Perhaps not coincidentally, I had two totally separate conversations on Sunday within the same theme: how much should I charge?
Later that day I tweeted:
Several folks responded that they’d like to hear more about my reflection in a blog post, so here it is.
One conversation was with a friend who’s interviewing for a new full-time job. Another was with a friend who’s pitching a consulting gig. Both were unsure of how to make their case.
Ultimately we all realized that this has very little to do with the money itself — something I think I already knew, but needed to relearn. Money is only a quantitative assessment and agreement between supply and demand, consumer and producer. Value is determined by the scarcity of the merchandise; the more you have something to offer that no one else can provide, the more you’ll get paid.
When anyone asks me, “How do I figure out my value?” I say that value is the greatest amount that someone is willing to pay. It’s incredibly elastic, so it’s crucial that we continually put ourselves in a position to figure out how that value is shifting.
But there’s a deeper issue here: your current value is not necessarily equal to your worth. And the only way to get your value as close as possible to your worth is to know how to sell yourself.
Of course there are people out there whose value is much greater than their worth, and I say more power to them for selling something that doesn’t exist. What they lack in hard skills they certainly make up for in soft ones.
What you’re worth is a question only you can answer. It’s loosely a combination of your ability, experience, and instinct. I don’t believe any of these three can be objectively measured, therefore it’s your responsibility to make a subjective assessment and assign a dollar amount to it.
Some people charge by the hour, but I won’t. If my worth requires more time to shine through, the client should not be penalized. But if my worth gets me to the answer faster, why should I be penalized?
When you present a client with three options — the rate you’re willing to take, the rate you expect, and the rate you deserve — any smart businessperson would offer the rate you’re willing to take. Why? Because it is every business’s duty to increase revenue and decrease cost. If a business isn’t actively trying to do this, that probably isn’t a business you should be working for.
They’ll ask for the cheapest option and will agree to limited scope, but I assure you they’ll come to expect more than they’re paying for as the project progresses. Because they know that you have more to offer. They know you’re worth more. And worst of all, they know that you don’t.
Accepting a valuation that’s less than you’re worth is a quick way to lose others’ respect and diminish your chance of success. By pricing your value at full worth, you give the person an opportunity to have more than they thought they needed. Not everyone will recognize this opportunity, but the right person will. That’s the person you want to work for.
Having a full-time salary isn’t much different. If you believe you deserve more, then you owe it to yourself to ask for it. But remember that you’re also going to be expected to deliver on it. It might mean having to up your game.
You find your worth when you butt up against your own limitations. If you aren’t always trying to outdo yourself, then you won’t know where that worth lies. Moreover, you lose the biggest opportunity of all: making yourself worth more.
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Attaching a value to yourself is definitely a hard task. But, I’m not sure that I agree with these statements:
“If my worth requires more time to shine through, the client should not be penalized. But if my worth gets me to the answer faster, why should I be penalized?”
When I look at this, it reads as though you *only* deliver value at the end of the project. In that case, the longer you take, by the hour, yes, your clients are penalized. However, I highly doubt that you *only* deliver value at the end of a project. I am sure that as you help a client shape their project, you are adding value at *every* step, every day. In that case, you’re actually backwards – the longer it takes you, the more *value* you are giving to the client, helping them to create a project that is perhaps far beyond their original understanding.
Now, on the other hand, if you get things done faster, your statement reads like you suffer. That would make sense if you had a fixed number of clients per year. As a trite example, let’s say you only have one client per year. In that case, the faster you finish, the more you do suffer; but, again, I doubt this is the case. I would assume that for you, the faster you finish your work for your clients, the sooner you can start *new* work – new work that pays you cash money :)
Now, I’m not saying by-the-hour is the way to go; I’m just saying that you’re not seeing the bigger picture if you think by-hour is “penalizing” people.
Great thoughts. It’s also important to mention, as I’ve learned through one of your other posts, that its better to charge what you feel and perhaps limit your possible clients as a result. I’d rather charge twice as much as my current rate, and lose half my clients. Its about valuing your time and hard work, and limiting yourself to clients who will also value you more.
Good insights. In the Finance industry, doesn’t matter how good you are, they never pay you what your worth until you go get another job offer from a competitor and threaten to leave. The unfortunate ways of that world.
