Last updated on April 16, 2022 - My Free Marketing newsletter 👀
On a recent trip to Australia, I stopped by Brisbane to have a drink.
At the bar, I started chatting with the locals. We talked about their love of rugby. They bought me a couple of pints. I asked what the hell was up with all the scary insects in Australia.
You know, the usual conversations.
Then, we started talking about business.
I was blown away when my one my new friends said he prefers NOT to charge for his work.
“I feel guilty when I charge people for my time.”
He’s not alone.
Tons of people — including successful entrepreneurs — struggle with pricing strategy. For example, six-figure copywriter Neville Medhora recently told me he hesitated to raise his rate.
In this article, I’m going to share a pricing strategy which has allowed me to stop feeling guilty about charging people.
(In fact, it even helped me QUADRUPLE my hourly rate.)
You’ll learn about the various pricing strategies ANYONE can use for freelancing, consulting, or project work. Plus, I’ll show you how to charge what you’re worth without feeling guilty.
Let's do this.
|Get the same pricing strategy six-figure consultants use|
As employee #4 at Mint.com, I was in charge of growing the user base from 0 to 100,000 users in six months (here’s how I did it).
When they hired me, they paid me a salary of $100,000. I thought they were crazy, and I truthfully didn’t think I deserved it.
After I quit Mint.com and started AppSumo, one of our first deals was a one-hour talk with me for $250.
It sold out.
A few months later, we did it again — this time with a $500 price.
That sold out, too.
Then, we raised the price to $1,000 for a one-hour call with me…
Yup, all gone.
EVERY TIME my team at AppSumo wanted to push out a new deal for an AppSumo customer to buy a consultation with me, I resisted.
I had tons of guilt about charging these prices, and I went back-and-forth with my team about lowering the price or offering “discounts.”
Why did I feel this way? Why do we feel guilty charging for our time?
In my experience, there are 3 main reasons people feel guilty charging money for work:
How can you get away from this negative thinking? How can you charge even more money, knowing you fully deserve it?
The first step is to understand the intricacies of how to price. When you’re prepared, you feel less nervous and guilty.
Let’s dive into the strategies to price your work and charge people for your knowledge and help.
Part of the reason so many people are scared of setting their rate is because there are so many options.
It’s overwhelming to think about where to begin:
If you just started a business I’m going to show you the most commonly used (and easiest) pricing strategy.
If you’re an expert in your niche or industry you’ll learn how to break from the shackles of hourly work and level up your cash flow.
If you’re trying to maximize growth and revenue, I’ll share how to boost your revenue when you have diverse, proven, and in-demand skills.
The most common pricing strategy for freelancers and consultants is an hourly rate.
One way of determining your hourly rate is to reverse engineer your last salary.
For example, let’s say you made $70,000 last year. There are roughly 2,080 working hours per year, which means your hourly rate is about $33.
Sounds easy, right?
Not so fast. There are a couple things to keep in mind...
First, many first-time consultants and freelancers forget their rate assumes a 40-hour workweek. What if you can’t find enough clients to fill up all 40 hours? What if you get sick? Or what if you just want to work less?
Second, many people don’t consider total comp and benefits (like health insurance) in their pricing. You’re going to pay for those on your own, amigo. No company to help you out now.
This doesn’t mean you shouldn’t use the hourly strategy. It just means you should be careful.
A good rule of thumb: If I don’t expect to work the full 40 hours, and I have to pay my own benefits, I take my hourly salary rate and double it. In the example above, an $33 hourly rate would turn into about $65 per hour.
If you’re just starting out, an hourly rate is an easy and effective pricing strategy. And remember: It’s often better to take the easy route and just get started. Refine later.
When you productize your services, you start to free yourself from the shackles of time.
Instead of being locked into an hourly rate, you charge based on the value or results you create. Typically, you charge project-based fees as you become more familiar with the results you give your clients.
If you’re a web designer who knows your web redesigns get a 10% revenue lift for your clients on average, and this usually equals about $30,000 more revenue for your client, you can price accordingly.
When consulting, I like to deliver 10x what I charge — so $30,000 average increase in revenue for a client would mean I charge about $3,000.
Free yourself from the shackles of time. Charge your clients for projects, not hours. (Tweet this)
To start billing project-based fees, ask yourself: What value do you give?
Remember, it doesn’t always have to be pure bottom-line revenue. If you help your client save 10 hours per week, it could be worth tens of thousands of dollars to them in saved time.
But before you dive into project-based pricing, be careful setting your price based on the time you think you’re going spend.
