{"id":160,"date":"2015-07-20T08:00:00","date_gmt":"2015-07-20T12:00:00","guid":{"rendered":"https:\/\/freelancetofreedomproject.com\/?p=160"},"modified":"2021-10-25T18:36:11","modified_gmt":"2021-10-25T22:36:11","slug":"im-a-chronic-under-pricer","status":"publish","type":"post","link":"https:\/\/freelancetofreedomproject.com\/im-a-chronic-under-pricer\/","title":{"rendered":"I\u2019m a Chronic Under-Pricer"},"content":{"rendered":"\n
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Hi. I\u2019m Mark, and I\u2019m a chronic under-pricer.<\/em><\/p>\n\n\n\n

When I launched my services as a Budget Nerd (which means I act as bookkeeper and CFO for consultants and agencies), I set my retainer at $200 per month.<\/p>\n\n\n\n

I DIDN\u2019T MEAN TO UNDER-PRICE \u2014 I PROMISE.<\/h3>\n\n\n\n

I estimated I\u2019d need about an hour per month per client for data entry and maintenance (the bookkeeping piece) and an hour per month on the phone with the client (the CFO piece). \u201c$100 per hour is plenty,\u201d I said to myself.<\/p>\n\n\n\n

And two hours at $100 per hour would be enough\u2026if not for my fatally flawed assumptions, such as:<\/p>\n\n\n\n

  • Expecting nearly-robotic efficiency in my work.<\/strong> Turns out I\u2019m not a robot.<\/em> (I\u2019m a sci-fi nerd, so that\u2019s a disappointing realization.)<\/li>
  • Expecting nearly-perfect behavior from my clients.<\/strong>Hahahahahahahahahahahahahahaha\u2026deep breath\u2026.aahahahahahahahahahaha. (Am I right?)<\/li>
  • Expecting myself to exhibit super-human stamina.<\/strong> \u201cFifty to seventy-five one-on-one consultations per month in order to reach my income goals? No problem!\u201d<\/em> (See previous robot assumption.)<\/li><\/ul>\n\n\n\n

    I quickly saw that $200 per month would kill my business, and fast.<\/strong> After signing ten clients at $200, I raised my rate to $300 per month.<\/p>\n\n\n\n

    A 50% increase!<\/p>\n\n\n\n

    Being a chronic under-pricer I was proud of myself for the increase \u2014 and relieved when people kept signing up for the service.<\/p>\n\n\n\n

    I signed another 20 clients (give or take). Revenue was adequate; I didn\u2019t have to worry about covering my bills.<\/p>\n\n\n\n

    But now I was supporting close to 30 clients and, thanks to not being a robot, it was taking almost all my working hours.<\/p>\n\n\n\n

    In other words, I found out that a retainer that took roughly two hours of direct time (ie \u201cbillable time\u201d) translated into closer to four hours of real time<\/em>.<\/strong> Client emails, occasional supplemental calls, messy bookkeeping cases, and my own human inefficiency were eating up an extra couple of hours per month, per client.<\/p>\n\n\n\n

    It\u2019s not the end of the world, I told myself. The money I\u2019m making is adequate; I\u2019ll just figure how to be more efficient as I add more clients. \u201cI\u2019m fine,\u201d<\/em> I pretended.<\/p>\n\n\n\n

    The clients kept coming (thankfully), but I discovered I wasn\u2019t getting much more efficient. I\u2019m still human, and so are my clients.<\/p>\n\n\n\n

    My income increased, but so did my working hours and my stress.<\/strong> I lied to myself, claiming it would get better with time.<\/p>\n\n\n\n

    Why did I believe that?<\/em> There were no indicators anything would fundamentally change about my business model. I guess I was just scared to admit the current approach wasn\u2019t sustainable because I didn\u2019t see another way to support my family and keep the mortgage current.<\/p>\n\n\n\n

    Around this time I had an in-depth consult with a business coach named Jenny Shih. We did a great little exchange: I reviewed her business finances (which were pristine), and she took a zoomed-out view of Budget Nerd.<\/p>\n\n\n\n

    Jenny gave me exactly one piece of advice:<\/strong><\/p>\n\n\n\n

    \u201cRaise your retainer to $500 per month.\u201d<\/p>\n\n\n\n

    \u201c$500 per month??\u201d I spat my diet coke all over my keyboard.*<\/p>\n\n\n\n

