In our last post we focused on overcoming the plight of the creative entrepreneur, we talked about the fact that defining How you do your work is important to properly defining What it is you do. We also learned that we need to think about how we do our work and what we do quite differently than we did before in order to overcome our plight. However, today we are going to switch our focus. Over the past few posts, we’ve been talking a lot about knowing the Why, How and Whats behind your business. But, this series is not aimed at being purely philosophical. It is also meant to also be practical. So today we are going to switch from understanding and defining the ether around your business, to understanding your real value, and, more importantly, figuring out how to price that value. I know you are excited for this one, so let’s jump right in!
Change Your Approach to the ‘Money Conversation’
It’s always interesting to try to talk to creative entrepreneurs about value, especially when value means money. It just so happens that it’s not in many of our creative heads to enjoy thinking about or talking about money. I think that Mark McGuinness does a great job of summing up why this is in his post 7 Reasons Creative People Don’t Talk About Money. All be it a bit sales-y of a post, he does point out how creatives don’t talk about money because of reasons like ‘we don’t think it’s important’, ‘we don’t know how to get it’, ‘we don’t want to sell out’, ‘we don’t want to look greedy’, and my favorite ‘we don’t know what we’re worth’. Unfortunately, because money conversations are uncomfortable, so, too, is thinking and talking about our real value. Further, if we’re not thinking about or talking about our value, or money in general, that means that us creative entrepreneurs aren’t talking about our price (I.e. what we should charge). Of course, the fact that our natural creative state makes it hard for us to think about and talk about money, causes us some issues.
Devaluing and commoditizing our work doesn’t make us helpers or martyrs, but means we are hurting everyone else in our industry by devaluing what they do too.
Accepting Your Real Value
First, because we are uncomfortable dealing with the idea of money, many of us default to what everyone else is doing. And, what everyone else is doing is something of a mashup between cost based pricing and competitor based pricing. If we freelance for agencies we are a cost to them. They may be making $300/hour for our work, and so we charge $100/hour for that work. Another thing we CEs do is say to our peers “what’s the going rate for web design these days? I was thinking $80 – $100/hour. Is that what you are charging?”, and we’ll base our rate off of what others are charging. Both of these methods are easy for CEs because they seem fair (I.e. I’m not being greedy or selling out), and they make it so that we don’t have to discuss money with others at length. But, both of these methods are the exact things that devalue, and make a commodity out of, our work. And, as we mentioned last time, devaluing and commoditizing our work doesn’t make us helpers or martyrs, but means we are hurting everyone else in our industry by devaluing what they do too.
Second, as Mark points out, we CEs don’t understand our value. Hopefully, you are now much better acquainted with your value after thinking through your why, how and whats. But, combine not understanding our value with not wanting to look greedy or sell out, and you can bet your bottom dollar (pun intended) that we are undervaluing ourselves in a BIG way. We creatives have a soft spot for helping others and for self expression, and think that money shouldn’t matter if we are doing the right thing. All of this thinking can be great, unfortunately it probably means that you aren’t charging a high enough rate for your value.
Third, and perhaps most important, we creative entrepreneurs can end up with a payment amount that doesn’t compliment our work/life style. This means that you aren’t getting paid an amount that supports how you want to live, so you have to work harder and more to make more to try to stay afloat. This negates the entire point behind being independent in the first place.
So what is a creative entrepreneur to do? Afterall, it’s not your fault you are creative… you were born this way dagnabit! Well, rest assured there are answers.
We need to first think of ourselves as an investment instead of an expense
Pricing Your Work
Enter value based pricing. First thing is first, know and understand your why, how and whats. This is what ultimately helps you to understand your value. Once you have your value you can start to see just how important you are to your potential client base. Here’s an example of understanding your value.
Company A needs to sell more widgets from their website. By working with a qualified web professional who can look through their site, figure out what the problem is (or if there is a problem at all), and tell them how to fix the problem, odds are they can reach this goal. This seems like something that you can do, and it seems like something they need. Therefore, the help you can provide is valuable to this company! Hiring you is not just costing them money… it is making them better, saving them time and helping them to sell more!
Therefore you need to switch your thinking from “I’m costing this company money” to “the value I provide this company exceeds a dollar amount”. In his Skillshare class Mo’ Money, No Problems, Brennan Dunn tells us that we need to start pricing based off of our value, and to do that we need to first think of ourselves as an investment instead of an expense, we then need to assess the project we are looking to take, and lastly we need to determine the potential financial upside to our work being successful for the project. Is our work going to help to increase revenue? Is it going to save the company money in some way? Once we know these factors we can set our project price.
My personal way of pricing a project is a combination of Brennan’s way, and my own cobbled together way. Based off of my market (those in need of IA and strategy consulting), my location (I live in NYC), and the value my work has added to companies in the past, I know how much I need to make a year to live how I want (well not exactly how I want. Some sort of 6 month vacation to France would be nice, but one can dream), how much I want to make a year in an ideal world, and the number inbetween the two. When pricing projects my first questions to my clients always involve, what do you need, how long until you need it, and how much money to you have? From there I can determine if the project meets my criteria. But my criteria are ultimately based on the value I provide… which is the key. (Note: a great article for understanding this method is Needs + Resources + Location + Schedule + Budget = Scope).
Face Your Fear: Charge More
Anyway you slice it, you need to price based off of your value. And usually, for us creative entrepreneurs this means you need to charge more!
Now, I know what your thinking “I’m scared to charge more?”, “What if that means I’m being greedy?”, “It’s not about the money to me”, “What if I lose clients?”, and “What if I can’t get enough business?”. I know you are thinking this because these are all questions that I have asked!
Rest assured, however, that being scared is normal. Many of us CEs are humble folks, and being humble is always important. But, ripping yourself off doesn’t do anyone any good. We exist in an economic system where we make money from our clients, who make money off our work work. And within this system if we devalue ourselves, we devalue our industry, and no one can make enough money to do great work, because we all get stressed out about finding more work. Thus charging the right amount for your work isn’t being greedy or selling out. It helps everyone in the industry, including you.
Also rest assured that you will lose clients, and that this is a good thing! In fact, losing clients is the entire point! Because if clients aren’t willing to pay for the value you provide, they are the wrong clients for you. These are the clients that have been helping to strengthen your plight not diminish it. So feel free to kick them to the curb, and get ready to find the clients that you should have been working with all along (more on how to do this later in the series as well).
So, the outcomes of you knowing your value and pricing off of it are many. By aligning your price and value you begin to get paid for the value you provide instead of for the “goods” you output. Pricing off of value, and charging more means you take on less work, but you get paid more for it, so, economically it pans out that you don’t go broke, but instead live a more balanced lifestyle. Because you take on less work, you have the time to take a more quality approach to your work. You are a creative entrepreneur, you need the time to let the creative process happen in order to see real value from it. In order to get that time, you need to charge for it. Lastly, you’ll be making what you deserve which eases your mind, and gives you more time to say, take a class that deepens your knowledge in the process. In short, work becomes fun, creative, and worthwhile, not just something you do to pay the rent.
Our lesson here today is simple. It’s hard to be creative, humble and financially savvy. However, it isn’t hard to open your eyes to the value your work provides, to charge for that value, and to realize you are helping both your clients and others like you in the process. But, of course, besides helping others, you’ll be freeing up brain space and time to help yourself, and that is what being a creative entrepreneur is all about. Next time we’ll talk about figuring how to charge our clients, but in the meantime, I want you to start charging your value… because you’re worth it!