Today’s post is about how to set your fees correctly, so that you attract more clients and are well rewarded for providing a great service.
Let’s go!
Fee setting: The golden rule
The starting point, is always to ensure that your fee makes mathematical sense. For example:
Barbara is a web designer, who wants to earn £100,000 a year. She plans on working 8 hours a day, 48 weeks of the year. If she charges £50 an hour for her time, she isn’t going to be able to reach her income target. Even if every single hour of her working week, every week, was spent on billable work, she would still be £6,000 below her income requirement.
In short, if you exchange your time for money, make sure the numbers add up.
Fee setting: Finding the sweet-spot
The marketplace will always let you know if you are offering good value for money.
If you explain what your service is, for example, then quote your fee, your prospective client has a simple value / cost equation to do. If the service sounded appealing, but they thought it was overpriced, they won’t hire you. If the fee seemed to represent good value, there’s a good chance they will hire you.
Interestingly, you can lose business by quoting a fee or price, which is too low. If they think your fee is too low, they will wonder why. The marketplace is not stupid. People know that if a provider promises them a diamond quality service, for a bargain basement fee, something is wrong. They will think that either the service is not as good as you say, or that you will find hidden ways to increase the fee you quoted. I refer to this gap between the fee and the promise as a fee fracture.
To set your fee, so that it offers the perfect balance of value for the client and value for you, you need to start with a fee, which you believe to be good value for both parties. Then, measure your feedback. I very strongly recommend you check out what your competitors are charging, so you know what you are competing against.
If prospective clients eagerly hire you very quickly and without negotiating, it could be a sign that you have tipped the deal too much in their favour. Conversely, if they hear your fee and very few elect to hire you, it’s possible you have tipped the deal too much in your favour.
Fee setting: Add more value rather than lowering your fee
The temptation, when people tell you that your fee is too high, is to lower your fee. Whilst this may be the solution, it is very certainly NOT the first thing to do!
You should always seek to pump as much value into your service as you can, thereby increasing what it’s worth. For example, consider offering something extra, which has a high perceived value, but a low delivery cost to you. This approach is a far better way to increase the sale of your services, than undercutting people, in a fee “race to the bottom.”
Fee setting is a huge subject, far too big to cover in a blog post. However, I hope these few ideas and tips help you to earn what you deserve and avoid underselling yourself.