Knowing what to charge is a matter of gaining confidence about the value you bring to the table, says Entrepreneurial You author Dorie Clark in this extract from her book. Dorie will be presenting live with Decision in November.
Building up the courage to monetize can be a challenge. What if no one wants your product? Or if people complain that you’re overpriced? Or call you a sellout for charging at all? All of that can, and likely will, happen. But you can’t help others with your insightful advice or great product or service if you can’t keep yourself in business. Charging what you’re worth is key to creating the long-term impact you desire.
In this chapter, we’ll look at how to begin monetizing your business. It starts with gaining confidence about the value you bring to the table; focusing on the right metrics; overcoming some common types of resistance; and striking the right balance regarding things like timing.
Understand the Value You Offer
The first step is to get clear on the value you bring to others. Once you do that, you’ll feel more comfortable charging appropriate—even premium—prices.
Shortly after I launched my consulting business in 2006, I landed a meeting with a potential client. I spent an hour asking her incisive questions about her organization and talked about possible solutions I could offer. I’d nearly sealed the deal, when she asked a rather obvious question: What do you charge?
I was blindsided.
I suppose I’d been hoping to avoid the question, or have her make the first offer, or intone something about paying their “standard rate for consultants,” whatever that might be. Somehow, I’d managed to avoid even thinking about my rates; I had no idea what to say.
I thought fast. “$60 an hour,” I mumbled. That was just a bit less than what my acupuncturist charged; I figured if I didn’t mind paying it, she wouldn’t either. But when she said yes—too quickly—I realized I’d made a crucial mistake. I’d left money on the table.
Over the next few years, I stumbled along, accepting laughably small assignments for minuscule pay—writing a speech for $500, or doing copywriting for a few flyers for $250. I made up for it in volume; in my first few years of business, I worked with more than eighty clients and still managed to bring in a six-figure salary, despite my absurdly low rates. But the pace was relentless.
Over time, I began to raise my rates—and my standards— just a bit. I had a track record, so I no longer bothered to accept $500 engagements. But I still did plenty of $2,500 and $5,000 consulting assignments that took weeks or months of my time.
In the early days of your business, you’re willing to do almost anything to gain experience and build a list of clients who could provide referrals and testimonials. You’ll probably lose those early, low-paying clients when you move upmarket and increase your rates over time, which can be a daunting prospect.
But it’s necessary in order to break the pattern of being so busy working to survive that you don’t have time to raise your profile in a meaningful way—because that’s the only thing that will give you long-term brand security.
As of this writing, I charge $6,000 for a half-day strategy session with clients. That’s a far cry from the early days of my business. It’s the result of getting clear on the value I can bring; building my brand to attract the right kind of clients (who would be happy to work with me, even at a premium price point); and being confident enough to name that price and stand firm on it.
Author Kevin Kruse learned a lesson about understanding one’s own value a number of years ago, from an unexpected source: someone he was trying to hire as a speaker. At the time, Kruse was running a nonprofit life-sciences association, and his job was to organize the annual convention. “The board really wanted this one specific guy who was an expert on creativity” as the keynote speaker, he recalls. Even though Kruse had a budget of $30,000 to offer for the keynote address alone, he wasn’t sure he could land the speaker, a New York Times best-selling author with an Ivy League doctorate and a heavy media presence.
But when he called, the author quoted a shockingly low fee: only $3,000. “From the outside,” says Kruse, “it looked like he had all the signs of success and credibility, and we would have gladly paid literally ten times his asking price.” As it was, Kruse wondered if the author’s low fee scared a lot of people away, thinking he must be an inexperienced beginner on stage.
The speaker may have simply been clueless about market rates for his craft. But it’s also possible he lacked the confidence to value himself appropriately.
Think about it: when something is simple for us, we often assume it must be easy for everyone else, notes Jason Van Orden, who runs the popular podcast and online training program Internet Business Mastery. If you’re a golf instructor, for instance, the proper handgrip may be obvious to you. But by showing it to someone else, says Van Orden, you’ve saved them “maybe months of frustration and trying to figure it out, and you’ve just boiled it down into three lessons for them.”
I became more confident raising my rates for two key reasons. First, I constantly upgraded my skills and reputation. I knew that I could safely charge more in the marketplace when I started blogging for the Huffington Post and, later, Harvard Business Review, because I’d be perceived as more of an expert. Second, I gained more clarity about what others were charging, which gave me confidence that my rates weren’t out of line with the mainstream, and that I could even safely increase them. That’s one of the reasons building relationships with other professionals in your field is worthwhile, so you can compare notes and make sure you’re not undervaluing yourself.
Gaining the confidence to charge what you’re worth is a common problem among new entrepreneurs. But it’s vital that you do whatever it takes to overcome it—be it hiring a personal coach, finding a mentor, or getting involved with a mastermind group or professional association where you can develop a better sense of pricing in your market.
Reprinted by permission of Harvard Business Review Press. Excerpted from Entrepreneurial You. Copyright 2017 Dorie Clark. All rights reserved
Catch Dorie Clark live at the next Decision webinar in conjunction with the MBA Association of Ireland on Nov 12th, 18.30 onwards: https://www.eventbrite.com/e/entrepreneurial-you-monetise-your-expertise-tickets-124537722681