freelance rates

The Power Of Pricing

by Paul Strikwerda in Articles, Career, Freelancing, Money Matters 23 Comments

Snow stormSNOW EVERYWHERE… and Max was in the thick of it.

His client was expecting him within the hour, and he was all dressed up but couldn’t go anywhere.

This was the account he had been grooming for months, and today was D-Day: Deal or No Deal. Snow or no snow. He had to get out of that airport.

“This is the worst snow storm we’ve seen in decades,” said the dispatcher. “No cab driver is going to go anywhere today. I’m afraid you’re on your own.” Max headed out anyway. Perhaps he could hitch a ride with one of the other passengers that was being picked up by brave friends or family members.

As the snow was coming down, visibility was at a minimum. All flights were canceled until further notice. Just as Max was about to head back inside, a black SUV came out of nowhere, and stopped at the pick-up spot. The driver rolled the window down:

“Need a ride?”

“How did you know?” said Max, as he hopped in. “I have to get to my presentation. Are you here to pick somebody up?”

“No one in particular,” said the driver. “But I’d be happy to take you.”

“Well, that’s awfully nice of you,” said Max. “Thank G-d for Good Samaritans.”

“Dream on,” said the driver. “It’s going to be one hundred dollars. Cash only.”

“You must be joking,” replied Max. “They said a cab would cost me no more than ten.”

“Well, why don’t you get a cab then?” asked the driver. “I’ll go and rescue some other grey suit in a hurry.”

“I’ll offer you 50,” tried Max.”

“Listen,” said the driver. “You look like a smart businessman. You and I, we don’t run charities. We’re both entrepreneurs. We see an opportunity. We jump on it. We take risks. Today I am risking my life and my car just so you can get to your meeting. That must be worth something, don’t you think?

“How about 60?”

“You don’t get it, do you?” said the driver. “My economics teacher taught me: ‘When something is scarce, it becomes more valuable.’ You have a major problem. I am offering you a solution. No one else will. If you want to stay, you’ve got to pay.”

“70?”

“Think of it this way,” sighed the driver. “This meeting you want me to take you to, must be important, right? Otherwise, why bother? Is there a lot of money at stake?”

“You got that right,” answered Max impatiently. “I’ve got one shot to seal a deal.”

“Well,” said the driver, “It’s none of my business, but what’s 100 bucks compared to the money you’ll bring in after that contract is signed?”

“Alright,” said Max as he took out the cash. “I get it. Now, drive!”

While the SUV was battling the elements, Max looked at his chauffeur and said: “I gotta give it to you, man. You know what you’re worth, and you’re not afraid to ask for it.

Some ten years ago, when Max started his freelance business, he had had such a hard time putting a price on the service he was providing. To help him focus, his startup coach had asked him a couple of simple questions:

  1. Do you consider yourself to be a pro?
  2. Do you want to run a for-profit business?
  3. Do you want that business to grow?
  4. What are the costs of running that business?
  5. What’s your break-even point?
  6. How much do you want to make?

In the past, Max had always treated his services as a hobby. That’s exactly what it was. There was no plan. No purpose. Just a passion. He spent hours and hours helping people and never worried about what to charge. That is, until he lost his day job, his benefits, and his security. Perhaps this was an opportunity to turn his hobby into a real business. That’s when things got serious and complicated.

“Here’s the good news,” smiled his coach. “You’ve got clients, don’t you? I mean, you’ve been helping friends all along. If you want to turn your hobby into a genuine profession, why not start close to home. You obviously offer something people want. You already have a market… Go for it!”

“Here’s the problem,” said Max. “I never really charged my friends anything. Most of them gave me pizza and a six-pack. I can already hear them say:

Why would we ever pay you if we can get you for free?

“Good point,” admitted the coach, and he went on: “My brother is a computer geek and he’s crazy about technology. But if he would do every single friend ‘a favor,’ he’d be fixing broken laptops all day and night and not make any money. Free pizza does not pay the mortgage. Besides, I don’t think he’d make the guys happy who repair computers for a living.

