A few months ago, I had a client who was interested in having me expand what I was doing for them to include videos. While I was waiting for them to get back to me, I did a job for another client based on a fixed-price. I loved it and made almost twice as much money. Before and after that job, I made a few videos to get a feel for the work, and quickly realized I was getting faster. A lot faster. Like 100-200% faster in the first 4 videos. I thought, “If I charge an hourly rate and keep improving at this speed, I’ll work myself out of a job. Or, more likely, I’ll get paid dirt for doing my best work and delivering the greatest value.”
I knew I wanted to do a fixed-price engagement but I didn’t know how. I talked to a business mentor. I tell him about the new opportunity, what is being offered to me and how I’m thinking of doing fixed price because I’m getting faster. He tells me “Get away from hourly rates.” He gives me the classic time plus materials model. You take an hourly rate like $15/hr, estimate the worst case scenario of time spent for each part of the project, any expenses (an Upwork fee, gear, education) and add 20% profit. That is your lowest tier. Create two more with better feature sets and higher prices, then give all 3 to the client. I take his advice, create a spreadsheet, and come up with three options with differing prices.
When the client gets back to me, he offers a 50% increase to my hourly rate. I ask if he is willing to do fixed-price and he is on board. Then, I don’t do it. I don’t give him the options. I choke. I think, “I wouldn’t pay x for a video.” And I give him my highest tier for the lowest price. Jonathon Stark refers to this as “selling to your own wallet”. You can’t imagine paying that much money for a service you offer so you assume the value it provides them could never be enough to warrant charging that much. I still walk away with a fixed-price agreement that is the equivalent of a 100% increase to my hourly rate instead of 50% which is a good start even if I did leave money on the table. Over the next few days and weeks, I run across Chris Do from The Futur and The Win Without Pitching Manifesto he keeps talking about. Thus begins my journey to understand and implement value-based pricing.
10/11/21: There’s a beginning phase where you have to take whatever work you can (usually hourly) and establish a reputation before you can command a premium on price. You can still charge value pricing when you’re newer to something, you will just have a harder time figuring out what makes sense.
Title image is from Icons8 Team on Unsplash.