When seeking a full-time role, it’s best to do research into your industry and see what someone with similar qualifications, experience, and skills can earn. Ask for a good healthy figure, but also be honest. You don’t want the employer to recoil in terror, but at the end of the negotiation, you should be feel a little disappointed.
For consulting it’s tricky because raising your rates will also drive away certain clients. The extra fees you command from your next job might only just equal the extra sales time required to find a higher-paying gig with different client. A tough one, indeed, as you’ll always have to answer the question “why should I go with you, instead of so-and-so who’s cheaper?” Prepare your answer carefully — this is essentially your promise of value, and you have to deliver on it.
Over the past couple of years, I’ve slowly doubled my rate from what it was as an after-hours, for-fun freelancer to a full-time, making-the-mortgage-this-way freelancer. I was horrified to find that almost nobody batted an eyelash when I tell them my new rate. I was seriously undervaluing myself!
Astute points, all. I particularly enjoy the perspective (and the hope) that “the more you have something to offer that no one else can provide, the more you’ll get paid.” One problem with this, though, can be that “what you have to offer” may be hard to qualify/quantify in a client’s (or employer’s) eyes. Soft skills like being both technically-savvy and impeccable with grammar, spelling, delivery and tact generally take a lot of time (experience) to develop. Often this winning combination of skills (and consequently others’ perception of our value) doesn’t reveal itself immediately.
Per hour is the best indicator I can see especially in my line of work.
Even for a fixed amount, I am estimating the # of hours and then assigning a $$ by hour to get the final cost.
As a salaried employee, you can also divided your gross (or better, your net) salary by 2000 hours in a year to get what you are “worth” to the company. That doesn’t include benefits, but it’s a raw figure.
My line of work, I charge by the hour, and overtime has to be approved but I charge for overtime too. It isn’t my fault when managers don’t estimate correctly, and I try to get things done on their timeline pending approvals/delays.
If I need more time, I charge for it. If not, what I deliver will be late.
Great read, Whitney.
In design, at least, if you charge less than your worth you also end up doing work that is, not to be pompous, beneath you. You end up lowering your perceived value because you don’t get as many opportunities to really shine. People who simply want the cheapest option generally don’t put as much value on all the things that make you great.
Love the take/expect/deserve thinking. Brilliant!
Just want to add two things:
1) Regardless of whether you charge hourly or fixed-fee, I think you need to be good at both. If you’re fixed-fee, it’s still smart to know how long things take so you can figure out what projects are typically the most profitable. If you’re hourly you should still estimate a budget and try and hold yourself to it so that you can set more realistic expectations with your clients and prevent surprises.
2) I think the “getting paid what your worth” thinking attached to fixed-fee projects can be a trap. I believe a crucial part of becoming a professional is to predictably and reliably deliver value. If a similar project sometimes takes 10 hours and sometimes takes 40 hours, something is terribly wrong. There’s too much reliance on outside forces (like creativity) to be predictable and reliable. Blaming hourly rates for costing you or your client too much money is avoiding the real problem and isn’t fair.
Over and out, Dan.
Thanks for writing about this Whitney, it’s actually what I needed. I recently reduced my hourly rate believing (somewhat foolishly) that the project would be a great learning opportunity. HA! Now the company in question thinks that I”ll accept the same rate next time and deliver the same results. Urgh. I could have avoided this pickle if I’d realized my true worth earlier. Better late than never I guess. :)
I love this way of thinking about it – the relationship between value and worth – very smart and very helpful.
I think for so many people – women especially – we don’t end up estimating our worth accurately and starting a negotiation from that amount. Too often we think instead about what seems reasonable, what the organization’s needs are, what we imagine will be balked at (or cause someone to ask, “who does she think she is!?”). Or we underestimate our worth. I’ve found that I really have to go way outside of my comfort zone, and my own estimation of what I should be paid, and throw out a number that is much greater. Because in fact the world gives me more helpful data about my worth and value than does my internal worth-o-meter. I have yet to be turned down with my ‘crazy’ numbers, which tells me there is something very skewed about my own perception of my worth, and my value. I love encouraging women to go way outside what they think they can be paid – and see the surprising results.