freelance pricing

Does Money Make You Uncomfortable?

by Paul Strikwerda in Articles, Career, Freelancing, Money Matters 7 Comments

hamburger“Why are you so expensive?”

The question came out of nowhere. I was talking to a client about a job he wanted me to do, and he verbalized what many customers are thinking when they hire a voice-over:

“Why should I pay you over four hundred dollars for three measly minutes of audio? It’s outrageous!”

“Why are you so expensive?”

How would you react to that question? Would you start doubting yourself? Would you apologize for your fee? Would you say: “Well, if it’s too much, perhaps we can agree on a different amount?”

The truth is this: money makes many people uncomfortable. Especially those who have chosen to do what they love. Creatives like musicians, writers, photographers, and yes, voice-over artists. If you are fortunate enough to enjoy your dream job, the wonderful work itself should be rewarding enough, shouldn’t it?

For years, the Concertgebouw, Amsterdam’s Carnegie Hall, didn’t pay young musicians a penny for playing lunch concerts. Not even travel expenses were reimbursed. Meanwhile, the ushers, sound engineers, and other staff members making these concerts possible were receiving a salary. How could that happen?

The Concertgebouw said it was giving artists a unique opportunity to gain some experience and get exposure. The same reasoning was used by schools “hiring” musicians for educational concerts, by pubs, churches, charities, and even TV shows. This went on for years and years. Why?

Because the artists agreed to it, thus teaching clients how to treat them.

Many had to give up their dream career because exposure doesn’t pay the bills.

JUSTIFYING YOUR FEE

As a for-profit freelancer, you have to answer the question “Why are you so expensive?” on at least two levels. First, you owe yourself an explanation. Secondly, you have to explain it to your client.

Before you do that, you have to realize that most questions are based on unspoken assumptions. If you buy into these assumptions, you buy into the client’s way of thinking, which is not such a smart thing to do.

Let’s unpack.

The question “Why are you so expensive?” has three elements. WHY, YOU, and EXPENSIVE. The word WHY demands justification, immediately putting you on the defensive. Do you wish to go there?

Here’s the thing: if you are comfortable with your rates, there is no need to defend them. The moment you feel unsure about your prices (and your self-worth), you’re more likely to lower your fee at the first sign of resistance.

In the beginning of my career, I was afraid to lose jobs because my fees might be perceived as too high. As soon as a customer uttered the magic words “we have a limited budget,” I believed them, and I lowered my price. Big mistake.

These days I know that there is no way of knowing how much a client -big or small- can or cannot afford. I do know that I cannot afford to work for low rates. Here’s the kicker: low fees are often seen as a sign of inexperience and amateurism. Charging less may actually result in not getting hired!

Bottom line: stop being so desperate. Have some dignity. If you are running a for-profit business you must be okay to walk away from a bad deal. Let others record that lengthy, self-published, shitty novel for $75 per finished hour thinking they have landed the deal of the century. You can’t convince stupid. Stupid has to learn from experience or repeat the same mistakes over and over again.

THE REAL DEAL

This brings me to the YOU in “Why are YOU so expensive?”

The question behind the question is: Compared to whom? The unspoken assumption is that there are others who are willing to do it for cheaper. That may be true, but you have to realize that the client is talking to you for a reason. You are not a dime a dozen. You sound like a million bucks and they know it.

Your voice is used by multinationals, world-famous brands, and well-known organizations. You need no hand-holding and no sound engineer to fix your audio. You’re easy to work with and you always meet your deadlines. That’s worth something. A lot, actually.

And if you’re a voice talent that’s just getting started, you know you have this fresh voice no one else has. You have a solid studio with decent equipment, and you’re a natural at making the words in the script dance off the page. You listen to your clients, and you give them what they need without an attitude. You may be new to the business, but you are a pro!

DEFINE EXPENSIVE

A wedding photographer I used to work with got this question all the time: “Why should we pay you a fortune for a few hours of your time?”

She learned that the first thing she had to overcome was the costumer’s ignorance about pricing and ignorance about what’s involved in doing the job. Most people had no idea of the going rate, so they had no way of telling whether someone was expensive or not. They just heard a number that seemed high. They made a mistake many beginning freelancers make:

Thinking that what you make is what you take home.

They did not realize that the fee for a photo shoot paid for professional cameras, lenses, lights, a shooting assistant, computers, editing software, a website, advertising, accountant’s fees, taxes, memberships of professional organizations, insurance, continuing education, a retirement plan, transportation, a photo studio, time spent looking for work, doing the books, editing photos, et cetera. Whatever is left has to pay for rent or mortgage, groceries, utilities, childcare, vacations, charitable donations, and many other expenses.

CLUELESS CUSTOMERS

Believe me: your clients have no clue about your cost of doing business, and they do not care.

However, if you don’t build these expenses into your fee, you will go broke. All the talent, skill and experience in the world is not going to save you if you’re not turning a profit.

So, the next time someone asks you “Why are you so expensive?” think twice before you answer.

Personally, I am comfortable with what I charge. I think it’s more than fair, and I deserve it.

When people ask me why I charge what I charge I tell them in a friendly but self-assured way:

“That’s my rate,” and I leave it at that. And you know what? Nine out of ten times, they accept it, and that’s understandable.

I mean, I don’t go into a restaurant challenging the chef why he charges $35 for the main course.

It’s simple.

If I don’t want to pay that much, I should eat somewhere else.

There’s fine dining, there’s fast food, and anything in between.

What are you cooking up for your clients?

Paul Strikwerda ©nethervoice

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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 

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

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Paying the Price

by Paul Strikwerda in Articles, Career, Freelancing, Money Matters, Pay-to-Play 8 Comments

Is there a hidden link between price and perception?

Do we get what we are paying for?

Are we more satisfied when we’ve paid top dollar?

On January 14th, 2008, a team a of scientists from the California Institute of Technology and Stanford University, published a paper called:

“Marketing actions can modulate neural representations of experienced pleasantness.”

It was the result of research I would have loved to be part of. The hypothesis was that…

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

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