Archive for the ‘Raising Your Rates’ Category

On the Topic of Low Rates

Why is it that whenever the subject of low rates comes up (i.e., people charging rates that could not be remotely profitable, especially for what they are delivering to clients), there are always several people who bring up the words judgment and competition?

The idea of competition is such a pedestrian notion to me. It’s non-existent in my world. I don’t compete with anyone but myself.

It’s never had anything to do whatsoever with who was attracted to me and my services or how I obtained clients. And regardless of what anyone else thinks, it has nothing to do with how you attract and obtain clients either.

A lot of what you hear in these conversations are excuses and rationalizing.

And that’s too bad, because those who don’t charge profitably are being deprived of an opportunity to learn how they could do better in their businesses.

Instead, they are actually encouraged to continue being mediocre and operate in ignorance and poor understanding of business principles instead of being empowered to become more knowledgeable in business and gain more confidence in themselves and what they offer.

When people don’t charge properly, they rob their business of being financially solvent and profitable.

Undercharging also attracts the least desirable clients, who make the business so much harder and less pleasant to run.

Low prices also train clients to devalue you and expect something for nothing.

If people could get over this ridiculous idea that the topic has anything to do with competition, we could instead have more meaningful conversations that might actually help folks learn more about running their business better.

I guarantee you, nearly every single person undercharging has not done any business planning whatsoever.

With proper business planning, they would see how short their rates fall in building a self-sustaining, profitable business.

They would begin to see that they don’t have to work with everyone, only the people and markets that are the best fit. And that they could actually make more money doing so.

Granted, most new business owners are unsure of themselves, and lack confidence, which is a large part of the issue.

Lots have absolutely no business training or experience whatsoever.

But with knowledge comes power, and as they grow in their business smarts and begin to work more with clients who value what they offer and are willing to pay for it, their confidence grows as well.

These things grow in stages; it’s always a journey.

But we can’t help people in their journey when conversations are effectively shut down by tedious, ignorant attitudes and those who don’t have the fortitude to say something different.

What Does Your Pricing Say About Your Business?

Do you value what you do?

Do you hold it in high esteem?

Is what you do less worthy of respect than any other professional service?

Is it flunky work? Or does administrative support require every bit of critical thinking, experience, knowledge, talent, intelligence, and problem-solving skills as any other professional expertise?

What is the worth of your 10, 20, 30 years developing your skill, competence and expertise? What value does that hold for clients?

Your pricing will subliminally, but directly, answer these questions in the minds of your prospects and clients.

It’s one of the critical ways you shape their perception about the value of your expertise and what you offer.

If you don’t value what you do, clients sure as heck aren’t going to.

If you price too low, you focus clients on price instead of the results you achieve for them.

If you price too low, you risk coming across as a cheap commodity instead of a valuable professional service.

If you price too low, you will get more price-shoppers than quality-shoppers.

When you price appropriately, you get a whole other caliber of client. It’s the same difference between Nordstroms and Walmart.

Low price is a seduction, but one that rarely leads to anything more meaningful (or profitable) than a one-night stand.

If you understand that long-term business relationships, higher profits, and business happiness are integral to success in the solo administrative support business, make sure your pricing is in alignment with those values.

Children love candy and would eat it all the time if we let them. Does that mean it’s good parenting to feed them candy and junkfood whenever they want?

Of course not.

We’d have cranky, spoiled, demanding children bouncing off the walls and driving us crazy, wouldn’t we?

And neither should you let clients pressure you into devaluing what you do for them and pricing too low.

If a prospect is serious about their business, and you do a good job of illustrating the results you can achieve for them, pricing your services professionally and profitably is NOT going to deter them.

Dear Danielle: Another Pricing Question

Dear Danielle:

I’m not quite satisfied with my pricing strategy. I determined my hourly rate based on industry reports and looking at the rates others were charging for similar services. However, a potential client who I’ve worked with in the past, and who knows the quality of my work, suggested that I need to charge more. So I did that, but I wasn’t confident and reverted back to my original pricing. But now I’m having second thoughts. What’s your advice and do you ever change your pricing for clients? –JD

My first recommendation is that you download and complete our free Income & Pricing Calculator. This is a very eye-opening exercise that will help give you a more realistic understanding of what it really costs to be in business and what you need to be charging to be sustainable and profitable and earn a healthy living.

This worksheet gets you to think about overhead, capital outlay and all the other kinds of expenses it takes to run your business. It then gets you to define how many hours you want to work IN the business (billable hours), how many are needed to worked ON the business (nonbillable administrative hours), your profit margin, and what kind of salary you expect to earn.

When you start crunching all the numbers, it’s very illuminating to see whether the rate you came up with off the top of your head will actually sustain your business profitably as well as pay you what you need and want to earn.

On top of pricing intelligently and profitably, the biggest hurdle new VAs have is their own mental attitude and getting over the employee mindset.

They have got to place a value on themselves and the services they provide, and really internalize that understanding and believe it themselves if they are going to effectively convey that information to clients.

I wouldn’t get caught up too much in worrying about whether your rates are too high if you’ve set them with intention and deliberation. I’d be more worried about them being too low, which is usually the case in our industry.

Instead, focus on the value and the convenience the service gives to clients, how it gives them back more time; how it instills efficiency; how it allows them to operate more professionally; and how these things improve their business and their life.

As far as changing pricing, keep in mind you are the business owner, and you don’t owe clients any explanation or justification when increasing rates.

That said, it is extremely difficult to wean clients from a very low rate to a more appropriately priced rate once you’ve started them there. If your practice isn’t completely filled with ideal clients or long-term ones, be prepared to lose a few whenever you up prices. But don’t think of it as losing clients; what you are actually doing is creating space for better ones.

Also, when you raise prices (which most of us do periodically every year or couple years), I recommend giving clients at least 30-60 days notice.