Whether you’re a freelancer, a business owner, or member of corporate America, there comes a time when you have to put a price tag on your expertise, your effort, and your time. It might come in the form of a salary, or it’ll come in the form of a project quote or hourly fee; but at some point, you will be responsible for setting the bar on what you are worth. In currency.
This is one of the most difficult steps in owning your business, because not only do you have to set a price that people are willing to pay, but you also have to make sure you’re giving ample consideration and respect to your own needs and time. It takes a lot of research, introspection, and confidence to set yourself up for success.
Here are some tips I’ve learned about how to value yourself and your time:
1. When in doubt, look at what other people are doing (and take it with a grain of salt).
This is probably the first place people tend to look when setting expectations for price or salary. It makes sense — you expect that other people are getting paid for what you do, so naturally, this must be a good approximation of what you’re worth. That said, this isn’t always the right answer, because some firms are larger than others, some people have different work schedules, more experience or less, etc. But it does give you a sense what your customers or employers are expecting to pay you.
If you want to look for comparable salaries try websites like Glassdoor.com to get a sense for what your job title might be worth. Also, check out CNN Money’s Cost of Living Calculator, which is an excellent place to look if you’re moving from one state to another, or want to compare what a developer job in the Silicon Valley would look like if placed in the Midwest. It gives you a realistic picture of what your expertise and time is worth in specific states, and also prepares you to not be dismayed if you’re offered a lower wage in places like Texas or Arizona — where cost of living is significantly lower than in places like New York City, Los Angeles, or Honolulu.
But, when it comes to freelancing or starting a new business, not only are you trying to compensate for what salary you COULD be earning, but you’re also trying to compete on prices presented by other existing companies. This is where you need to be flexible and strategic about how you price yourself. Salary isn’t the only thing you are covering — your overhead will vary from other firms (and job salaries don’t account for paying for rent and other services). See what competitors are charging, and whether or not they have brick & mortar stores, deliver products, drive to clients, etc. This all affects what your price should be.
2. Beware of selling yourself short. Sometimes undercutting the competition isn’t the best idea.
If this is the first time you’re hearing it, let me repeat it again, for emphasis: Sometimes undercutting the competition isn’t the best idea. Now, that’s a very good way to win over price-conscious customers, and is extremely effective for nailing down your first clients. But you also put yourself at risk of finding clients who are otherwise unable to pay for the slightly more expensive options. Those clients might also be a missed paycheck away from not paying you.
Consider who your target market is, and really think about how much they have available in their budget. Are you targeting engaged couples about to get married? If you are, what budget wedding are you targeting? There are some generally accepted rules in wedding planning, like spending 10% of your budget on a photographer (which can be more or less depending on what they value) — so which clients do you WANT to pay you? For me, I love to help small businesses, but I also want to be sure I’m targeting the ones that are sustainable, that way (a) their investment in me pays off for them, and they are around to see it; and (b) they won’t sink anytime soon, and will be able to pay me.
3. “Time is money” is literal – spending your time ineffectively can be an opportunity cost, so be sure to value it.
I can’t say this enough. It’s tempting, when you’re starting out, to accept less for your work, because you either feel guilty for not having as much experience as other people, or you are desperate to have money at all. Ultimately, the choice is yours to make, and you’re allowed to undercut to obtain market share. That’s the beauty of business.
But like that first bullet discussed about comparable salaries, know that whatever time you DO spend on your freelance work, your startup business, or, heck, corporate America, you are spending AWAY from something else — in other words, an opportunity cost. By allocating yourself away from other income-earning opportunities, you are spending money you could have earned. This can be extremely disheartening because you need to have money in the first place to accept the loss that comes with starting your business. This is a major reason many people who have startups or small businesses had to maintain part-time or full-time jobs during those early stages.
At some point, though, you have to make the call to spend your hours on your enterprise as opposed to someone else’s enterprise. This point is when you have to decide when your time is more valuable in one earning scenario than another.
4. Finally, remember that you have a talent, skill, or knowledge about something that others do not have. People are willing to pay you for this because it has value. In short: YOU have value.
Whatever it is that you’re good at, someone is out there who wants to pay for your abilities. They want it for their company, or for their wedding, or for their home. People are willing to invest in you because they value what you provide. We know this is true because we live in America, a capitalist society where people spend on other people’s work.
You have purchased someone’s work before at some point in your life. You did it because you felt their work was worth it. It gave you some kind of value, and some kind of joy. It’s only a matter of time before someone lays eyes on your work and decides they feel strongly about it, and are willing to purchase it.
Until then, refine your product, become an expert, and remember that you are worth every penny of your time.