Now, I’m not saying that it’s not okay to help out a friend in need, but as soon as people found out that my brother knew how to fix a computer, everybody wanted to be ‘friends’ with him. He had to draw a clear line between real friends and those who were well below the rank of Facebook buddies. That’s what you have to do too, Max. No more giveaways. From now on, you run a business; not a charity.

One of your jobs as an entrepreneur is to manage your client’s expectations. Let me give you an example. If you take on a project you know you can easily do in two days, tell your client you can get it done in three. Guess who’s going to look good when you hand it in 48 hours later?

That way you not only create the expectation that you can beat a deadline. You’re also showing your client that she’s a top priority, and that you really know your stuff. Meanwhile, you’ve allowed yourself an extra day should anything unexpected come up. Does that make sense?

Pricing is one of the most important tools for managing your client’s expectations, as well as your bottom line. Your price point sends a clear signal to your market:

This is what I am worth.

Like it or not, there is a clear link between perceived quality and price. Otherwise, every wine connoisseur would drink Beaujolais out of a box, and Pottery Barn would be out of business.

Remember this: Your fee structure will help you attract the kind of customers you want to be working with, and the type of jobs you are shooting for. At the same time it will weed out the folks that cannot or will not afford you; the ones that are most likely to give you a hard time anyway.

Here’s the deal, though: Your fee must be backed up by experience and expertise on one hand, and by a realistic sense of your value in the market place on the other.

Simply put: Be an expert and do your homework. Don’t just pull a rate out of a hat. That’s lazy and crazy. Find out what the competition is charging. Then ask yourself: “Do I want to charge more, less, or the same?”

“I can’t imagine it’s that simple,” said Max.

“It’s not,” answered his coach. “Smart pricing decisions require at least three elements:

  1. Facts about your own cost of doing business
  2. The client’s evaluation processes
  3. Competitive activity

I know you really care about your work, Max. To you, it’s much more than a way to pay the bills. You’re an artist and somehow, some artists (and clients) believe that there’s a clash between creativity and cash. Doing what you love should be enough of a reward.

I don’t think Andy Warhol or Keith Haring would agree with that. Being creative and being commercial can go hand in hand, and since you’re in business to make money, let me give you a simple formula:

Profit = sales volume x price – cost

Have you ever heard of Hermann Simon? He’s a German economics professor and one of the leading experts on pricing. Together with Robert Dolan, he wrote a book called Power pricing: how managing price transforms the bottom line. He calls volume, price, and cost “profit drivers.”

Simon says something very interesting:

“The customer’s willingness to pay is not determined by the costs of a product but by its performance and resulting value to this customer.”

In other words: when people get a haircut, they conveniently forget that they’re also paying for the rent the salon’s forking over every single month, or for the training the staff receives so they can make every teenage boy look like Justin Bieber.

Clients don’t care about your costs.

You should.

That’s why you have to figure out the answer to this question: How low can you afford to go? What is your Price Floor?

A Price Floor is a point below which a product or service should not be sold. In the long term, the price must obviously cover the full costs of a product. Otherwise the seller cannot make a profit and will not survive. Volume never makes up for selling below cost. 

Every year, tens of thousands of self-employed people file for bankruptcy because they made one big mistake: they followed a dream and forgot to run the numbers. They are what I like to call ‘under-estimators’. Literally.

Knowingly or unknowingly, they started selling below cost in an effort to drive out the competition or even out of ignorance. Some started giving their work away for free, hoping to get exposure and attract business. Last time I checked, my local baker was handing out free samples but never entire cakes. And between you and me: he doesn’t strike me as a marketing genius.”

“Speaking of prices… a friend of mine just bought a brand name watch at a price that was too good to be true,” said Max. “It turned out to be fake.”

“Were you surprised?” asked the coach.

“Not at all,” said Max. “You get what you pay for.”

