Meeting her for the first time, at the local Starbucks, I could tell that she knew her stuff.
She agreed to meet with me for a free consultation and it was one of the best hours I have ever spent. I forged a friendship with Samantha that has lasted since then and have gained a wealth of knowledge.
I was trying to make my way in business and Samantha, turns out, is one of the top independent marketing consultants and she lived in this small town where I had just moved.
She introduced me to so many things I’d never heard before, but the one thing that stood out was her approach to pricing.
Maybe I was charging less than I should all along.
Like most people, when I started freelancing, I charged based on hours. It sounded easy, right?
You decide what you wanted to make in a year, the potential number of hours, decided on your skill level and you set an hourly rate.
Then, with each project, I estimated the number of hours and multiplied by my hourly rate.
It was a recipe for being locked into an hour for pay exchange. However, I was no longer anyone’s employee.
I have struggled to adjust my pricing ever since, but I know that I only have a certain number of hours in a day I can work and as I get older, those hours get shorter.
In my spare time, I like to study what others are saying about pricing.
Pricing, of course, is one of the biggest issues that freelancers have. Over the years various phrases such as passive revenue and value-based pricing have received popularity.
Another factor freelancers face is the market itself. What will the market bear? We’ve all heard that question.
If you are considered an expert, usually, you are beyond some of these issues.
Today we are going to discuss four examples of escaping the freelance pricing trap.
via GIPHY Freelancing doesn’t have t obe a trap
4 Examples of escaping the freelance pricing trap
Monthly Recurring Revenue
Monthly recurring revenue is the holy grail of many businesses. It is the model that software as a service was built upon. You offer a product, often software-based, and receive payment every month for its use.
As Troy Dean explains, recurring revenue can help you escape the time-for-money trap:
“When your business relies solely on new projects, you are trapped in the time-for-money paradigm, and you will be forced to keep your nose to the grindstone indefinitely, just to pay your bills.”
How can WordPress entrepreneurs take advantage of monthly recurring revenue?
To start, MainWP users know the power of monthly recurring revenue. MainWP users utilize the plugin to build their own platform to provide a service at a monthly cost.
Website maintenance services are often the top of the list of WordPress entrepreneurs as it is an upsell to existing clients.
Companies like WP Curve and WP Sitecare built a business of recurring revenue.
Looking for more examples, check out these articles:
Creating and selling products
Creating products has a tremendous upside. Whether it is coaching packages, books, ebooks, training courses, tutorials, or any other type of product, once they are created and launched, you can then work on getting customers.
The customers pay for the product that you created once. Naturally, depending on the product, you will need to make updates and changes, but it is usually something you do less often.
Carrie Dils and Chris Lema each have used products to advance their personal brands and careers.
Both give a ton of valuable information away for free, but they also offer premium products such as coaching, a theme, ebooks, courses and more.
Products are an excellent way to counteract the times of famine in the feast or famine cycle. Build a product during the down times so that in future famines you will actually generate revenue.
It is important to note, that, depending on the product, you may have ongoing support.
For example, Carrie built the Utility Pro Theme. This means she has ongoing support.
Productize is one of my favorite pricing models. It combines the best of a flat rate fixed model with recurring revenue.
A productized service takes a problem that a specific business niche has and turns it into a solution that becomes a scalable business model.
Brian Casel explains productize:
“From the founder’s perspective (that’s you), a productized service is one that runs systematically, and continues to produce and grow with or without your direct involvement.”
Switching to this kind of model isn’t really easy to do, and, I think, takes time as you work with clients. Once you begin to see problems, you will find the solution and begin offering.
Dan Norris utilized the productize model when he started WP Curve.
Building automation into the business is a big part of the success of the business. This helps make productize go.
Adam Clark used productize when he created WPTheory, a service that launches a website in a day.
Is this a model you can implement?
Value Based Pricing
Value Based Pricing is a model most of us would like to adopt. My conversation with Samantha (see above) began to change my perspective about what was possible.
With VBP, you are charging the client that value that they recognize.
For example, if you a conversion is worth $1000 to the client, and you help them collect convert 50 leads in a year, then the value would be $50,000. You may choose to charge 10% of this value.
You have to discover the value before you quote the price. The value is an agreed upon amount between you and your customer.
This takes time and isn’t very easy.
Kirk Bowman is the king of value pricing in the WordPress space. He says this regarding value:
“Identifying value is having a conversation with the customer to learn what is important to him. It is asking questions to uncover the “why” behind the “what”. A customer does not intentionally hide the why. Most of the time he simply needs help to figure it out himself.”
Bowman is a big advocate of Value Based Pricing and has presented the topic in a number of places including WordCamps.
Bowman talks about how to move toward Value Based Pricing in this video at WordCamp DFW
Chris Lema, also a proponent of Value-Based Pricing, gives examples of what is not Value Based Pricing on his Youtube video.
Before you launch into a Value Based Pricing Structure, you should take time to study to learn more about how it works or you will make the mistakes that Chris mentions.
As freelancers, we are often saddled with the fact that many will use us like an employee demanding things that employers will demand. This puts in a trap where we are trading our hours for money rather than building a business.
We need to escape the freelancer trap by adopting more of a business mindset.
We can do that by working with different pricing models such as Value-Based Pricing, a Productized service, creating and selling products, and monthly recurring revenue.
Which model do you have experience with?
Which do you want to implement?
Let us know in the comments below.