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Ditch Hourly Pricing and Price Your Work on Value Instead of Cost

I love this quote from Seth Godin:

“Are you charging for your work based on what is costs to make, or based on what it’s worth? Professionals charge based on what it’s worth.”

It’s so true. Pros charge based on what it’s worth because clients don’t care what the “costs” of making it are. 

Most people set an hourly rate like this:

“I want to make X amount in salary per year. And it “costs” me X amount per year to run my business.”

Then they take that amount they want to make per year, add in the expenses (laptop, software subscriptions, internet, co-working space, etc.) and overhead, and divide by the billable hours in a year. And voila! They have an hourly freelancing rate.

But here’s the thing.

Your internal costs (your salary is also a cost) have nothing to do with the value your work brings to your client. 

When you buy a car do you ask to see how many hours it took to build it, and then determine if the price is correct?

No. You don’t.

You buy the car based on what it’s worth to you.

Do you care about the gas costs FedEx incurred to get your package delivered the next day? Do you care if it took them 8 hours or 10 hours to get it there?

As long as it got there the next day, the answer would be no.

Similarly, no client of yours ever cares how long it took you to build, write, or design your work. They want to know when they’ll get the work, sure, but they don’t care how many hours it took you to create it. 

What Your Client Is Really Buying

What your client cares about is the result of you work. Does it meet their goals? Will it have the right impact on their business?

Those are the only things they care about.

What would it matter how many hours it took to make the car if it didn’t get you from point A to point B.

When you charge by the hour, you are saying, “This is what an hour of my time costs.”

When you charge based on value, you are saying, “This is how much value this will bring to your business.” 

Big difference right? You are framing your work in an entirely different light. You are showing the client why it’s valuable and what the benefit of working with you is for them.

One is about time (which clients don’t care about). 

And the other is about the results you’ll get them. 

That’s how you can sell a result (that might only take you an hour to complete) and charge $400 for it without a client even batting an eye at it. 

You charge for value, not hours.

Focus on the benefit. Not on the time it took to create that benefit

 

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