“That’s right. In part, price is about perception. That’s probably why your friend wanted to buy that Rolex rip-off in the first place.

Professor Simon puts it this way:

“Price is the economic sacrifice a customer makes to acquire a product or a service. The customer always compares this sacrifice with his perception of the product’s value. (…)

“In essence, a customer buys a product or a service only, if its perceived value -measured in money terms- is greater than the price. If selecting from several alternatives, the customer prefers the one offering the highest net value, i.e. the greatest differential of perceived value over price.”

Go to any tattoo parlor and see for yourself how much pain people are willing to suffer in exchange for the pleasure derived from a name, permanently painted in the perforations of their delicate flesh. Years later, they spend a fortune burning out their ex-hubbie’s initials with a laser beam… turning the man in question into an ex-boyfriend, once removed… But I digress. We were talking about perceived value, weren’t we?”

“You’ve mentioned volume, price, and cost,” said Max. “How exactly does the market factor into this? Isn’t a certain price ultimately the result of the interaction between supply and demand? That’s not something I have any influence over, is it?”

“Great point,” smiled his coach. “First off…

*          *          *         *         *

THE BLACK SUV slowly made its way through the winter weather.

“Care for some hot cocoa?” asked the driver as he pointed at a thermos.

“Yes please!”said Max.

“And help yourself to a muffin too,” said the driver. “This might take a while.”

“Well, you certainly know how to treat your customers,” remarked Max.

The driver smiled. “Always exceed your client’s expectations. That’s my philosophy.”

“Will you pick me up when I am done?” asked Max.

“Of course,” said the driver.

“I love return business!”

Click here for part 2.

Paul Strikwerda ©nethervoice 

PS Be sweet. Please retweet!

photo credit: It’s been DUMPING snow at Heavenly… via photopin (license)


The Lowdown on Lowballing

by Paul Strikwerda in Articles, Career, Freelancing, International, Money Matters 70 Comments

You’ve probably heard the story of the priest who preached the same sermon every Sunday.

After a few weeks, some of the parishioners got tired of it and demanded an explanation.

“Do you really want to know why I’m repeating myself at every service?” asked the priest. The crowd nodded.

“I will continue to tell you the same thing over and over again, until you take it to heart and do something with it.

If you don’t change your behavior, I don’t see any reason for me to change my sermon.”

Well, I may be the son of a minister, but as a writer, I can certainly relate to this priest. When it comes to setting rates, I sometimes feel I’m talking to a sea of people with frighteningly short memories and no backbone.

Watch me as I go to my pulpit and address the crowd:

Read the rest of this story in my new book. Click here for the paperback version, and click here for a Kindle download.

Click on the cover to access the website and get a sneak peek.

Making Money In Your PJs cover


It’s the stupid economy!

by Paul Strikwerda in Articles, Career, Freelancing, Money Matters 19 Comments

If we blame the economy for all of our freelance failures, perhaps it’s only fair that we should credit the economy for all of our successes. After all: we’re hopelessly helpless.

It’s the economy, stupid!

In 2000, Cleanthi Peters sued Universal Studios for $15,000. Cleanthi claimed to have suffered “extreme fear, mental anguish, and emotional distress” after visiting Universal Studios’ Halloween Horror Nights haunted house. She said it was too scary.

My European friend Philippe is eager to bring these type of examples up whenever he tells me that Americans live in a country of finger-pointers. I agree.

If we get lung cancer from smoking, we blame the tobacco industry. If we slip on a wet surface, it is the cleaning lady’s fault. If we burn our lips on a cup of fresh WaWa-Java, we sue the company that forgot to print a warning.

Heaven forbid we should take some credit for our own actions. Why should we? Blaming someone else could bring in big bucks!

So, what’s next?

Read the rest of this story in my new eBook. Click on the cover to access the website and get a sneak peek. Use the buttons to buy the book.

Making Money In Your PJs cover


The secret to landing any freelance job

by Paul Strikwerda in Articles, Career, Money Matters 11 Comments

Is your freelance business going down the drain?

