Rates Charged to Clients

greenspun.com : LUSENET : Becky Says Come and Chat : One Thread

As I told you in this entry, I've been pondering whether or not to change the way I charge clients for work that takes a minimal amount of time, but requires much knowledge and effort. Your experiences? Your thoughts?

-- Becky (becky-says@diaryland.com), September 15, 2000


I suspect you already know what I think--your rates have gone up since last spring and you now have a policy of requiring a deposit at the time of employment based on your estimate of the work.

-- Wendy Kimbel (spam@beckysays.com), September 15, 2000.

Well doggone it if Wendy didn't beat me to the board! Plus she said it a whole lot nicer than I would of. lol

-- Bonnie (rabble@express-news.net), September 15, 2000.

A workman (woman) is worth her (his) hire, is I think Biblical in origination, yet true today. Having no knowledge of your work or rates, why am I commenting ? Like the reason for the ascent of Mount Everest -- because the opportunity is there. As a pensioner of ten years duration, it is all to painfully obvious that costs and prices go inevitably up. To exist and survive, income must rise as prices and costs do.

-- Denver doug (ionoi@webtv.net), September 16, 2000.

Hello Becky -

I was reading through your online forum tonight and came across your question on charging clients different rates. Since the question was old, I thought I'd email you rather than post online. Perhaps this is no longer relavent, but I thought I might share with you my experience.

I operate my own consulting firm, and I have a variety of clients. Some of my clients are very large, multinational corporations with money practically dripping from the sides of their buildings. Others are individuals or very small firms, with very limited financial resources. It's reasonable to say that what the former clients consider to be fair value for service may be different from the latter.

While some firms have a stance of setting a rigid "the fee is the fee" pricing structure, I've found this not to be the best solution. Why? Because having a set rate might scare off some clients who cannot afford to pay "retail" pricing, and at the same time, it may mean I leave money on the table when dealing with clients of greater means.

This is my approach to the situation:

1. - Start by finding out exactly what the client is looking for. What are the services they need? Do they fully understand the scope of what they need/want? What is their timeline for completing the project?

2 - Once I fully understand what the client is looking for, before I reveal my pricing, I ask if they have a budget for the project. This is a crucial point in the conversation. If you come off like a used-car salesman, the client will resist this. However, if you do #1 well, you have already established a repoir with the client, and you can explain to them that understanding their budget will help you best propose a fee that works for them. Say something like: it doesn't serve either of us if I propose a fee that is out of line with your expectations, so if we can work together on this, we can come up with something that works for both of us.

In the best case, the client will tell you what their budget is, then you have the leverage to figure out what your fee might be and what value you can give the client. If their budget is so low that it feels like it would not honor your time, then you say so. If the budget is higher than you expect, then you have room to ask for more than you would from a more financially restricted client.

3 - If the client won't tell you what their budget is, or in the more common case - they don't know what budget they have, then say this: "Well, my retail rate is $x per hour/day/etc.". Price your retail rate as high as you can without putting yourself out of the market for similar services. Then listen to what the client says - not only the content of their presentation, but also the "feel" of what they say. If you sense the rate is too high for them, then say, "that is my retail rate, however, if that cause you some concern we can talk about what works for you." Then, ask them to propose what might work for them. Don't jump in with a proposal until you know where they stand. On the other hand, the client may just say "OK" and then you know you have come in at a good rate, and on the high end of what you expect to earn.

4- When you give a client a discount from the retail rate, get something in return. Such as: "My normal rate is $250 per hour, but I hear that may be out of your budget. So, I can trim that to $200 an hour, if you are willing to commit to a 5 hour minimum." Thus, you may give up $50 per hour, but you gain the committment for $1,000.

For example, for a particular seminar I do for clients, I charge $575 per person. For smaller clients, this is too expensive. So, I trade a discount for volume. If they send three people to the seminar, I give them the rate of $475. I lose $300 in "retail" revenue, but I gain a guarantee of ~$1,500.

In the case of the business you do, you might trade a lower rate for say, a minimum amount of business in a given year.

5 - When does a project fee make sense over a hourly fee? Going back to point #1 - when you know the client is asking for something that takes less time but has more value, don't propose an hourly fee. Propose a project fee. That way you lock in revenue and get a guarantee of the money you will receive.

My last recommendation: From my reading of your site, you strike me as a particularly well-rounded, intelligent person. This is marketing gold. What is the work you do? What is this research? Put it on your site! You have many people visiting there - what a good marketing opportunity! Tell people what this thing is that you do (aside from your handicrafts).

Also, as lame as it sounds, and I hate it when people say this to me: network! Tell people what you do, ask your clients if they might know of others who could use your work!

Okay, that's it for my unsolicited advice.

As I mentioned earlier, I run my own consulting firm, and if I can help provide any coaching for you in this area, let me know - it's on the house. Just keep writing and we'll consider it fair trade!


Sister Betty Does, LNM

-- Sister Betty Does, LNM (webmaster@SisterBetty.org), November 23, 2001.

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