I have to tell you…
Getting the “market rate” when you’re a professional sucks.
There, I said it. (You know you’ve thought it.)
The problem is the “market” is happy to settle.
The “market” is filled with firms who know no other way of getting clients, other than to be the cheapest.
So, they drive down the “market rates.”
It’s the financial advisor willing to do all the planning without a fee, just the commission…
The attorney, so desperate for clients, he’ll work for half what he should…
The CPA, or engineer, or architect, who BELIEVES that average rates are good guides.
Today, I’m going to show you three ways to come up with your fees. Each of them superior to pegging yourself at “average.”
So Why are Premium Rates So Important?
Why all the fuss…?
Aside from the obvious, you charge more, you make more (isn’t that reason enough?), there are three reasons you NEED to be charging higher prices.
1. You’ll attract better clients. Clients that flock to you for a low price, will leave you when the next guy drops a dollar lower. Higher prices force your clients to choose you for reasons other than money…reasons that will keep them with you longer.
2. You can spend more to get clients. Low fees are usually driven by desperation. I remember back in the engineering world, firm owners actually taking work at break even or a small loss, “just to keep people working.”
I get what they were hoping to do, but the minute you start down that road, you strip your ability to spend to attract new clients. The winner is the one who can spend the most to get a new client—and still be profitable.
3. You can invest in high-end experiences. Whether that means spending to get the brightest, most innovative professionals to come to your firm, or having the big luxurious office that your clients expect, or delivering a higher level of service…
Premium experiences require premium investment. You’ll need the added profit.
How to Set Higher Fees
There are three methods you can use to set your fees. All three work. Just pick one…
The Dartboard Method for Raising Fees
This one is my preferred method (really). I first heard this from Sean D’Souza.
It works like this:
1. Get a dartboard and darts.
2. Write a bunch of fees that make you happy on slips of paper.
3. Tape the slips to the dartboard.
4. Throw a dart.
The point of the exercise is to get you to make a decision.
Let’s say you’re currently charging $150 an hour and you’d really like to get to $300. You don’t know if you should go to $200 or $250 or $285 or all the way to $300 first.
Put them all on the dartboard. Throw the dart. The dart removes the fear and uncertainty around choosing the “perfect number.”
There isn’t one.
Get a number. The specific number matters a lot less than you think.
How to Justify Charging More with The Value Method
Value-based pricing has been around forever. It’s an excellent way to get a lot higher fees, but requires you to do a little detective work with your future client.
You need to understand exactly what they’re getting (value) from working with you. What’s their return on investment. Often in professional services this can be difficult to uncover, but it’s there.
Once you have your fee, set your fee at a fraction of the value your client is receiving (get them to tell you what that value is).
Your fee might be anywhere from half to 1/10th the value they receive. Or, from the client’s perspective, they’re getting 2-times to 10-times more return, then the investment their making with you.
If you’re billing by the hour, this can be a quick way to “justify” your way to higher fees.
Using The “Market Multiplier” to Triple Your Fees
The third method is the “Market Multiplier”. This one requires no special equipment…just multiply the average market rate by any number.
2, 3, 4, 10…whatever.
I used this approach when running my first company to go from “average” to triple the market rate overnight.
Now, the next trick is getting clients, and prospective clients to pay your higher fees.