Unfortunately, there’s no scientific formula, philosophical principle, or magic wand to give you an exact answer to this question. It’s a complicated question, but there are a few bits of wisdom I have learned that can help take the guesswork out of the equation.
First things first, let’s discuss value, because price and value are two different things, and it is essential they match up in order for a client to be willing to pay for our services. You probably already know what price is and what value is, but let’s pretend you don’t for a moment… Price is the monetary value placed on a good or service. Value is the summation of all the intangible values that come from a good or service. They sound similar, but not the same. Make sure you take the time to consider the value you bring to any given project. Whether it’s your education, experience, industry knowledge, or just outright creative talent, you have a lot of value that is more than just the price of a specific item.
But here’s the kicker. You knowing your value is important, but making sure your CLIENT knows your value is essential. People cannot value something they don’t know they are getting.
Take the time to properly explain the value you can provide to your clients.
Going back to pricing, here are a few key signs you may not be pricing accurately.
1. Your clients never negotiate and always accept the first price you give them without question.
Let’s be honest, most people are out to get a good deal. If no one is phased by your prices, then they already know they are getting a great deal and don’t see a need to discuss it further. Automatically, you can tell that they are valuing your services more than your prices are. Believe it or not, it is okay if your prices turn away clients who don’t see your value.
2. You aren’t making any money.
Full stop. If you aren’t making money, your pricing is not working.
3. Most of the projects you are excited about don’t move forward.
In any endeavor in life, there’s bound to be a disappointment, but if you’re consistently missing the opportunities to work on projects that excite you, you may need to re-evaluate a few things. In that same vein, if you are being approached by the kind of client you want to work with but in the end, they tend to go in another direction, your pricing may be to blame. If they didn’t appreciate your design style, they most likely wouldn’t approach you in the first place. So, take a look at what may be turning them away on the pricing side.
4. You end up taking projects you don’t want in order to make ends meet.
Some people may think, “What’s the problem with taking on more projects even if I’m not excited about it?” As a person, you only have so much time and energy. Continuously having to take on small, short-term, or overall disappointing projects means that you won’t have the time or energy to accept the projects you do want or to attract your ideal client.
5. You get super anxious every time you send a proposal.
When your prices match the value you provide, you should be able to send your proposals with confidence. Not every proposal you send will be accepted. However, you should be able to stand behind the services you offer knowing that the pricing reflects the value.
6. You feel like you can never take time off.
If you are feeling as though you are tied to your work and you can never step away from it, then you are probably not properly charging for your time and energy. Your time, skills, education, and energy are all a part of the value you provide. This also leads to our next point.
7. You aren’t able to hire help.
Similar to the above, if you can’t take a break or hire help for your projects. You are not receiving proper compensation for the value you provide.
8. If you are charging $5000-$10,000 to design an entire house…you are not charging enough.
Period.
So, if you’re feeling like any of the above applies to you, you may think to yourself, “Okay great! Now, I know that I’m doing it wrong, but how do I fix my pricing?!” Let’s jump into some solutions!
First, take a good hard look at everything you provide for your clients; experience, industry knowledge, relationships with vendors, sources, etc. All of your know-how saves them time, money, and effort. That’s not even mentioning your talent, passion, and artistic choices. There are people who couldn’t design a room with all the resources in the world. All of this is the VALUE you bring; be confident to charge for it. Every single thing you do for your clients is a HELP to them. You shouldn’t do any of it for free. Charge for every single thing you do, every hour you spend, and every product you sell. And then let them know all that you are doing for them, so they understand what they are getting.
Second, communicate, communicate, communicate. As I mentioned above, let clients know what you are doing for them. If you do decide to do something for free, put it on their invoice with a cost of $0. Most people are unaware of what’s involved in the process and might not appreciate the deals you give them if they aren’t told about it. Be transparent about everything. Let them know upfront what you have to offer. This also gives them the opportunity to decline a service or product if it’s not something they want/need which can save you time and lead to a more satisfied client. This also helps them to trust you which is key to a great relationship with your clients and possible repeat business or referrals.
Lastly, track your metrics. I talk to so many designers who are baffled they aren’t making any profits. They have a revenue of over a million dollars a year and are constantly busy and overworked, but at the end of the day, their profit margin is 1% or less. This is a problem that comes from not tracking what you are doing and where you are spending your money.
The point of running a business is to make money. If you aren’t making money, your business is basically just a glorified hobby. So, stop allowing yourself to feel guilty for charging clients for the work you are doing. If it takes you 10 hours to pick out tile for a bathroom, imagine how much longer it would have taken your client. Track your hours, track your margins, track your product sales, your warehouse fees, your shipping costs, your travel expenses, hell, even track your sample orders! Know what you spend, for whom, and for what reason, and then charge appropriately.
If you are interested in reviewing your specific pricing structure and getting thoughts on how you could improve it, feel free to schedule a free 1-hour consultation. In just one meeting, we could assess your pricing structure, talk about your value, and understand how you should try adjusting for the future.
I’d love to hear any lessons you’ve learned about over or underpricing yourself and your services in the comments below!