Are you sick and tired of rejection?

Have you had enough of wasting your time on auditions, bids and proposals that never lead to anything?

Perhaps it is time to make frustration your friend. Be sure to add a strong dose of disgust to the mix. According to success strategist Jim Rohn, disgust is one of the four emotions that can lead to life change. Rohn:

“The person who feels disgusted has reached a point of no return. He or she is ready to throw down the gauntlet at life and say, “I’ve had it!”

RESOLVE

Once your frustration has reached a boiling point, it is time to make up your mind. Are you throwing in the towel, or are you going to take massive action and turn your business around? If you pick the last option, the next question is: HOW?

Read the rest of this story in my new book. Click on the cover to access the website and get a sneak peek. Use the buttons to buy the book.

Making Money In Your PJs cover


How much $$ do you need to break even?

by Paul Strikwerda in Articles, Career, Freelancing, Money Matters 5 Comments

7-7-2008

“It will look so good on your resume”
“This might lead to regular work”
“We’re a start-up business”
“It’s such a small project”
“This is an Indie film”
“It will only take a few minutes”
“You’re new and we want to give you a chance”
“Even if you don’t get the job, it’s still great practice”
“You’d be perfect for this… I wish we could afford you”

If you’ve been an active job-seeking member of the voice-over community for… about two weeks, I’m pretty sure these ‘teasers’ have been thrown out at you a few times. They’re getting old quickly, don’t you think? Or are you still falling for them? Be honest!

These days, clients are getting even more efficient by leaving these phrases out. Now it’s just:

“Manhattan-based attorney’s office in need of a male voice for their website. Budget $100.”

Are you kidding me? These attorneys won’t even pick up the phone for 100 bucks. So, why do they expect us to work for a hand-out? Is it perhaps because many of us call ourselves voice-over ARTISTS?

MISCONCEPTION ONE: Artists don’t work. They just enjoy their hobby.

My wife, a phenomenal professional flutist, had just finished an exhausting wedding gig: a ninety minute Mass followed by a two-hour cocktail party. All in all she had had two breaks: one to rush from the church to the banquet hall, and a ten minute bathroom break during the reception.

When she came back to get a refreshment, some guests looked at her as if she was stealing from the buffet. One of them even walked up to her and whispered: “Aren’t you supposed to be playing?”

At the end of the engagement, the mother of the groom walked her out and said it had been “lovely”. She sighed: “I used to play the flute. It must be wonderful…. being able to play music all day long.”

When my wife discretely asked for the paycheck that should have been handed to her at the beginning of the day, the groom’s mother looked shocked. She said: “Are you telling me you’re actually getting paid for this?”

Some people just don’t get it, do they? Whether we’re musicians, writers, web designers or voice-over artists, the opportunity to do the things we’re passionate about, should be enough, don’t you think? Well, why don’t we ask Alex Rodriguez about that? Perhaps he’d be satisfied with getting the keys to the Big Apple and a fat World Series ring.

MISCONCEPTION TWO: All you need in this profession is a computer, a microphone and an Internet connection, and you’re in voice-over business. Small investment. Huge ROI (and you can even do it in your PJ’s!).

Well, well…haven’t we heard that one before? If it were that easy, tell me who is paying for your:

  • marketing
  • advertising
  • bookkeeping
  • hours spent finding work
  • taxes
  • overhead
  • continued education
  • attorney
  • sick days
  • paid holidays
  • vacation
  • union dues
  • health insurance
  • dental insurance
  • disability insurance
  • life insurance
  • business insurance
  • unemployment
  • retirement
  • invoices that never get paid
  • … and all other joys that come with running your own business?

 

BREAKING EVEN

Remember, all of the above (and more) has to come out of that job that you almost accepted for $125. Do you even know how much money you need to make in a year, just to break even? How about in a month? How much per week… per day? That’s just to cover costs. How about making a profit? How about saving a little for a rainy day or for college?

