Value vs. Time

A reader wrote, "I wish I'd known how to make money while I wasn't working, ie: I'm a graphic designer and only get paid when I'm physically working and it's based on MY TIME. I wish I'd known to base it on value vs. time."

Sit up and take note. This is an incredibly important concept for those of you providing services vs. products. It's a lesson I didn't learn as early as I should have. Because of it, I was on the treadmill for a long time, working a lot but not producing as much income as I could, or should, have.

Believe it or not, it was a freelance job I wasn't very interested in that taught me to consider value as well as time. I was contacted by someone looking for an editor to hire on a retainer basis. The work didn't excite me but I was early in my at-home career and I wasn't comfortable passing on the job. So I bid high. And got it. Now, I'm extremely glad I did as this account as become my bread and butter. I'm paid on a regular basis and the steady income has helped with the ups and downs of the speaking portion of my business.

While bidding hourly is one way to secure business, it's also a good idea to consider value. In the example I shared above, the client wasn't just looking for an editor. She was also looking for someone to handle the entire publication. The bottom line was that she didn't want to have to worry about it. Consequently, when I bid, I didn't bid hourly. I asked myself what I would be willing to do the work for. After coming up with a number, I outlined the value for the client. I'd handle advertising solicitation and coordination. I'd work with authors. I'd proofread. I'd coordinate with the printer and the mailing house. By specifically outlining my services, I added value for the client. And that made it possible for me to receive more for my services.

What can we learn from the above?

• It's hard to get ahead as an hourly worker. Instead, consider quoting your overall fee--and what you'll do (very specifically) to earn it. As you outline your value to clients, you'll be able to charge more for your services.
• Don't assume clients know all of the steps involved in getting a project done. By identifying each step, in writing, you'll help the client see how much work you're doing for him or her.
• Consider the emotional factor as well. If I'm not very excited about a project, I ask myself, "What am I willing to do this project for?" I'm not ashamed to admit that if the price is right, I can often get excited about a mundane job.
• Look at what you'll have to sacrifice or give up to do the job. I recently bid very high on a project that was going to require me to rework my schedule for two months. I wanted to be sure that if I was going to the trouble of rescheduling other projects, it would be worth my time. Frankly, I was relieved when I didn't get the job. (But if I had, I had bid enough to make it worth all the extra effort it was going to take.)
• Quick workers are actually penalized by charging hourly. Let's say you charge $50 per hour and are able to create a new logo in 5 hours. Another designer charges the same, but takes 10 hours. One logo cost $250, the other $500. But the client still has a new logo. What's the value of a new logo? Asking this type of question will help you adjust your mindset.
• The average freelancer makes 40 cents profit for every dollar she earns (assuming overhead of 30% and a tax bracket of 30%). That means that for every $100 you make, your profit is $40. Keep this in mind as you bid. Though this is a helpful guideline, it's just that--a guideline. Your business may be different. If so, it's important for you to know it.

If you're currently stuck in the hourly trap, I urge you to consider changing your mindset so that you consider value as part of your quoting equation. And if you're still more comfortable charging hourly, how long has it been since you've raised your rates? One freelancer I worked with raised her rates by 50% and not one client flinched. Sure, there's a recession. But when you're focused on value vs. your hourly rate, it's much easier to sell yourself to clients. If you're focused on cost, they will be too. But if you're focused on the value you bring to the table, they'll focus on that as well. Good luck.

By the way, I'd love to hear from you regarding your own value vs. time experiences. I'll share what you send in my next post. Or, share your comment below and let's get a conversation started.

Valuably Yours,