It’s easy to set your price too low and work 2-3x more hours than you priced. This is why I recommend you start with hourly until you’re more familiar with your industry and client project requests.
Before getting into how you can develop pricing tiers for your business, let me run you through why you should test pricing tiers as you grow your freelancing or consulting:
With so much opportunity, how to do tier pricing RIGHT? No sweat, I’ve got you covered. #fistpound 👊
Step 1: Create base features you want to include for every tier
The first step is to start organizing the base scope of benefits you want to provide to every customer.
At my 8-figure company Sumo (here’s what I learned while growing the company), all customers get access to apps, A/B testing, and all design templates.
What are your “base” features?
If you’re not sure which base features to use yet, that’s OK. As you become more familiar with client needs, you’ll be able to fill in the gaps.
Step 2: Develop a buyer persona for each tier
Tier pricing widens your audience by helping you target different groups of people with different needs.
An individual who just needs you to write an email funnel vs. a client who wants you on a monthly marketing retainer to help them send emails and optimize their opt-in forms every week have different needs.
For example, MailChimp has three pricing tiers for three different customer personas:
Step 3: Include additional features and benefits
The final step is to add unique features and benefits to each tier. Here are three questions you can ask yourself to develop higher tier products:
At Sumo, we learned our biggest clients have a lot of different tools they use for their businesses.
With our "established" business owners this means supporting email providers like Mailchimp, Aweber, and Zapier.
And for our massive enterprise customers, this mean supporting enterprise products (like Infusionsoft and HubSpot).
And if you need more advice on how to price, here’s a recent podcast on building a six-figure business and pricing your services accordingly.
|Get the 3 best pricing strategies in a PDF to go|
Even after reading the EXACT proven steps I’ve used — and hundreds of my consulting friends and readers have used — it’s easy to feel nervous.
But I want to make sure you don’t quit now.
With your pricing strategy picked, here are four ways to feel confident in whatever pricing you decide.
It’s easy to start feeling guilty when you can’t directly see the value you bring to your client or customer.
The best way to overcome this type of guilt is to understand the problems you help solve.
To gain clarity on the value you create, talk to your clients or customers about their goals. Then, break down metrics or key performance indicators you can quantify and measure success.
The key to remember: Value isn’t always created with a dollar sign. When you map out the metrics or key performance indicators, recognize the value you’re charging and price accordingly.
Some amazing products and services which have gained huge market acceptance over the past few years do ONE thing really well: Save people’s time.
Time is a finite resource, and everyone values their time.
Even if the financial ROI is cloudy, many business owners will buy your product or service if it means they’re able to free up their time for something else.
If your service doesn’t help customers generate direct revenue, think about how much time you can help your customer save.
If your product or service helps save time, you win. (Tweet this)
This is exactly why I created Sumo as a way for business owners to increase their traffic and email subscribers — without wasting a lot of time.
And, it’s why I’ve hired a digital editor even though I know how to write. Having someone help me with writing means I can create better content at a faster pace for you.
What happens when your friends give you their “great” advice?
Even if their advice is really, really good… most of us (including myself) don’t listen to it.
People ignore valuable insights when they're free.
Now, think about getting advice from someone like Tony Robbins, who charges $2,000 for a seminar. Thousands of fans will do exactly what he says with strong determination because of the cost.
(Speaking of Tony: learn why I recently walked out on a $2,000 Tony Robbins event.)
Most of us value what we pay for over what we get for free. So do your customers.
Another example: I recently gave a friend a few free AppSumo products. Three weeks later, I hit him up to see what he implemented in his business.
He didn’t do a DAMN thing with the products I gave him for free. On the other hand, thousands of customers have paid for these products, implemented them in their businesses, and received crazy results.
Money is a truth-teller. When you trade your money, you’re automatically more invested.
“I’ll just be nice and give this away for free.”
How long will “free” pay your bills?
When you charge nothing, you’re undervaluing yourself. You have a solution for someone else’s problem and you asking for money is fair.
If you’re scared about charging too much at first, even simple pricing strategies can work: charging $1 is better than giving it away for free.
Some examples of the price point you can start with:
Start small. Then, gradually increase your price as your business gains traction and provides significant value to your customers. (You can also add more benefits and features as you increase your price.)
With Sumo, I used to do a 10% price markup on every product
As the business grew, I start experimenting with the pricing. I tried marking up 100% because a few of my friends kept nagging me to charge more.
Guess what happened when I 10x’d my markup?
If you’re feeling guilty charging for your time, just start small and experiment.
Pricing strategy can be confusing, complicated, or scary — but with my four tips above, you’ll be ahead of the pack.