If all of this is a little overwhelming and intimidating, let me reassure you. This does not have to be your life! If you don’t have the drive now, do not waste any more time. If you’re not prepared to run your career as a for-profit business, you still have plenty of options… to name a few:

1. Stop posing as a pro and leave the market place to those who are willing to be professional. Stay an amateur instead. No pressure.
2. Get a ‘regular’ job with benefits

GET REAL

However, should you decide to become a professional solopreneur, start acting like one! Don’t do anything else before you take the next step: figure out what your basic minimum hourly rate must be, based on cost, billable hours and the profit you’re comfortable with.

Depending on your input, this could take 5 to 20 minutes of your time. How do you do it? By using this simple on-line rate calculator, developed by one of my favorite websites: www.freelanceswitch.com.

calculatorRUNNING THE NUMBERS

Of course it would be a little presumptuous to tell you what to do. Some people just don’t want to spoil their hopes and dreams by facing reality. These are the folks that purchased a house they can’t afford because they thought they could swing it. And now they’re paying for it.

Some people are more comfortable playing the victim or playing the blame-game. Others use excuses such as: “I was never any good with numbers”.

Sorry, but I’m not buying it!

First off, this rate calculator is so easy, even I can use it. Secondly, you can always ask a friend to help you out; find a mentor, hire a pro… There are business coaches out there who’d love to have your voice on their AVR in exchange for their advice. It’s often better to have an impartial opinion from someone who is not in love with your dream. Have a business lunch with them and bring your calculator and a note pad.

Third, make a small investment and get “The Money Book for Freelancers, Part-Timers, and the Self-Employed” by Joseph D’Agnese and Denise Kiernan. This was the first book about money matters that I actually enjoyed reading. It felt like I was getting advice from friends who knew exactly what situation I was in. Joe and Denise offer very practical, down-to-earth strategies in a language anyone can understand, and they’re actually very funny too!

FINE DINING

So…. next time a voice-seeker holds up one of those carrots I started this article with, imagine yourself walking into a restaurant and telling the waiter:

“I can’t really pay you full-price, but if your food is any good, I’ll be sure to spread the word about this place.”

Please let me know how that worked out for you.

And if that did not go over so well, try going into Home Depot, hoping to get 75% off that professional pneumatic drill. 

“And why would we do that?” asks the manager.

And then you utter the magic words: 

“Well, it’s only for a small project….”

And finally, would you be willing to do me one last favor, please? Once you’ve figured out your desired and minimum hourly rate, look at that $100 voice-over project again, that you were just considering. You know, the one that “will give you great exposure”.

Now look at your hourly rate again.

Get it?!

2-17-2008

Paul Strikwerda ©nethervoice

PS Many thanks to artist N.C. Winters for the comic strips. Find out more about the work of N.C. at the artist’s site and at Freelance Freedom.

PPS A Dutchman visiting the US offers some refreshing insights as he holds up the mirror: Only in America.


Money, Money, Money

by Paul Strikwerda in Articles, Career, Money Matters, Pay-to-Play Comments Off on Money, Money, Money

They had a saying at the bank I once worked for as a trainer:

“If it’s about money, it’s never funny”

Ain’t that the truth! To that I added my own saying:

“Show me your bank account, and I’ll tell you how you lead your life”

Bankers and accountants probably know more about you than your therapist. By the way you spend your money, they can tell whether or not you lead a healthy lifestyle, if you’re a good planner and even if you can resist instant gratification.

On blogs and networking sites, money is a recurrent theme. People want to know how much to charge; whether or not they should spend  $300 on a membership of a particular site, and if it’s OK to discount some services… the list is endless.

Recently, I found myself caught up in a discussion about on-line freelance job sites like Elance. These sites offer an opportunity to connect with prospective employers from all over the world, and find projects that are not listed on the familiar voice-over casting sites.

