 6 signs you’re going to be a great freelance designer.)

Hourly rates = working more for less

One of the biggest issues with hourly is clients wanting to nickel and dime us on our hours.

Time and time again, I worked over the hours we agreed upon and just let it go because it was easier than having to go back and tell my client they needed to pay more.

(Are you nodding your head in agreement?)

But I also realized that clients don’t care about hours worked; they care about price.

Hours are just a way for clients to understand value. I needed them to understand value in a different way…and you do, too.

How to sell value-based pricing

I set up a new process for quoting clients that involves a creative brief explaining the value for the investment.

It is very important to emphasize investment over cost; to train clients to view creative work as an investment.

I also emphasize excellence in quality and ask them to define excellence (so I know exactly what my goal should be).

Then I follow up with a proposal again emphasizing investment and giving a flat, value-based price based on the creative brief.

I implemented this at the beginning of this year, and none of my first four new clients questioned my flat rate price!

Of course, in this transition, some of my existing clients decided to part ways, but that is okay. If they can’t see my value, they’re not the right clients for me anyway.

Struggling with “selling?” Here’s how to do it sleaze-free:

How to know what to charge

Pricing is never easy, even in the value-based system.

For me, the price should be based on how much a client may make on your work in a year. I charge 10-15% of that number.

However, clients are not just going to hand their financials to you.

But you can ask what their expected ROI is. From that information and some research into the company / industry, you can formulate the anticipated value of your work.

One more thing: each client and project is unique, and therefore should be priced based on their unique circumstances.

A logo for a mom and pop shop that just started and a logo for a multinational corporation that has been in the business for over 50 years are going to cost VASTLY different prices.

The small mom and pop just started and has no brand equity. They just need a logo. Most likely I’d charge them a minimal price, probably $300-$500.

But an established multi-national corporation has brand equity and most likely is a re-brand. You’re probably going to develop a brand experience for them. I would charge them $10K or more. Keep in mind: with their customer base, they will gain more value from your design.

Finally, I recommend having a base price for everything. (Don’t tell your customers this base price, but do write it down for your personal benefit.)

This helps you not sell yourself short!

Example

I recently redesigned a website for driving school business. (He had originally contacted me for maintenance on a non-responsive template.)

So I proposed a re-design.

In my proposal I explained how his website needed to appeal to the younger “learning to drive” generation as well as the importance of a mobile friendly website. I also described why I felt he should move away from a predesigned template.

Furthermore, I looked at how much he charged per student (public information) and showed him the investment he would need to make into a custom-coded, responsive WordPress theme. And then I revealed how many customers he would need to bring in through his new website before he broke even on his new website investment (less than 20 customers!).

Before, I may have charged him $1500 for this website.

Instead I was able to successfully charge $3000.

Some of the more experienced web developers here I’m sure would have charged more than that even. But keep in mind I have only been doing value-based pricing for less then a year!

Final thoughts

Time is money. Time is valuable.

The time and effort I put in to my work is valuable and thus I, as a professional <insert title here>, am valuable.

(Whenever you’re feeling a lack of self-worth, repeat that line 3 times.)

That is why value-based pricing not only changed the way I do business, but it also changed how I value my work and myself.

But what really makes value-based pricing work is that you make yourself a valuable partner and asset to your clients. You help them succeed so that you can also be successful.

And that’s what being a creative entrepreneur is all about.

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About Benjamin Smith

Ben is the owner of IFBDesign and a self-taught graphic and web designer who loves a challenge. He is highly creative, observant, and multi-talented with extensive experience in multimedia, branding, marketing, web and print design. He likes to look beyond the clients immediate needs and help solve their long-term goals. He is also a talented piano player, and collects stamps as a hobby.

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Comments

  1. Joshua Allen Donini says:

    All of us creative folk seem to have a hard time placing value on our work & time.
    I wonder if it is because, most of the time, we LOVE what we’re doing and would do it for free…. (if we didn’t have bills or need food).

  2. future graphics says:

    I literally had a conversation with a colleague last night regarding value based pricing and self-worth. How pertinent your post was!!

    Love this as a take-away “what really makes value-based pricing work is that you make yourself a valuable partner and asset to your clients”. Well said!

    • Exactly I feel often we as designers tend to like to hide behind our emails, but when we go the direction of value-based pricing it pulls on us to get out from behind our email and prove our value through providing a better customer service experience. For me and my business the next level for me is working towards this goal of providing better service.

  3. Sharon Pettis McElwee says:

    I think the issue isn’t competence, but confidence. Freelance writers struggle with the EXACT same issue. Thanks Ben!

  4. Tramaine Stallworth says:

    Have you ever read something that just encouraged so much you wanted to cry? Thanks for this post!

  5. I definitely need to work on this! I think it will help me get further ahead in my business instead of charging for time, I need to charge for value.

  6. alvalynlundgren says:

    Thanks, Benjamin, for writing this article.

    Of course, if we start out with value pricing rather than project-based or hourly-based pricing, no shift has to be made in our thinking.

    I have never charged by the hour, but by the value to the client. It’s been, if not easy, at least more comfortable to discuss money and scheduling with clients when you talk about what they receive instead of how much it will cost them.

    You are correct that clients don’t care about the number of hours we put into something; they care about price. And they also care about results. Value-based pricing shifts the conversation from a labor point of view (hurry up and get it done) to a results point of view. As a designer matures in skill, craft and thinking, the number of hours a project requires is reduced, but the value remains and even increases.

    The number of hours we put in on something is none of the client’s business. What I can accomplish in 2 hours might take another person 6. Hourly pricing is not equitable – for the client.

  7. Sweet thoughts & tips, thank for sharing!! 🙂

  8. Mindy Lepp says:

    Hey Ben, thanks for sharing a follow-up to my post a few months back. My favorite line from yours was “It is very important to emphasize investment over cost; to train clients to view creative work as an investment.”