My Electrical Controls and Automation services range on a per-hour charge M-F of $1745/hr and Saturday - Sunday $3750 /hr. If I have to travel to their plant another surcharge for driving is another $200/hr. So If I have to Drive on a Saturday to their plant and it takes 1.5 hrs to drive there and 2 hours of time. $300 plus $7500 = $7800. Some Contractor thinks it is a little high but when a plant is down or an operation is down that is nothing when you are loosing $20K - $300K and hour is peanuts.
I run a Handyman business except I offer more advanced services than the typical handyman. - Roofing (metal mostly) and concrete finishing.aka valuable skills worth paying to be done correctly.
Since an on-site visit is usually needed for any handyman's estimate I cant just call and ask my competitors. My main fear is I will get underbid and not get the contract. Especially since we do struggle financially causing me to to lower my quotes . My question is = HOW can I learnOf the project's total cost, 50% is due upfront. This will be used for the initial expenses. i.e. backhoe, dumptruck, debrisbdisposal fee, forms and stakes, concrete delivery, etc. what competitors charge?
I absolutely loved this! Thank you very much!
Thank you. I appreciate your words pearls of wisdom.
Thank you. I'm a rideshare driver of 4.5 years and retired from the USPS a week ago Friday. I've just started a local chauffeur business. I just provided my first booked client trip to the airport.
Thanks for the wisdom and knowledge.
Hi, this sounds like great advice, and I really believe people value our services more if we charge. Do you have any advice for Musicians? We normally do 1 - 3 hour shows. The "hard work" is packing lifting, setting up instruments and sound system, which takes close to 4 hours, from start to finish. Many people don't understand that, even if we tell them we have a professional sound system.
Thanks for the wealth of knowledge. I know l will use it.
This article was very helpful and gave me wonderful insight on pricing for my services. I provide safety consulting and assessments for at risk teens. I have always had a hard time determining hourly rate for these services. Any additional suggestions are appreciated
Outstanding article. I am a Freelance medical entomologist and contracted for expert witness at $300 per hour. After reading this article i am reevaluating my fee which i will receive because my participation is invaluable. I am being considered for a multiyear contract and was concerned about pricing because i really wanted to do this work when i read about project pricing...excellent. J.brown,PhD, RPE, BCE
Really useful, thank you
Spot on. Recently started in business and the price is not the point. They just want the service.
Best article I’ve read about pricing strategy. I’m just looking at starting my own consulting business and worry about my value and how to sell my worth/product. Saving people time and increasing their revenue are great suggestions. Thank you ?
Yes, As a handyman I've heard, "We just want it fixed right and well pay for it," They are desperate due to their dilemma
I’m so grateful to you for sharing all this info. Trying to convince myself that what I feel the need to charge is not something I should also feel guilty about, is extremely difficult. I so greatly appreciate the encouragement. Thank you!
what is my worth if im the organiser, inviting in a new club, start up with a location and no investoers?
Thank you this was very helpful. Now I just need to get rid of the guilt and fear and I should be good. Any more suggestions is good.
I lead a Women's Creativity Workshop bimonthly in LA. I provide supplies, space, my valued time. I charge $40! I have woman say, they wish they could afford the full amount. I'm always struck by this and not sure how to respond. I'm a licensed therapist and art therapist. Any suggestions on replies?
Charge more - $80 or $200! This gives you the freedom to offer scholarships and discounts to the group of women who can't afford your service.
I do advertisements for a real estate association. The only way to get a way from people that are cheap is to bring in more people. As easy as it sounds. It's 100% true. As a man looking for gold in a lake picks up a handful from the water and swishes it around, he only finds 3 pieces of gold. He then gets a bucket and then swishes it all in his pan and find 20 pieces!. What I'm trying to say is that the more people you gather, the more golden nuggets(people) you will find that won't mind paying your fee
I also have clients that say the same to me. I own an Upscale Pet Grooming Salon.
It used to make me feel guilty or like I should discount my fee for them.
After many years I finally just started to reply "Well I am here when you are ready!" With a big smile.
Soon after they would call me and book an appointment!
They would quickly start recommending my business to others because they valued my servises.
Thanks for reminding me to continually eveluate my value to others, its so.easy to be complacent about this at times, it always cost me money. Rfs
This let us with plenty of homework 😀
Thanks again for your helpful advice.
That's what I'm going about I like that and Great Ideas...
Thanks so much. This article has taken off a lot of doubts on my mind.
