Like many people in the web consulting arena, when I first started I was in a constant battle with myself to charge what I was worth. I had bills to pay, and some particularly lean times had led me to lower my prices in order to get anything. Luckily, the new lower rates brought work, but over time as my business matured they also brought a bunch of headaches as well.
To begin with, I was stressed and distracted. In order to try and meet my financial goals I was filling my schedule with as many as twelve or fourteen projects at once, then juggling them throughout the week to ensure they all continued moving forward. Not only was this hard on me, I was beginning to feel that it wasn’t the best situation for my clients either, who relied on my focus and attention to detail in our work together.
Aside from the stress, I was being underpaid and I knew it. Worse, I was the one who was underpaying myself. I didn’t just suspect that I was under-charging, I had peers tell me so. I had clients tell me so. I had one client ask my price, then offer to pay me 30% more. I recognized full-well that my stress was completely self-imposed, and that the only person who could reverse it was little old me.
But the decision to raise my prices was slow in coming. My lean times had been really lean — like, $0.08 in my bank account and no work on the horizon lean — and when my income finally leveled out I promised myself I’d never end up in that place again. Even though people had told me I was undercharging, I was worried that raising my prices might take me straight back to broke-town. I knew logically that if I tripled my rate (which would put me in about the center of the pack in terms of competitive pricing) I could feasibly lose two in three customers and maintain my income. But there was nothing to say they didn’t all leave me, and that was my major hang up.
Beyond that, I develop close relationships with all my clients. Some of them are like family to me, and I enjoy working with them tremendously. I was partly worried about losing the business, but equally worried about offending them, or seeming to pull the rug out from beneath them.
One afternoon while staring blankly at the cover of a Tony Robins book on my coffee table, I finally had a revelation. I realized that the reason I had so many clients wasn’t because I had low prices, but because I’d put my mind to getting each and every one of them. Each had a unique type of business, and I’d really wanted to work with them, so I’d put in the effort and ended up winning the job. I realized that there was very little — maybe nothing — that I’d ever wanted that I hadn’t gotten once I focused and acted. I realized that I wanted to make a better living for myself, and be able to deliver greater value to my clients, and that the only way to do that would be to raise my prices.
I realized that they might leave me, but I also decided that I wasn’t going to be the one to keep myself or my business down. Then I sat down and drafted the following email:
Then clicked send, and waited for the world to end…It didn’t.
In fact, the response was overwhelmingly supportive, even positive. Part of the reason, I know, is that many of my clients were self employed and understood the exact same struggle. Some were in the exact same industry as me, and subcontracted to me. As I mentioned, we build a close working relationship and routinely offer each other help or advice on our businesses.
However, even those who were outside of my industry didn’t press the eject button.
In the end it may have taken some short-term work off the table
But ultimately no one walked, and virtually everyone was very supportive — even a personal friend whom I’d previously been charging nothing.
In the end I got more than I asked for. My hourly rates went up, my existing project-load may have been lightened a bit, and I kept all of my clients.
How to Duplicate These Types of Results
I don’t think these results are a given for everyone who raises their rates, even if they’re currently undercharging. There are two things I’ve been doing that I think had a profound effect on the outcome of this move. Both of them come from Richard Koch’s book The 80/20 Principle and have to do with developing clients that take your business to the next level.
1. Define the Right Types of Clients
When I first started out I was hungry, and eager, and worried about making it to happy hour with my friends so I took on virtually every project that came my way. Some clients didn’t feel like a good fit, but I took them on anyway with the idea that – when things were better – I’d be more selective.
Then, I proceeded to work straight through happy hour, servicing accounts that took up way too much of my time, and paid way too little (sometimes even shirking the bill). It’s hell, and if you’re self employed you’ve probably been there. The change came when I began listening to Seanwes, and realized that the better work would never come until after I began being more selective.
It’s scary to tell yourself that you’re going to turn down work. Especially when those bills are marching your way, and it seems like the phone’s gone silent. But very quickly I found it to be the best business decision I’d made in months. My project load dropped off a little bit, but the things I was working on were going unbelievably smoothly. What’s more, the good clients were referring more good clients, and the whole system was building on itself.
Now, before taking on work I’ll sit with a prospect to talk and ensure our personalities are a good fit. As a result, my client list is filled with the names of respectful, attentive, successful people who work hard and value my time. I have no doubt this selectivity was a huge driving force in the response I got.
2. Provide Extraordinary Service
The second thing Koch suggests is to go above and beyond for your existing clients.
Whether or not I’m successful at that is ultimately for my clients to say. But the one thing I can control is how much thought goes into providing them with extraordinary service.
Each day I wrap things up by spending fifteen minutes brainstorming ways in which I can take our relationship from good to extraordinary. Ways in which I can step outside the role of my typical advisory position, and provide extra value to them and their clients. That habit has yielded a lot, and I’d recommend it to everyone.
There are other tips in Koch’s book, and I believe every business owner should read it. I also hope that for those who are considering raising their prices this article has served to convince you it’s possible.