Are You Really Worth That Much?

February 17, 2009


Are you overvaluing yourself, or the services you provide? With the economy in the toilet right now, charging more than you’re realistically worth is one of several business sins to avoid.

Overcharging And Why Did Everyone Suddenly Become A Consultant?

A whole heap of folk launch themselves into self employment by becoming a consultant in “whatever” and lets face it, there’s far more “whatevers” than most folk really want, or need. And I’m not saying they all suck but most people have little desire to pay for these “whatevers” in this economy. If you have heaps of experience, training and knowledge in “whatever” you might just be worth a few hundred quid an hour.

If you don’t, you may well get a bit of work initially but once folk realise you’re not actually worth 5 times the amount their lawyer charges (and they will) – they’ll be keen to make sure that others know you’re just not worth it either.

Charging Folk For Quotes:, Or Consultancy Fees

Nothing turns people off faster than being charged for a quote, or a consultancy fee – as some businesses describe it. To me, charging for quotes is like advertising the fact that you “suck at selling”.

And in this economy, you’ll be competing against businesses who don’t charge, just to tell folk what they can do for them and give them a price. If your business would suffer drastically, from not charging these upfront fees – either re-think your pricing, or take a decent sales course.

Asking For Money Upfront

People don’t want to pay a heap of money upfront right now, no matter how good your price is. For starters, a lot of people are either broke, or worried about becoming broke. But what they’re really worried about, more than anything, is the possibility that you might go bust.

Airlines and travel companies will suffer big time because of this consumer fear. In fact plenty of travel companies are offering reduced deposits and some budget airlines are taking small deposits, instead of charging upfront for fares. If these large organizations can’t get people to pay upfront, your little business has no chance.

What other mistakes have you seen business owners make recently? Would you be wary about paying upfront for things right now? Have you avoided things like, making travel plans in advance, because you worry that you could lose your money?

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Comments

20 Responses to “Are You Really Worth That Much?”

  1. Trade Show Guru on February 17th, 2009 9:03 pm

    hi Cath,
    A little gloomy today, talking about toilets… :)
    I have to laugh because often times I hear people say they are a “consultant” or are doing “consulting” instead of saying they are unemployed. All laughing aside, these are tough time, and one has to work hard and work smart, which means offering better value than the next guy. ~ Steve, the trade show guru

  2. Jason Cohen on February 17th, 2009 10:23 pm

    Ug, so true. It was fun for me to read this coming off my last post that explains how to charge more. :-)

    However I absolutely agree! Act like you’re worth more, charge less.

    I would suggest one other tactic for your list. OK, charge a lot, but bill VERY FEW HOURS.

    As you say, don’t charge for housekeeping stuff like quotes and quick chats. You could list that on your invoice but put a “$0″ in the rate so they see you’ve thrown it in.

    Next to your real items, low-ball the hours. You want them to think, “Yeah the nominal rate is high, but look how much she accomplishes in 2 hours! And she didn’t charge us for that other time.”

    If you appear to be worth a high rate but you give time away, it looks like you’re giving away something of value.

    Thanks for putting things in perspective! :-)

    Jason Cohen’s last blog post..Act like your price just doubled

  3. cathlawson on February 17th, 2009 11:05 pm

    Hi Steve – I guess there’s a lot of people that do that. Definitely, giving value is the most important thing.

    Hi Jason – I will have to check it out. As you know already, a lot of folk charge too little too – there’s definitely a balance. They’re always the ones who never have enough work because they can’t afford to do any marketing and they’re really in the shit when the tax bill comes.

    And that is exactly right about housekeeping stuff, you can absorb all that in your total costs, instead of charging for quotes and stuff.

  4. Vered - MomGrind on February 18th, 2009 12:11 am

    I agree that business owners need to adjust the way they do business during a recession. Not to do so would mean losing clients. My prices for ads and freelance writing services are more than reasonable. But I do ask that people pay upfront and no one seems to mind.

    Vered – MomGrind’s last blog post..When Scrapers Steal Your Content: How To Deal With Internet Copyright Infringement

  5. Kathy | Virtual Impax on February 18th, 2009 12:38 am

    WHAT A HOOT!!!

    “I suck at closing the sale so I have to charge for quoting the job!”

    I’m seriously LMAO!!!

    With that said, while I’ll never charge for the opportunity to quote a job, I will ask for a % down on work to be performed. I’ve been “unemployed” (a.k.a. consulting or freelancing) for over 12 years now and will never forget the last time I completed a job without getting money up front. I submitted my invoice and when payment didn’t come, I called. The client had her husband answer the phone when I called and he told me there was NO WAY she was EVER going to pay me for my work. She loved it and USED it – but I couldn’t make her PAY for it.

    Turns out, she was right. Making her pay was the hard part. When I contacted my attorney, I discovered that 75% of my invoice would be eaten up in attorney fees. The best I could hope for was a judgment against them with little hope of collection.

    Lesson learned on my part – and I now collect at least a % up front – but it still didn’t drive me to invoice a potential client for the opportunity to quote a job.

