The 5 Major Pricing Mistakes That Keep You Broke

Brian Hood (0:00)

This is the 6 Figure Creative Podcast, episode 329

Welcome to the 6 Figure Creative Podcast, where our mission is to help you turn your creative passions into a stable, reliable income. If you're in audio, video, design, photography, or really any other creative field, and you just want to learn from other successful creatives, you're in the right place. In the freelance world, which you are in, if you listen to the show, pricing can make or break your business. It is so easy to mess up. You could literally have every other part of your business built to perfection. But if you don't have your pricing strategy correct and your rates correct, if you don't get those two things right, you can still be busy all the time and broke, which is a horrible combination. You can end up resenting your work, or worse, resenting your clients. Actually, they're both terrible. I don't know which one's worse. And even in some cases, have clients resent you, which is also awful. Of all the things you work on in your business, nothing has a bigger effect to all things that you do than pricing. You can suck at sales. You'll still get clients. Most freelancers, unfortunately, you suck at sales. It's OK. It's not your full time thing. You suck at sales and you still get clients. Still done. All day long, people still do it. You can suck at generating new leads and still get clients. Many freelancers are the same. You wait for referrals. You don't actually generate new leads. That's fine. You could still have a business that works that way. Many freelancers do. You can even suck at your craft and still get clients, which is funny to think about. This is a total side note. If you suck at what you do, there is a client who equally sucks. So if you're the best of the best at your skill set, there's an amazing client to match that. If you're the worst of the worst at your skill set, there is a terrible client to match that. But I've just seen in many niches, there is a level of client to match every skill set. So you could still technically suck at your craft and still find clients out there for you. But if you are amazing at sales, amazing at generating new business or new leads or new opportunities, new clients, amazing at your craft, but you mess up pricing, you'd still have a terrible business that you don't enjoy, that you don't want to do every day, that you get burnout on, that you're super busy on, etc. etc. etc. So let's get this right. I want to talk about five of the most common pricing mistakes that I see that can lead to some of these issues that I'm talking about today. And I want to talk to you how to avoid those as well. To get this right, we can make more without changing anything else about our business. You can enjoy your work more, and you can have a better relationship with your clients without you resenting your clients or your clients resenting you in some cases. If you're new here, hello, glad to have you here. I am Brian. This is my podcast called 6 Figure Creative. This is a podcast for creative freelancers who want to earn more from their services without selling their salt. If that sounds like maybe a thing you want, then this is the right podcast for you. So let's dive right into this. We're going to talk about the five common mistakes that I see freelancers falling into that I want you to avoid. If you fall into one of these mistakes, let's find a way to dig our way out of it, right? The first one, and this is one of the most common ones, and this is many, many people is in the show right now, you're going to feel personally attacked here, and that's okay. You get stuck in hourly pricing. That goes for like day rates, hourly rates, half days, anything where you are literally directly trading dollars for hours or hours for dollars. And the reason we get stuck here is because many freelancers are in this world where we're just offering bespoke services. Every single project is totally unique, totally different. There's no possible way we could go to a flat rate. And so you're forced to forever trade your hours directly for dollars. And I don't know about you, but I didn't get into business to just go have a day job somewhere else where I don't have health insurance, where I don't have any real upside, where I'm literally capped by how many hours I work in a day. You capture none of the upside. If you get more efficient, if you get better at your craft where you can deliver things a higher quality at a faster pace, you benefit from none of that. The only person who benefits from you becoming better, faster, more efficient, hiring a team, the only person that benefits from that is your client. You capture none of that value. So instead of daily pricing or hourly pricing or trading our hours for dollars, I want to talk about two things to do here. The first is productize the services with a flat rate. A productized service is basically where we have created this package, a package that fits a specific type of client. It doesn't work for everybody. It works for a specific type of client. And then we sell that over and over and over and over again. And because we're delivering a same or similar thing over and over and over again, it's easy to price, it's easy to deliver, it's easier to schedule. So you know how long something should take, and you're no longer having to reinvent the wheel for every single project. A good example of this is if you look at a $10,000 custom made suit from Savile Row, which is like a high end area to get suits and blend in, I think. Look at that compared to a $50 suit on Amazon. $10,000 custom suit, you go in, you get measurements, you pick your fabrics, they make some mock ups or some small things, you go back in for another measurement, they make some more adjustments, you come back for another measurement, and it can take weeks sometimes to get these suits or even longer. And so every single project that someone at a high end tailor like that is doing is very custom made to that one specific individual. Compared to a $50 suit on Amazon, it is going to be mass manufactured in a factory probably