However, when I looked at the average bids some of our colleagues put in to get voice-over work, I was stunned. If you think that doing a job for $100 is stretching it, wait until you check out sites like Odesk.com. Your jaw will drop to your knees. And that’s not a good thing if you’re in the voice-over business.  

HARD TIMES

Some people are justifying this downward trend by pointing at the current recession. This is what they will tell you:

“We’re all suffering. We all have to tighten our belts and do more with less. The only way to still get work is to lower our fees. The economy is going down and our rates have to follow suit.”

I’m not buying it! Are you? As I was paying a stack of medical bills, I had a realization. Do our doctors lower their rates because we’re in a recession? Would a nurse take care of us at half price? Is a baker going to charge less for his loaf of bread, or would a plumber be willing to show up and take a 40% pay cut? No way.

If anything, their fees increase every year to keep up with the rate of inflation. Then why do some of us feel the need to put themselves up for grabs in the bargain basement?

Remember: once you’re in there, it’s so hard to climb out. Recession or no recession, if you subscribe to the notion that you often get what you pay for, why are you selling yourself and your colleagues short? What are you afraid of? A certain two-letter word?

THE HARDEST WORD

Top negotiator William Ury wrote a book called “The power of a positive No”. For some of us, that powerful word is one of the hardest in the language. But when we’re saying “No,” we’re asserting ourselves and we’re affirming our boundaries, whether it’s in an intimate relationship or in a business relationship.

Being an independent contractor means that we have to have a good sense of what we’re worth. We have to have the guts to stand up for ourselves (and each other), and say “No” when faced with a bad deal. If we don’t, people will inevitably take advantage of us.

Let me rephrase that: if we don’t dare to say “No,” we are allowing others to take advantage of us. Or, as Dr. Phil puts it: we teach people how to treat us.

HERE COMES THE BRIDE

Did you know that I’m also a non-denominational wedding officiant? I basically set my own fees. Every now and then a young engaged couple tells me that they’re on a shoestring budget, and they’re practically begging me to lower my rate.

In the beginning -when I didn’t know any better- I fell for it big time. I wanted to be liked and I felt sorry for the couple as I remembered the times I had to nickel and dime. Guess what… I paid for my lack of backbone, until I had learned my lesson.

First of all, these couples turned out to be the most demanding couples I had ever worked with. I’d give them a finger and they would ask for the entire hand. I’m all for underpromising and overdelivering, but within reason. If you’ve seen some of the Bridezilla shows, you know that not every princess is as sweet as her Daddy believes her to be.

Secondly, these ‘shoestring weddings’ often turned out to be the most lavish events I’d ever be invited to. Apparently, other vendors had not fallen for the couple’s story of woe. These days, I encourage my brides to be, to price officiants out. I also tell them that low fees are often a red flag. It either means that an officiant is just starting out, or that he or she might not be able to offer as many services. I tell my couples: Don’t expect a gourmet meal at a fast-food price.

When I started to put my foot down, something amazing happened: as soon as I decided to charge a fair fee, people started taking me seriously. Sure, I lost a few weddings due to price, but my limited time on earth is too valuable to have to deal with haggling Bridezillas.  

THE SECRET TO MAKING BILLIONS

William Ury recalls a breakfast he once had with Warren Buffet, one of the most successful investors ever. Ury writes: “He confided in me that the secret to creating his fortune lay in his ability to say No.” Buffet said:

“I sit there all day and look at investment proposals. I say No, No, No, No, No, No -until I see one that is exactly what I am looking for. And then I say Yes. All I have to do is say Yes a few times in my life and I’ve made my fortune.”

So, let’s learn from Buffet and promise each other to teach our clients how to treat us. Say “No” to rates that insult your unique talent, your professionalism, your intelligence and your experience.

Economists tell us that the only way to get out of this recession is to start spending again. If anything, we should start making more, not less. You can bank on that!

Paul Strikwerda ©nethervoice

PS There’s much more on “the power of NO ” in this article!

HERE COMES THE BRIDE
Some of you