    Kathy | Virtual Impax’s last blog post..The shit fight is beginning- should you join in?

  6. Lillie Ammann on February 18th, 2009 12:40 am

    Interesting article, Cath. My hourly rate may be a little high, but as Jason suggested, I don’t bill for every little thing. I ask for a deposit from new clients unless they have been referred from someone I know, but it’s only a couple of hours’ fee.

    I have awarded you the Premio Dardos award. You can read about it on my blog.

    Lillie Ammann’s last blog post..By: 12 Days Left to Join the WoBM Anniversary Contest

  7. Ari Koinuma on February 18th, 2009 3:20 am

    Hi Cath,

    Hmmm, as someone who’s about to launch new consulting service, this one hits a tender spot. I see your point, for sure, but I also think that for me, the danger lies in underpricing. When you under-price, you get low-ballers who take up your time. When you under-price, you introduce resentments into your own jobs.

    I think the rough state of economy is a great reason to get creative about your monetizing strategies and offerings — but not necessarily to decrease value your offerings. Offer a lower-priced option/offering, perhaps, but I’d vote against lowering prices of your consultancy, unless you know in your heart that you’re overpriced for the market and can’t justify your fee.

    ari

    Ari Koinuma’s last blog post..The Art of Web Design

  8. cathlawson on February 18th, 2009 6:21 am

    Hi Vered – I guess that it’s necessary to get the money upfront when folk ask you to write something specific for them. If they change their minds – it could be a real waste of time for you. I’m pleased you’re getting plenty of work – you deserve it.

    Hi Kathy – I’ve been there and it sucks. I guess some folk will always try to avoid payment, no matter what. I must admit – I was stung so badly with one job, that if I was doing something huge, I would ask for interim payments.

    Hi Lillie – That sounds reasonable enough. If people want a lot of work done, 2 hours doesn’t seem excessive.

    Thank you for the award – I’m looking forward to reading about it.

    Hi Ari – Definitely don’t underprice – there’s a huge gap between underpricing and overpricing and I’m sure you’ll fit in somewhere in between. When I say overpricing, I’m referring to folk who charge hundreds an hour for something that is worth bugger all.

  9. Davina on February 18th, 2009 8:02 am

    Hi Cath. For coaching and editing, I ask for at least 50% of the total cost upfront — for new clients especially.

    I don’t believe my prices are higher than I’m worth. I set them as recommended by colleagues in the same business to be competitive and to not undercut them. And, because my business is newer, I set them a notch lower than more seasoned colleagues. Plus, I’m offering a discount to the first group of a dozen clients. I take my career seriously and aim to give the best of what I’ve got.

    I agree with Ari that setting prices too low attracts low-ballers and time wasters. They waste both their time and yours, and probably don’t respect you and wouldn’t give you a good recommendation either.

    Davina’s last blog post..The Morning Muse — Just Write

  10. cathlawson on February 18th, 2009 8:24 am

    Hi Davina – Checking out what folk in the same field charge is a good place to start. Not everyone does that. I think some people just think of a number and multiply it by ten.

    I wonder, with the type of business you have, if you’d not be better off allowing customers to pay in installments, as you’re going to be working with them for a good few months? I reckon it would be easier for you to get new customers, as it reverses the risk a bit.

    Obviously – I know you, but I would be wary of paying someone a lump sum up front. I once paid someone for services upfront and it was a huge mistake. When I worked out the time she spent helping me, I think what she wound up charging me worked out at something like £800 an hour. I’m not sure how much that works out in Canadian but I’m guessing it would be like double. And I’m guessing that neither you or Ari charge anywhere near that much.

    So, as you can imagine, I expected a lot for that kind of money. I was really specific about what I was looking for and she had totally lied about her skills and experience. I let the sessions carry on for the whole month but I really should have asked for a refund. Trouble is, folk like that know they’re ripping people off to begin with – I don’t know how they can do it.

  11. Alex Fayle | Someday Syndrome on February 18th, 2009 8:31 am

    I’ve been thinking lots about info-products (ie ebooks). So many of us will pay as much as 5 times (or more) the amount we’d pay for a print book and yet very often I find that the print book holds more valuable, practical information than the ebooks do.

    I think as the online self-publishing market matures the prices will come down. Right now everyone is a bit cowboy-like and doing whatever they feel like.

    Alex Fayle | Someday Syndrome’s last blog post..Is your business beatnik? Mine is.

  12. Barbara Ling, Virtual Coach on February 18th, 2009 5:51 pm

    I always charge upfront; I’m rather shy by nature and want to know I’ll be paid without having to followup with the clients.

    Your article has many truths, but there’s also the point that there will always be people willing to pay for quality/status symbols/trophy spouses/etc.etc.etc. You have to ask yourself if you want to fulfill that particular segment….

    Data points, Barbara

    Barbara Ling, Virtual Coach’s last blog post..Must-have HIGH payout alternative to Google Adsense

  13. James Chartrand - Men with Pens on February 18th, 2009 6:10 pm

    Ha, Cath, you had me at the first paragraph! I couldn’t click fast enough to get over here and say…

    You are dead on so right.

