Do you have an hourly rate that you give to clients when they ask you what your pricing policy is? As you work, you track in half-hour increments and when you’re finished, you add them up and multiply them by your hourly?

I used to charge hourly too until I realized it was actually impacting my projects negatively.

Many of my client conversations became about exploring options that would take less time. The client was more interested in trying to save money than they were on investing in something that would eventually make money.

As a result, the quality of my work was suffering due to the time constraints and cut corners. Not only that — I was profiting way less than I should have been.

This didn’t feel right, so I adopted a flat-rate approach. When a client came along, I wouldn’t discuss my hourly. Instead, I gave them a fixed price that reflected my hourly rate based on the amount of time I thought the project might take.

There were less conversations about money and my clients were more relaxed with the project process, but I eventually realized that I was still selling myself short.

The Problem With Hourly Rates…

…For The Client

Clients want to make money with their business. This is obvious.

But the unfortunate reality is that clients often put more effort into finding ways to cut costs than finding ways to capitalize.

Starting a relationship with conversations about money is one of the worst things you can do. Your client now thinks of you as an expense and since they want to spend as little as possible, they’re not going to be focused on the value you could potentially provide them.

As soon as the client starts racking up a fee, they want the quickest solution — not the best solution.

…For The Professional

Professionals also want to make money with their business.

But when a client is trying to cut corners to keep costs down, you face two major problems.

First, you’re not doing your best work. You’re doing the fastest work. You’re compromising on your quality, and in the end, you haven’t produced your strongest work. And if you’re not providing the best solution, it might even hurt you to showcase that work in your portfolio.

And second — beyond the compromise of quality, you’re also not getting paid as much as you should be!

Pricing on Value

Most clients will prefer a flat rate. If they can justify that fixed price, they don’t need to worry about you racking up working hours and inflating the price.

But the flat rate model falls short for you, the professional. When you work at a flat-rate, the work that you produce and deliver is valued at that set price. But what if the work you delivered ends up giving the client a significantly higher return than what they paid you?

For example, a clothing company hires you to design a t-shirt. Perhaps your hourly is $50 and you think it will take 5 hours, so you charge $250. But what if that t-shirt was being sold at $40 and the client was making a run of 2,000 shirts? What if they all sold out and they made another run? What if that design was so popular that they start printing it on $90 hoodies?

In this scenario, your client has made a ton of return on your work and you were just a negligible fraction of the expense. You just made them thousands of dollars but without you, they wouldn’t have sold anything!

By selling your service for $250, you’ve drastically undervalued your work.

If you were to price on value, you would do your best to determine what the potential return the client could discover from your work. If you know the client is going to pimp your design out and sell a bunch of units with a major return, then investing more money for them is a no-brainer.

Think of a different situation in reverse. If I was to tell you that if you paid me $1,000 and you would get a return of $10,000 dollars, would you not invest?

Value Discovery

Throwing a high price at a client without justification isn’t pricing on value. Again, your client is going to be looking to cut costs, so they’re going to be hesitant when they see a price higher than that of the novice designers they’re used to working with.

The difference between you and these other novice designers is that they’re just throwing out an arbitrary price. If it’s low, the client will pay. If it’s high, the client isn’t going to pay unless they’re confident that they’ll get a higher return.

Your job is to positioning yourself as the obvious solution. You need to prove to your client that it would be a mistake to hire someone else because the work you do will provide a higher return.

Even though your price might be higher than your client expected, it shouldn’t matter if they’re truly confident that their return on investment is going to be higher than the cost of hiring you.

If you’re looking for ways that you can position yourself in a better light to your client, check out my post on asking the right questions. You can provide value to your client by understanding them better. The better you understand them, the stronger the solution is that you provide.

These questions will allow you to discover areas in which you can add more value to the work you do. This benefits you in that you can earn more for your hard work.

But most importantly, it puts you in a position where you can provide services to your client that are superior to any competitors and enables them to see a huge return at only a fraction of the cost of hiring a professional.