I have been a math teacher/professor for over 50 years. I have won teaching excellence awards and I have given teaching/learning seminars at my college. I am going to retire at the end of June and I want to do 1 to 2 hour seminars at community colleges and high schools helping teachers learn how to become more successful in their classrooms. I have handouts and all types of information as to how to create a learning environment in which students can be successful . My question is what should I charge per hour for a 1 to 2 hour seminar plus travel expenses. Is $75 per hour good choice for what I am trying to do? Should I go lower or higher? Can you give me some reasonable advice? Thank You
It's great that you want to pursue your passion and teach others - this time teachers.
When you ask what price you should charge for a seminar, I think Noah's article provides a lot of insights.
What I learnt from reading the article was that you think of the value you provide for other teachers.
- Students scoring higher on GPA's
- More students going to college
- Less students dropping out of school
- Better retention rates
- Better participation
- More and deeper materials studied
- Less stress and emotional upheaval for the teacher
- Less preparation work
- More fun and free time
- Potential of receiving awards
- Recognition from parents and principal and students for your work
If you lead with the value of your class, then you can maybe expand your seminar into a full-day training and charge hundreds of dollars...
Eventually you should think of creating an online training course and have the 1-day seminar as a premium charging even higher prices and only work with the most ambitious teachers that have already gone through your course material online.
Also, make sure to start talking to teachers about their problems and needs.
Get real world data.
Best of luck
Incredibly helpful, thank you! Came for another reason, and now percolating on how tier pricing can fit into my business.
Good Job ive learnt a lot from this..
What is it called when you ask for something like a base salary, to secure a specific time frame (your availability) for a client on an ongoing basis (to complete assignments if needed) whether needed to perform work in that time frame or not.
I'm essentially saying...pay me something for leaving a slot of my time available for you this week in case you need me (whether you need me or not) otherwise I am going to fill that slot of time with other work that I know I'll paid for.
Thank you in advance for any advice.
Enjoyed the article from the "Buyers" side. Will keep me wise in tactics used to "increase" their revenue while depleting mine. Two way streets.
January 28, 2018
Thanks so much for the tips. I've been giving advice 'for free' most of my adult life, but I simply can't afford to do so any longer. I completed my last graduate degree in August, have massive debt and still have no job prospects in sight. (As a native of Albuquerque, my recent move to central New York has been beset with difficulties from the start.) Your advice makes sense--I certainly have undervalued myself. Navigating my way as a consultant at sixty-two may be a challenge, but I am willing to learn.
Noah, what would you charge for a high quality article like one you've wrote in this piece? Pictures, SEO, & content marketing best practices like you've done? I write similarly & am curious how to price hourly on freelance sites? As well I'm more interested in the client (monthly retainer) side of things. Thx!
Thanks for the tips!
Hi Noah - great article...very much appreciated I'm transitioning career from Accounting to Business Relationship Executive, believe it or not! - not sure of the title, however it involves bringing individual and organisations together where they can build, share and improve their individual and collaborative business outcomes. For many years my peers and associates have recognised the value I helped create, delivered and maintained outside of my profession - this was in relationship building. I have the talent to bring people together efficiently and effectively identify benefits of a particular collaboration. My annual salary within accounting, (including superannuation and KPI incentive structure was $109,500.00 gross per annum. I have 30 years corporate experience I would appreciate your opinion on which fee structure I should adopt. I've recently taken the leap of faith and starting my transition and have had numerous offers of engagement however all have asked what my charge rate is.
Thanking you in anticipation
Thanks for Ur article. I'm in the medical field and have a very busy schedule. Patient's are struggling to get my appointment as the average waiting time to see me is 20 days. I have very reasonable fees and I wish to increase my consultation fees. But I have not done that because I feel very guilty of charging patients more, as I feel it is not right on my part to hike my fees just because I am in demand. Actually my colleagues who are not very busy are charging higher fees. I am struggling to spend time with my family and get adequate sleep. I enjoy work and very passionate about it cos seeing patients getting better gives me a great feeling. Earning money is not my first priority, as by god's grace my needs are less. But sometimes I feel I should charge higher so that I see less no. of patients and have a peaceful life. Just don't really understand what to do and how to reduce my work load . I struggle saying no to a patient who is in pain and wishes to see me. My front desk staff has a tough time handling the patients as they always want an early appointment.
Why don't you consider a "concierge" type of practice where by you charge your patients a monthly fee instead of per visit? You determine when you will be available yet make a steady stream of income while putting limits on how many patients you're willing to take on. It seems to me to be better for the doctor and the patient. Better quality of life for you and able to spend more time with your patients. Patients have better access. I saw one website where a doctor charged $79/mo per person. That equates to $948 per year per patient. How many of your patients actually see you EVERY MONTH? Many go to the doctor quarterly or only when needed. You can also put a limit on the number of visits per year without paying additional charges. You'd have to determine what the best price is per month for your practice and the max. # of patients you're willing to take on.