    We’ve always priced ourselves at about half the going rate for similar quality simply because it’s egotistical to jack the rate like so many do (and offer crap or something that just isn’t functional for a business). I mean, more power to them if they rake in money, but we’d rather feel good about the money we do earn.

    And just to stress – self-worth has NOTHING to do with price tag. I think many people jack their rates because they think cash equals self-credibility.

    Plus, yes! What’s this with everyone being a consultant these days! I mean, okay, if you really know what you’re doing, fine, but very often, we’ve had to clean up what other ‘consultants’ suggested (and then implemented at high rates).

    And lastly! (Can you tell I’ve had too much coffee?) Charging for quotes and estimates is, I believe, illegal in Canada. I would hope it would be the same elsewhere, no?

    James Chartrand – Men with Pens’s last blog post..Three Men (with Pens) and a Lady

  14. cathlawson on February 18th, 2009 8:37 pm

    Hi Alex – I was thinking the exact same thing as you a little while ago. And as well as charging more, many of them are far shorter too.

    I guess the only advantage is, ebooks are sometimes more up to date than ordinary books. But as you say, some are written by cowboys and prices will probably have to come down. I for one would definitely not pay $47 plus for an ebook right now.

    Hi Barbara – Now that’s an interesting reason for taking payment upfront. I hope if someone ever tried to swindle you out of payment – you would still chase them up though. I read somewhere that 20% of ordinary people arrange to have work done with no intentions of paying.

    Am LMAO here imagining what consultancy services folk could offer to trophy spouses. But I’m guessing I probably shouldn’t contribute my ideas.

    Hi James – I was a bit worried when I saw your name in the comments section, incase you were coming to tell me you’d increased your rates to a couple of grand an hour.

    I think you’ve hit the nail on the head when you say a lot of people think cash equals credibility. I guess they don’t stop to think about how high the customers expectations are going to be and the consequences of not being able to meet them.

    In the UK, I don’t think it’s illegal to charge for quotes. I’ve certainly seen a few people do it – even for tiny little jobs. They would be far better off just absorbing costs incurred into their regular prices.

    Hey, I’ve just read your new post title and it looks like you’ve taken someone new on. Good for you – it’s nice to know that not everyone is laying folk off.

  15. Kim Woodbridge on February 18th, 2009 9:34 pm

    I ask for half or a percentage up front and a contract with larger jobs. No one has had a problem with it so far. For smaller jobs, the people usually just pay and then I do the work.

    I offer free consultations but you have to be very careful with that. I am currently dealing with someone that has called me a couple of times, wants another call, wanted mock-ups, etc. I have probably spent at least 2 hours doing actual work with this person would no indication that I am actually going to get the job.

    Kim Woodbridge’s last blog post..2 Online Resume and Portfolio Builders

  16. Davina on February 19th, 2009 12:33 am

    Hi again Cath. I give people their first session for free to determine if they want to work with me… if there is a rapport between us and if coaching is for them. I think asking for 50% upfront after that is fair. If someone values the service they will find a way to pay. If they are financially strapped there are ways to work around that. I’m flexible.

    Davina’s last blog post..The Morning Muse — Just Write

  17. wilhb81 on February 24th, 2009 5:23 am

    In this case, I mostly charged the customers at a very fair price, after a negotiation with them! Sometimes, I’m offering some discount to the clients, this to ensure that the buyers will use our services again!

  18. John on March 3rd, 2009 2:45 pm

    Regarding upfront fees – I’d argue that now is a very good time to be taking upfront fees, otherwise there’s a real risk that your customer might go bust.

    Naturally (as you note) they’re going to worry about you doing the same so it’s a balancing act.

    John’s last blog post..11 Interesting Online Business Ideas And What You Can Learn From Them

  19. cathlawson on March 3rd, 2009 4:13 pm

    Hi Kim – I guess it’s a balancing act and how much you’re willing to do upfront will also be dependent upon how much each client is worth to you. If you’re doing two hours work upfront and they just want a one of job which will take a couple of hours, I can see how it would not be worth your while.

    Hi Davina – I guess it depends how long they’re signing up with you for. But at least by giving the first session free, you’re giving them a chance to decide whether they like working with you and vice versa.

    I would imagine that in your type of business, getting a customer to continue with the service may not be so easy if they’re paying you on a weekly basis.

    Hi Wilhb – discounts for loyalty are ok, so long as you know the customer is going to use you on a regular basis.

    Hi John – It would be very good for you, if you could get them to do it. It’s a difficult balancing act isn’t it, as both parties are worried that the other may go bang.

    I know someone who paid upfront for over £100k worth of products. The supplier went bust before the product was delivered and that caused the buyer to go bust too.

  20. John on March 3rd, 2009 5:10 pm

    £100K – Ouch, a good argument for upfront payments being staged against deliverables.

    John’s last blog post..11 Interesting Online Business Ideas And What You Can Learn From Them

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