About ten years ago, I was in a situation. I had just sold my traditional planning practice and I was moving into consulting and other work in my field. My new work had me consulting directly with other financial advisors at a rate of $150 an hour. This rate seemed reasonable for me based on my past experience and my years of expertise.
When talking with other consultants, however, they implied that it was rare in our field to charge that rate. But hearing that didn’t change anything for me. My attitude was: If you don’t like my prices, then don’t hire me.
But they did hire me.
One day, another consultant said, “Wow. Mindy, I love that you’re charging $150 an hour. Now I can charge that too!” She noted that before I had set my fees, the industry rate had been so low and no one thought the consulting advice was worth $150 an hour.
Nowadays, I see my rate as neither a badge of honor nor as a way for me to gauge the competition.
At first, her comment annoyed me. I knew that I was worth $150 an hour, but that didn’t mean she was worth $150 an hour. If she was worth that same rate, why was she taking her rate cues from me?
I expressed my frustration to my father, and he had a great perspective. He said, “Mindy, everybody can charge $150 an hour. That’s not the point. This is capitalism; everybody is free to decide their own rate. I suspect, however, that more clients will perceive your rate was valuable and worthwhile. It will balance out in the end. Ten clients may work with you, and perhaps only four will work with her. Don’t worry about this hourly rate. If you charge less, you’ll be busier and you’ll make more money. If the other woman charges less, she’ll be busier and she’ll also make more money. But no matter, it will still balance out. The same clients will still be attracted to you.”
Nowadays, I see my rate as neither a badge of honor nor as a way for me to gauge the competition. My rate is simply the easiest well to help me plan my time and client offerings. In fact, I purposefully kept my rate low for several years in anticipation of scaling my business. Rather than making it a competition or about someone else, my rate is a purposeful representation of my current time, life, and business goals. When you’re deciding your own rate, focus on these three essential areas:
Set your rate based on your own value, and then learn how to best communicate your unique value proposition compared to others in your field.
1. Understand Your Value Proposition
Notice that I didn’t charge more than the other consultant because I thought that I was better than she was. Comparison wasn’t the reason for our rate differences, and it shouldn’t be the basis for your rate either. That being said, I learned how to effectively explain to prospective clients why they should hire me instead of her. You need to do the same. Set your rate based on your own value, and then learn how to best communicate your unique value proposition compared to others in your field.
2. Charge What You Can Confidently Assert is Your Worth
When I first started out, I used an audition method to test out a rate hike. When I needed to raise my rate, I would audition that new rate first. So, if I wanted to charge $150 per hour, I’d set my rate at $175, but then I would offer a discount for bulk pricing. It usually went something like: “If you need X number of hours from me I’ll offer a 10-15% discount.” This allowed me to communicate the higher rate, test out how I felt asserting that as my new rate, while still offering the previous value. Once you have auditioned that new rate, you can more confidently assert to other clients this higher hourly rate — and you’ll feel more confident that you can communicate the value proposition for their money.
Instead of comparing your rate to other people, you need to align your rate to the number that makes your life work.
3. Focus on Your Personal Bottom Line
Do you know the number it takes to make your life work? And not “just” work, but what number lets your life flourish? I talk about this concept in my Profit Clarity workbook because it’s an important one. What is the number that allows you to run your business and still have the amount of downtime you need? This number is the one that allows you to live the life you currently want for yourself. Instead of comparing your rate to other people, you need to align your rate to the number that makes your life work.
One year after that initial conversation with the other consultant, she closed down business and began working for an employer. Though we didn’t have a chance to talk to her about her reasons behind the shift, I have some ideas about what might have happened. Perhaps she was too focused on her competition — on what I was doing — instead of focusing on herself and her own value. There’s a chance that if she had done that, instead of focusing on an arbitrary rate, she’d still be in business.
The takeaway here is:
- Don’t get hung up on pricing; get hung up on value.
- Identify what you bring to the table and then learn how to communicate that to your prospective clients.
- Understand your value, learn how to stand confidently behind your rate, and make it a rate that allows your life to flourish.
When you have these three aspects covered, it’s infinitely more difficult for others to compete with you.
ABOUT MINDY CRARY
Having the diverse combination of finance and coaching experience (along with an actual sense of humor that didn’t require any particular certification), Mindy helps both you AND your money succeed. From growing your wealth to the actual person behind it, Mindy bridges the gap between the energetic, spiritual and practical financial services industry with a creative twist. If you want to feel more confident about your finances (without relying on a spreadsheet!) check out Mindy’s excellent (and FREE) Profit Clarity Blueprint.