Thank you for this article! Timely for me as I'm starting out my Interior Design Business- and what I love to do and comes easily for me- is hard to put a price tag on!
Thank you sooo much for this. I have such a fear to charge what I'm worth. I know that is because I don't believe what I'm worth... The proof is in the puddin' I really appreciate this article. Now, let me go create my pricing structure!
Thanks for your reflection. I am a trained education consultant working full time as a tutor (because it pays better than my other offers). Your tips were encouraging. There is always the fear that if I charge more, I'll scare the client away. This is one family who claims they want me to work with their son till he finished: 5 years. But five years means I'm taken off the market for that long. I pay my own insurance. I pay my own self-employed taxes. I have a PhD in education and 30 years of teacher/training experience. I hired in at an okay price, raised my price in 3 months and they didn't blink. Now, summer's here and I'm wondering --should I propose another way of charging? by the week? by the month? Your thoughts would be helpful.
Brilliant article on all the factors that go into developing the right price for both your customers and your business
Thanks for the amazing insight. Its very good advice, however free :).
Thank you for this...it addressed many issues that I work out my business as well as with my students
Great article Noah and timely as I'm preparing a fixed price proposal for a new offering 🙂
One of the problems with getting people to do things for you for free is that because its outside of the normal rules, ie I pay you and you provide me with what you said you would, it can be a lot harder to follow up and ask for what was promised. 'Mates rates' where something is free or done in exchange for doing something for them are often very wobbly on agreed deliverables and due dates. Most times I'd rather pay than muddle through all that uncertainty. So if someone is offering their service for free they need to provide great service in a timely way. Free shouldn't equal disappointing or it won't help your confidence and get you out of it and properly charging.
I often feel that sometimes when you take on a project for free the leader often lacks the delegation of expected tasks and deliverance. Which is what I'm often discouraged by because I don't receive the feedback as I normally would for paid gigs.
Such a gift that you're writing more.
Hi Noah! Great article, amazing how this is such a huge problem for so many of us.. Can I ask you how you tackle friends? I am going to start a consultancy job for a friend (not a close friend though) and am feeling extremely uncomfortable to charge him a lot of money, but I have two kids, need to make a living, and while I am working for him, I wont be able to take another job.. Do you ever find yourself in this situation? Any tips? Thanks!!
This is something that I have been telling my husband for years: Your time has value and your customers do not have to like you and vice versa. My husband had kept his fee for service artificially low for years and I sat down with him last year and told him that making $1 per hour in profit was not viable as a horticulturist.
He was met with some resistance. One client stated that he will not discuss it with my husband until this year. My husband had me provide a list of where the money goes to and a price list of his services. When one client received this list, it was met with some hostility. Another client advised that he had thought that my husband's fees were previously too low and was happy to pay the increased rate.
This year, my husband has been busier than ever and has increased his client base and income. Additionally, he is undertaking further study which will provide further return on investment and attract new and higher paying clientele based upon the new skills.
I'm a rehabilitational massage therapist with 14 years of experience and I've put a lot of time into learning the best of the best techniques to make the biggest changes with the least amount of downtime for my clients.
I've been charging $120/hr for the last few years because it put me at a comfortable rate and ensured that I would get less riff raff. I have found that people are fine with it for the most part- enough that I can hand pick who I want to work for (I go to homes).
I'm also a new mom, and while I have the freedom to have help, I enjoy being home with my baby, so I'd ideally only want to work a few hours a week.
I've been considering raising my rates to $150/hr for a while now, to match a few of my peers who have different niches within the same clientele, but I've been hesitant because what I do is SO easy for me and I enjoy doing it so much. I know my clients can afford it, I know I'm worth it, and I definitely know I have put the time and money into crafting my skills. I just need to make the jump without psyching myself out about a $30 difference. I hope I'm in the minority of the people who have stumbled upon your page because I feel like I should see a shrink about something so trivial giving me this much anxiety.
I have charged $0 so far and the people I worked with,got results.
I produce records for singer-songwriters and bands in Austin and surrounding areas. Determining how much they make as a result of working with me is really challenging. Consumers don't buy records anymore. But I have pushed artists to make their best work, which in turn gets them fans. Then those fans pay for shows and merch. Several artists I've worked with have been able to quit their day jobs after making a record with me.
How the hell do I quantify that ROI?
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