    *Just kidding.<\/em><\/p>\n\n\n\n

    The truth is Jenny had read my mind. $500 per month was the number I had in my head and was too freaked out to admit it. I don\u2019t know why, but $300 per month sounded fine and $500 per month sounded like sheer madness.<\/p>\n\n\n\n

    Worth noting:<\/strong> I have no logical explanation for why I felt fine about $300 per month and paralyzed about $500 per month (and you probably have a similar problem)<\/em>. It was like trying to clear a mental and emotional great wall of China to get myself to buy into the idea that anyone would pay me such an \u201cobscene\u201d sum.<\/p>\n\n\n\n

    Also worth noting:<\/strong> The difference between $300 and $500 per month is just under $7 per day, which most my clients absolutely spend on the cliched \u201clatte per day.\u201d<\/p>\n\n\n\n

    My point? My fear was totally irrational (and yours probably is too).<\/em><\/strong><\/p>\n\n\n\n

    Jenny had to do some life-coachy voodoo on me, and I finally gave in. During my next round of client calls I let my everyone know I\u2019d be raising my retainer to $500 per month effective 60 days out.<\/p>\n\n\n\n

    My worst fears were realized when one of my clients said \u201cWhoa! That\u2019s an 80% increase! I don\u2019t know about this.\u201d<\/em><\/p>\n\n\n\n

    Guess what I heard from my other clients?<\/strong><\/p>\n\n\n\n

    \u201cOh, good.\u201d<\/em><\/p>\n\n\n\n

    \u201cSounds good.\u201d<\/em><\/p>\n\n\n\n

    \u201cYou should make it $600.\u201d<\/em><\/p>\n\n\n\n

    \u201cMark, that\u2019s an extra $200 per month. If you\u2019d started billing me the new rate without telling me, I probably wouldn\u2019t have noticed.\u201d<\/em><\/p>\n\n\n\n

    Me, sheepish: Oh, um, cool. Thanks.<\/p>\n\n\n\n

    I did lose some clients, including some who said they were gung-ho about the new price. (Lesson: people will say yes to save face and then cancel and\/or enter the Witness Protection Program. That\u2019s okay; they\u2019re human.)<\/p>\n\n\n\n

    The dust is just now settling and my revenue is up close to 80%. Not only did most of my clients stick with me, I kept signing up new clients at the new rate. $500 per month was the new normal, and no one serious about working with me flinches at the price.<\/p>\n\n\n\n

    I\u2019ve told this whole story in view of how it all affected me, but here\u2019s the big takeaway:<\/p>\n\n\n\n

    WHEN CONSULTANTS AND FREELANCERS UNDER-PRICE, IT\u2019S THE CLIENT THAT SUFFERS.<\/h3>\n\n\n\n

    I know \u2014 it sounds like a platitude we spout to make ourselves feel better about gouging clients, right?<\/p>\n\n\n\n

    Wrong.<\/em><\/p>\n\n\n\n

    If I hadn\u2019t raised my rate; I\u2019d soon be out of business<\/strong>. There\u2019s no way I could have kept it up. And if I had stuck with it, my performance would have suffered.<\/p>\n\n\n\n

    Do you really think your clients want a totally-exhausted, spread-to-thin freelancer on their team? Of course not!<\/strong><\/p>\n\n\n\n

    All this time you (and I) though we were doing our clients a favor with our \u201creasonable rates.\u201d With help, I saw the error of my ways and made a crucial change.<\/p>\n\n\n\n

    Will you?<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

    Hi. I\u2019m Mark, and I\u2019m a chronic under-pricer. When I launched my services as a Budget Nerd (which means I act as bookkeeper and CFO for consultants and agencies), I set my retainer at $200 per month. I DIDN\u2019T MEAN TO UNDER-PRICE \u2014 I PROMISE. I estimated I\u2019d need about an hour per month per … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/freelancetofreedomproject.com\/wp-json\/wp\/v2\/posts\/160"}],"collection":[{"href":"https:\/\/freelancetofreedomproject.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/freelancetofreedomproject.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/freelancetofreedomproject.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/freelancetofreedomproject.com\/wp-json\/wp\/v2\/comments?post=160"}],"version-history":[{"count":0,"href":"https:\/\/freelancetofreedomproject.com\/wp-json\/wp\/v2\/posts\/160\/revisions"}],"wp:attachment":[{"href":"https:\/\/freelancetofreedomproject.com\/wp-json\/wp\/v2\/media?parent=160"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/freelancetofreedomproject.com\/wp-json\/wp\/v2\/categories?post=160"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/freelancetofreedomproject.com\/wp-json\/wp\/v2\/tags?post=160"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}