Am I too ethical for value-based pricing? 🧐

Stupid conscience.

When I started out as a freelancer, I wanted to price my services in accordance with the market. I did not want to over or undercharge; I wanted to charge what other freelancers with similar skills and a similar level of experience were charging. I largely stuck to this ethos as I gained more experience, though I tried to increase my rates a little with each new client.

That is, until 2020, when I stumbled upon a brilliant Twitter thread that convinced me it was time to ditch hourly billing and embrace value-based pricing. My goal from then on became to figure out how much value I was creating for a client with my services and to set my prices accordingly.

And if I can let you in on a secret … my ultimate ambition is to charge what clients are willing to pay for my work. 👀 If a client thinks a particular service of mine is worth say €1,000, then I don’t want to be charging a penny less. This is a basic economic concept, FYI.

Assessing (or, let’s be honest, guessing) what a client is theoretically willing to pay for my services is of course tricky. The pricing experts I have followed make value-based pricing sound easy, but of course many of them are working in highly corporate industries, and their advice feels a lot harder to apply in a creative sector. The few times I managed to muster up the courage to flat out ask a client what their budget was, they always obfuscated.

The result has been that I have gotten my value-based pricing very, very wrong. (You can expect a newsletter on my most recent pricing gaffe in a few weeks, when I hope revisiting it will no longer give me physical discomfort.)

The biggest problem I have run into in embracing this pricing methodology however is … my conscience. For instance, a few weeks ago, an old non-profit client got back in touch with a potential assignment and I gave them the flat rate I had given them a year prior, with an inflation adjustment of a few percentage points. They okayed it and I got to work.

After I sent my invoice, I totaled my hours and realised that it had only taken me a handful of hours to complete the assignment, leaving me with a €100/hour rate.

Now, I did not cut any corners on this assignment. The client was happy with the finished product, their own client was happy and I was happy. Everyone happy, happy, happy.

But I felt like a con man. I couldn’t shake off this feeling that it wasn’t fair to charge them so much money for something that took me a few hours to do.

I tried to rationalise my rate to myself. If they were willing to pay my rate clearly they didn’t think it was an excessive rate? Also, consumers buy overpriced things from companies every second of every day, right? (€13-granola, anyone?)

Also, the 8 hours I spent working on this assignment were incredibly focused, in which no time was spent on social media, chatting to colleagues or being, you know, just not very productive. 

I told myself that if the client had given this assignment to a staffer not trained or used to doing this work that person would have probably spent double, if not triple the amount of time on the assignment. Then I reminded myself that I’ve been doing this for 10 years. That I’m good at what I do and that quality work costs money. That I made lots of investments into honing my skills, from signing up for our school newspaper at the age of 17, to writing dozens of unpaid pieces to build up a journalism portfolio while I was in college, to crossing the Atlantic to obtain a Master of Science in journalism from an Ivy League.

Still, I couldn’t quiet this stupid voice in my head that kept telling me I was a dirty capitalist with zero morals.

And yet clients are quite happy to play this game with me. They ask me to name my price without ever disclosing the budget they’ve set aside for a particular assignment, or sharing the slightest detail about how much financial value I’m creating for them.

I would venture that most clients are quite happy to pay freelancers a low rate if those freelancers let them; that too is basic economics and I fully recognise this is simply how the system works.

In fact, only one client has ever told me my price was too low. Or, to be more precise, I gave them my rate and they said: Actually, this is what we’ve paid other freelancers in the past, so you can charge that.

And that client is the client that’s been guilt-tripping me for the past few weeks. We are officially full circle.

What about you? Have you ever felt guilty about the rates you charge your clients? Do you have any advice that could help me other freelancers figure out how much value they’re creating with their services? Leave a comment on this post on our website or get in touch at freelancerthefriendly@gmail.com

Take care,

Linda

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What I’m reading this week:

• The Twitter thread I mentioned about value-based pricing. I can’t believe it’s still up and that he hasn’t taken it down to monetise it. Do yourself a favour and read it from start to finish; it 👏🏽 is 👏🏽 golden 👏🏽.

• I wrote a story about the quick-delivery companies that deliver your groceries within minutes and discovered that giving workers a contract isn’t a silver bullet that instantly fixes the abuses we’ve seen in the gig economy.