Pricing Your Work

Life lessons to help you stop second guessing

Oct 23, 2024

Those of us who are self employed or independent contractors often struggle with how to price our work. Is it best to set fixed rates? Should we offer a discount to long-term clients? When should we raise our prices? Should we lower them when times get tough? And what about negotiating with clients who can’t meet our budget?

Young people starting out often say they’re terrible at negotiating. In fact, they’re usually just inexperienced. Like anything else, it takes practice. Most of us acquire our skill as negotiators over time.

In addition, pricing is highly individual. So relying on advice from colleagues who insist, “You should be charging X!” often turns out to be a bad idea. Guidelines and tips on best practices are more useful.

I’ve been negotiating my own contracts and agreements for decades so I’ve learned a lot, and want to share some of my lessons.

First, setting a fixed price is usually best. It serves transparency. We don’t have to worry that client B will find out that we charged client A a lower price for similar work, which is the kind of revelation that can damage our reputation. It’s also less complicated: when a potential client writes to inquire about our availability for a project, we can simply attach a pricing list to our response. No need to schedule a call to discuss it. This saves time for both us and the client.
Of course, we’re free to offer different fixed prices for different categories of clients, as long as we explain why we’re doing so upfront. For example, we may want to charge different fees for non-profits than we charge for corporate engagements. If so, it’s smart to keep separate, and clearly labeled, pricing sheets on hand to avoid mistakes. It’s also wise to perform a bit of due diligence before we respond.
For example, you might want to know if the non-profit that contacted you compensates members of its senior team in the mid-six figure range or above. If so, you might prefer to send them the pricing sheet usually used for corporate. Often the size of the non-profit matters more when it comes to pricing, than its 501-C status.
Charging a fixed price doesn’t mean we never negotiate. However, we do want to be careful not to do so routinely, or the whole idea falls apart. For example, I often make an exception for members of the military and public employees, because I’m grateful for their service. And I usually charge long-term clients a somewhat lower rate than new clients if the long-time clients are having a problem meeting my price.
How to know whether or when to raise fees. One of the most frequent questions I get about pricing comes from people who want to raise their fees but aren’t sure whether doing so is a good idea. It may be, or it may not. It chiefly depends on how much work you have, and how much work you want.
Because the market sets prices for goods and services, you can really only charge what potential clients are willing to pay. If you charge more, you’ll lose good clients. If you charge less, you’re likely to be overwhelmed by work and put yourself at risk of burning out. My friend Marshall Goldsmith always says that the time to raise your prices is when you have too much work. By contrast, if you raise your prices when your calendar is a bit thin because you feel you need to or are entitled to, it could turn out very badly.
Is lowering fees always bad practice? I often hear people declare that you should never reduce your prices. My experience during the 2008 recession and later the pandemic, lead me to disagree. What you can realistically charge is determined not only by how the market values you, but the strength of the market itself. If potential clients are concerned about what the future might hold, or have already started to lose business, they’re not going to pay what they would have when times were good.
Know your economic environment. I learned a sobering lesson about how to charge during adverse economic conditions in 2009. The previous fall, the collapse of subprime lending triggered a what would become a severe, multi-year recession. Companies around the globe slashed spending, with budgets for leadership training and development particularly hard hit. As a result, I lost about 75% of the work I had booked for 2009, a drought that would continue through mid-2010 and require my husband and I to assume dangerous levels of debt.
In 2009, I filed my ‘08 taxes for the previous year. As I went through my earnings statements and matched them to my calendar, I received a shock. I’d somehow managed to forget that I’d decided to raise my prices at the end of 2007, based on the advice of a colleague who insisted that I was at the point in my career when I should be charging more. While I did manage to land some work at my new fee, I also lost a lot from potential clients who could not meet my price.

Timing is everything— and sometimes it’s beyond our control. With mounting horror, I realized that I could have avoided about half the debt my husband and I had to assume if I hadn’t raised my fees when I did. Of course, I could not have foreseen what would become known as “the great recession.” But the fact that I’d chosen to forgo good solid work that I could have secured if I’d been less extravagant about my pricing should have alerted me that doing so was foolish.
Acknowlege your true motivations. Why did I do it? Because I felt embarrassed when a colleague told me that he considered me underpaid. And because it served my ego to announce my new fee structure. In other words, grandiosity and impatience made me unwilling to test the market before making a unilateral decision. I paid a serious price because money during the recession was expensive for anyone with a lot of debt. It took my husband and me the next eight years to pay off everything we owed. A costly lesson on the importance of not getting ahead of the market!

There is no magic formula for setting the right price. Being pragmatic, though not overly cautious, is usually the best approach. But any approach depends heavily on the data or situation it’s applied to. So reading the lay of the land accurately beforehand is paramount. It may require us to put our ego on the back burner or not follow the advice of someone we respect, but understanding our economic environment is the key to getting our pricing properly aligned. And it helps us avoid second guessing ourselves later.

All Rise with Sally Helgesen

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