4 psychology hacks you can use to charge more
How much are you worth — as an entrepreneur, consultant, or freelancer?
It’s a dicey question. You have assumptions about your value to clients. And they often have, well, different assumptions of the same. Experience and knowledge factor in as much as hours and effort. Going rates are part of the equation as well.
So how do you determine where you fit on that spectrum? What questions should you ask yourself when gauging your contributions to a client or business? Are you really worth more than your competitors?
I talked with three successful entrepreneurs to find out what kind of mental calculus you should make to maximize your profit on every project.
We’re not going to discuss actual dollar amounts here — there are plenty of guidelines out there for ballparking your pricing — but rather the attitudes you need to adopt as an entrepreneur. Turns out, you can take these four to the bank.
Entrepreneurial attitude #1: ‘I am not an hourly rate’
To start, there needs to be a fundamental shift away from an “employee” mindset. You’re not any client’s employee. You’re the fuel that will ignite their business. How much that fuel is worth will vary based on how big of an explosion you can create. As such, you will need to price each project individually.
“This shift may take a couple of years,” says Martin Zwilling, CEO of Startup Professionals Inc. “But it’s how you adjust your thinking away from the monthly-salary perspective to one that embraces a goal of true profit.”
In other words, you could be worth $100 to one client but $1,000 to another for the same work. Embrace every opportunity to increase your profit margin.
“Value has more to do with what the client gets out of it than what you put into it,” says David Parrish, who specializes in consulting in creative industries. “We can spend years on a product that nobody wants. On the other hand, a small piece of advice, or the right product at the right time, could be worth millions to a customer.”
Profit-centric thinking is instinctive for some, less so for others (if you need help, you can start by studying pricing psychology). But it’s essential to success, says Zwilling. “Entrepreneurs who can’t do this will always be stressed and unhappy.”
Entrepreneurial attitude #2: ‘I am driven by the why of my work’
Once you shift to profit-centric thinking, you need to grasp the long-term benefit of that mindset. That is, the why of your work.
Are you in it to buy a nice house and fund exciting weekends, or to build a company that will exist for generations?
“Your ability to make a stronger impact and reach more people will require that you earn more than just a salary,” says John Lee Dumas, founder of the Entrepreneur on Fire podcast — a.k.a., EOFire. “When you begin to profit, that’s when you actually have money to invest not just in yourself, but also back into your business to help drive your message.”
In addition, whether you realize it or not, your why will greatly influence how you value yourself when approaching customers and clients.
Entrepreneurial attitude #3: ‘I choose my clients; they don’t choose me’
It’s hard to imagine when you’re just starting out, but there will come a time when you’ll decline as many new clients as you accept.
The moment will come sooner if you’re realistic about what, precisely, you bring to the table and make that known to potential clients. It also means making sure you’re targeting the right clients to begin with.
“If a customer doesn’t need my 30-plus years of experience, they won’t pay for it — no matter how convinced I am that I’m now worth much more than I was 30 years ago,” Parrish notes, adding that the people who make the most money aren’t necessarily the most talented, the hardest-working, or the best negotiators, but rather they’re the ones who best match their value to the needs of their customers.
“Many think marketing is about convincing reluctant customers,” he says. “But it’s really about avoiding bad customers and finding the right ones. Then everything clicks into place.”
Entrepreneurial attitude #4: ‘I will never let my ego have a seat at the table’
You’ll have successes. You’ll have failures. Leave it all outside.
Self-esteem should never be a central factor in valuing your own work. “I’ve found the self-esteem-derived sense of value to be all over the place among entrepreneurs, and it’s usually unrelated to reality,” Zwilling notes, adding that any amount that’s too high or too low can adversely impact any business relationship. “The only value that counts is what the customer will pay, or what the market will bear.”
Entrepreneurs should never make excuses for having a poor close rate or losing clients, Zwilling concludes. Nor should they spend time obsessing over whether their actual take-home syncs up with what they think they’re entitled to.
They should simply work on improving their real value — not their perceived one — and let the work speak for itself.