Your rates should reflect the benefits of hiring you — not any of your competitors. If you’re selling your services as a commodity then you’re not building on your individual strengths. As soon as you lose your uniqueness your client is going to focus on price rather than results.

@ Dave – I Googled Jeffrey and it appears his URL is actually http://www.restaurantcoachingsolutions.com/.

@ Jeffrey – I’m not sure if insane and unethical are words I’d use to describe those who bill by the hour or those who compare themselves to other local professionals. Personally I can’t stand billing by the hour because it’s an administrative nightmare, and I very seldom end up doing it. But I very strongly disagree that it’s unethical. Some clients very strongly refuse to pay anything but by the hour. I have a feeling sending them an email back saying “Sorry, we’re not that kind of shop. That’s unethical! Who do you think we are?!” is not exactly going to garner goodwill.

@ Tiffany – Absolutely. Local markets are a bitch. In my own locale, nobody wants to pay a dime for anything. One, because they’re cheap, and two, lease rates are so high that people really do operate from a standpoint of fear. Everybody in the area is going bankrupt and instead of seeing professional services as something that can stop that from happening, they see it as a cost that, if avoided, could prevent bankruptcy.

Almost all the work I do locally anymore is for barter. From tattoos to dinners out to free coffee for a year, I’ve bartered for pretty much everything. The best was the food basket co-op. We probably could’ve gotten it to not paying cash for anything, including rent. Local markets are incredibly tough to break when you’re used to the internet.

Oh, and your blog rules, by the way.

I do have one big caveat, though, and that involves your local market, if you’re working on a local basis. Since so many of us work with remote clients now that it’s so easy to do so, this is a lesser issue than it might once have been, but still can’t be ignored. If you want local clientele, you have to understand your local economy. Often, small businesses in smaller towns have very low budgets for things like marketing (or don’t have any budget at all and just decide on a case-by-case basis whether it’s worthwhile to dig into their pockets and pull out $200 for a newspaper ad or whatever arises). This might mean that there simply isn’t a local market for your work that makes it economically viable, but it may also simply mean that you have to be more adaptable in order to create the relationships and build the reputation you need in the local area–one that will move you to the next level of clientele. That doesn’t have to mean working cheaper; it might well mean figuring out how to offer smaller projects when you’re starting out, so that you can still meet the prospective client’s needs, get paid at a reasonable rate, and make a positive enough impression that they’ll see the value of the investment and share that impression with others.

Good stuff here. I used to be really uncomfortable talking about money with people. (I do voiceovers.) What cured me was a time many years ago when I agreed to do a narration for a project without setting the price first. Or even before I left the meeting. I just said, mail me a check for what it was worth to you. 2 weeks later a check for $25 came in the mail. That cured me of my reluctance to talk about money first.

Of course for my kind of work, depending on whether the job has come through an agent or not, many times the rates are already set in advance.

Be well,
Bob

I’ll have to respectfully agree/disagree.

AGREE: You should definitely focus on the value you provide clients when it comes to the rates you charge. The ideal situation is to find a client who is willing to pay based on ROI. If you can do a good enough job selling yourself, then you can snag it. But not everyone is currently at that skill level for sales (though the real answer to that excuse is “why the hell don’t you find someone who CAN sell, and give them a commission based on the higher fee the draw for you!) :-) I’m with you 99%.

DISAGREE: Here’s where the other 1% comes in. As a businessperson in my right mind, wouldn’t I pay $60K for someone who can bring me $200K? Of course I would … Unless I could find someone who could provide me the exact same quality of service for 30K. Or 15K. Or 5K. I like making money, but I don’t like overspending.

That said, if that 60K-level person’s skill is unmatched because they bring something to the table no one else can, then of course I’d pay 60K … unless, that was nowhere close to what my budget could allow. (And yes, the answer to that excuse is “Why the hell don’t you find some way to get the money if the ROI is guaranteed!” … except it might not be).

To take it a step further, you have to consider the sweet spot. There may be more than enough low-stress business at the ‘normal’ rate to justify not busting your hump to find the few and far between who pay a mint. It all depends on the freelancer in question.

AGREE: In having to type this, I’ve realized there’s a whole new article in this … “how to quit making excuses for why you can’t raise your rates through the f***ing roof.” Maybe we could talk on that one.

DISAGREE: I’m not certain why you imagine that hourly rates are unethical. If someone contracts to pay me $100 / hr for services, and they are satisfied with the services, then contract fulfilled = all good.

DISAGREE: “Why are you comparing yourself to a plumber if you’re not a plumber?” Because you’re trying to make the psychological shift away from “gee, I hope I can make some money …” to “Wait a minute, I need to charge more to reflect my value!” It’s common for people (almost everyone, really) to feel intimidated when it comes to setting rates. The plumber comments are intended to be a perspective shifter.

AGREE: “No wonder so many good consultants are gong broke.” Indeed. We rarely charge what we’re worth.

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Jeffrey, I hope you comment more often – even though I can’t agree 100% with what you’re saying, you have some valid and valuable points.

PS – The URL in your name link is coming up 404. If it’s a typo, shoot me an email at navarro.dave at the gmail (ugh, I hate anti-spam typing) and I’ll fix it for you.

Why are you comparing yourself to a plumber if you’re not a plumber? That’s insane. And hourly rates are unethical.

If a client makes an extra $200,000 this year in profits as a direct result of the value you brought to them through your work, then your services should be worth at least $60 – $70k easy – even if it only takes you half a day to do the job. That alone is a 270% ROI! Wouldn’t any businessperson in their right mind pay you for a 270% ROI?

No wonder so many good consultants are gong broke.

Jeffrey Summers

I think having a good established rate, equivalent to your level will help weed out the cheap clients and focus more on quality clients that are investing in their company, not trying to get something that is going to be half-assed.