in China, and they are just going to make the same thing over and over and over and over and over and over again, the same sizes, the same everything. You just go through the factory. That's an extreme example, but that shows you the two ends of the spectrum. Productizing your services is very much a spectrum. People that are too far on the end of the bespoke $10,000 suit has a lot of issues growing and scaling and even pricing their projects because every project is so unique, so different. It brings up all these challenges because you have no idea what you're going to do on this next project because it's so different from the last 10 projects you did. On top of that, most freelancers don't have the skill set to be the $10,000 bespoke suit at the fancy tailor, right? On the other side of things is the $50 suit. That's the extreme opposite side of the spectrum for the productized service. And that's where the freelancer is just churning out tons of little dollar projects. That's probably similar to working on Fiverr, if I were to guess. On the extreme other end, not only would most freelancers or creatives not enjoy that, because that's just very much busy, monotonous work, button seat work, you also likely don't have the skill set of productivity to do that. Because on the extreme other side, we have to be very efficient. Our productivity is what matters. We have to have a lot of systems, processes to make sure things get done quickly and efficiently and on time, because we're at high volume business. On the other side, the $10,000, the smoke suit, we have to be very high skill set, high touch, different caliber of clients. It's completely different. So somewhere between those two extremes is where freelancers need to find their place. And I always caution freelancers to move closer to the side of the product, to a service closer to the $50 suits. And the reason being is the closer you are to that side, where you find the sweet spot on that side of the spectrum, the easier your business gets to run. Again, there's a sweet spot for everyone. Every project does not have to look exactly the same, where you're doing the exact same thing every time. But a good book to recommend for this, there's a book called Built to Sell by John Warlow. And he tells the story of he had a, I think he has a design agency, and they were trying to do every single project under the sun, websites to full branding project, to logos, to anything that a client wanted, he was willing to do. And it turned his business into something he hated doing. And he tried to sell his business. Turns out he couldn't sell it because no one wants to buy a business like that. And so he specialized. He started offering just logo design, which is a productized service. He put in a lot of good processes in place, and were only doing logos for clients, and was able to find the team members who could specialize in creating these different styles of logos for different types of clients. And then he scaled that up. And by the time he got to the point where he could sell it, he didn't want to sell it because it was a good business to run. Surprise. So when you move towards the spectrum of the extreme side where you are closer to the $50 Amazon suit than the $10,000 Savile Row suit, when you're closer to that extreme productized service side, it's easier to accurately price projects. It's easier to accurately schedule projects. It's typically easier to create something that people actually want, because people can conceptualize a product package where it's very outcome focused, versus just I am a person who offers 30 services and now client has to do a bunch of brain work on how you can potentially help me. Much easier to sell a productized service than a plethora of services that they have to pick and choose what they want. And one other upside of this is you're able to create more income streams because you're not reliant on well clients. One really dark side of having extreme bespoke services is that you typically can take on only so many projects at a time. And anytime you have few clients representing a lot of your income, losing one client hurts a lot. It can be detrimental to your business. And when you have more clients coming in at a lower overall price point for a productized service, preferably in that $3,000 to $5,000 range, sometimes more, sometimes a little less, you can start to build stability because losing one client doesn't crush you. You have lots of little streams of income coming in. And most importantly, for productized services, you capture the upside of that service. If you find a way to deliver that $5,000 package in 50 hours instead of 100 hours, your hourly rate just doubled. Whereas before, if you offered that same service at a flat daily rate or a flat hourly rate, your hourly service doesn't change at all. You still earn 50 bucks an hour. And this is the power of being able to scale up your income by detaching your time, how much you spend on the project, by how much you charge the value of the project. And detaching those two things is how I was able to get my freelance income from that day rate. God, when I started, I spent $100 a day early in my career. Up to like 300 bucks a day was the most I charged on a day rate, where I eventually got to flat rate pricing and was able to start scaling my income to where I was earning 300, 350, $400 an hour on some projects. Because now when I have flat rate, I can focus on things that save me time, where I can actually hire help now. I can get people to come on the project and take some of those lower value tasks away, so that I'm only working on the high value tasks that only I can do. And when I start doing that, my income starts multiplying. And if I were to tell a client, I'm going to charge you 300 bucks an hour for this project, they would slap me in the face. They would say, hell no. And that's again, very specific to my market. Every market is different. Some people, you can genuinely charge 300 bucks an hour and they won't slap you in the face. Not in my niche. There was an episode where we talked about this on episode 169 Just go to 6figurecreative.com.