Raise Your Rates with Confidence
Charging less than you’re worth for your services will cost you money, and it could cause you to build up debt instead of making money.
We all get into business for ourselves to ditch the 9 to 5 job and get away from overbearing bosses. We dream of getting to pick and choose our customers.
I wasn’t very confident when I first started. I didn’t prepare properly. And I left a lot of money on the table that first year, all because I didn’t charge high enough rates.
I made some mistakes when deciding on my rates and how to quote them.
- I didn’t value my own work enough.
- I overestimated the competition’s value.
- I failed to make a pricing plan.
- I listened to the wrong people.
Even for another year, I lacked the confidence I needed to quote as high as I should for my business. It wasn’t until I took the following steps that I started quoting the rates I deserve and turned my business around.
Adopt the Right Pricing Mindset
The first assumption you have to overcome is the idea that how much you charge is directly related to how well you provide your services.
How much you charge and how much value you provide are two different things.
When you look at the competition and think you’ll gain new customers by charging less than they do, you’re only hurting yourself.
Being desperate and feeling as if you must take in every job that comes your way is another mistake many make. When this happens, bringing any amount of money takes priority, and you feel you can never raise your prices.
In time, you feel you’re only worth what you charge now, and you lack the confidence you need to raise your prices.
When you feel stuck, remember the knowledge, ability, and integrity that you put into every job is your worth as a handyman. Your customers pay for your expert craftsmanship.
Offering lower rates is not a marketing strategy that works.
Raising your rates and targeting better prospects is the marketing strategy you need.
Your Real Value
A lack of confidence can be one of the strongest psychological barriers that keep you from charging the rates you need.
You got into this business because you have a talent for it. You come with real value, or else you wouldn’t have made it this far.
Give yourself a break and acknowledge that the services you provide will give your customers the value they’re paying for.
One way to do this is to look at the job you’re quoting. Why does the customer need you? How have you improved your customer’s life once you’ve completed the job?
Then look at what you bring to the job that other contractors do not. It could be dependability, or it could be that you’ve invested in higher-end tools that allow you to provide a better result, or maybe you provide a better customer experience.
If you’re serious about your work, there’s something you give that’s better or different than the competition. Give yourself credit for it, and then be confident that hiring you is worth the price you quote.
Developing Confidence in You
Self-confidence doesn’t just happen. You have to develop the belief in your ability to provide value that exceeds what you charge.
We like to feel that we give the customer more than a 100% return on their investment when we provide a service.
Preparing in advance will help you develop the confidence you need to charge higher rates. I took three steps that helped me become confident enough to raise my prices.
- Developed a pricing strategy.
- Changed my mindset about people.
- Became comfortable with the word No.
The Pricing Strategy
A real pricing strategy shows you how much you must make to stay in business and be able to maintain the lifestyle you need. You may say you have your pricing strategy in place, but I wonder.
What the competition quotes mean nothing. If you used them as a guide when you first started your business, ignore them now.
Chances are, this is a top reason you’re not charging enough for your services.
It’s time you optimized your pricing strategy.
Understanding what you must bring in so that your business makes a profit is crucial to any business plan. Nothing else matters.
Look at three things:
- How much do you need to cover your living expenses?
- How much does running your business cost?
- How much do you need to cover your taxes?
Then look at your billable hours. Perhaps it’s 120 hours per month.
Let’s say you need $5000 a month for living expenses and $1200 a month for your business expenses.
Let’s set the estimated taxes at 30%. You’ll have to check what this is for you, but many freelancers I know hold back 30% and come out okay at the end of the year, so that’s what I’m using here.
- Business expenses are deductible, so we’ll figure them directly at the $1200 divided by 120 billable hours. This gives you $10. You need $10 an hour to cover business expenses.
- Taxes are at 30%, which means you get to use the other 70%. Use your billable hours and figure 120 times 70%. You get 84 hours left. These 84 hours are the ones you’ll use to find your hourly rate figure.
- Living expenses are $5000, so take your 84 hours and divide that into the $5000. This leaves you with $59.52 that you need for living expenses.
- Add together the $10 you need for business expenses and the $59.52 you need for living expenses, and you need to charge $69.52 an hour.
$69.52 an hour is not out of line for handyman services. Many charge way more and keep very busy.
The above is how I developed my pricing strategy with the help of an industry expert. If you’re unsure, enlist the help of an expert of your choosing or a financial accountant.
The key thing is: Understand what you need to make to turn a profit on your business.
The Right Mindset About Others
To boost your confidence, you also need to adopt the right mindset about other people.
Your competitors are people like you. Just because they’re charging low rates and their sign says they’ve been in business for years doesn’t mean they know what they’re doing.
In fact, some of them are probably doing shoddy jobs, and you may already be fixing their mistakes.
Even the successful competitors you admire make mistakes too. They were once where you are now, wondering how they can charge higher rates.
They looked at what they needed to stay in business and decided to raise their rates. They acknowledged that they offer a service worth the customer’s money.
When it comes to the customer, understand that they are calling you because they need an expert. They’re lost on what to do and need your guidance. They don’t have the proper tools to do it themselves, and they need someone who’s invested in the tools and training to do it for them.
In many cases, charging a higher price will help them have more confidence in you, not less. These are the customers you’re looking for.
Decide now to market to the customers who see your pricing as an indication that you know what you’re doing and that you will stay in business. Referrals and repeat business from them will help you continually find more customers like them.
The Power of the Word “No”
No is a wonderful two-letter word. It opens doors for bigger opportunities and better connections. When used wisely, it helps your business profit grow.
Get Comfortable with Losing Prospects
Some prospects will just look at your quote and say it’s too expensive. They’ll claim they can find five other guys charging way less for the same work.
Maybe they can. It doesn’t mean you’re charging too much. If the prospect challenges you this early in the process, they may be more trouble than they’re worth.
Even when you help them see how choosing your services is a wise investment, being told you’re too expensive by a few is a good thing. It means you’re working your pricing strategy in the right direction.
If no one challenges your prices, it’s time to revisit your pricing strategy and raise your rates.
You Should Say No Too
It’s time you learned how to say no too.
Stick to your pricing strategy and show that you have confidence in your work by walking away from jobs. If a prospect says you’re too expensive and the customer conversation doesn’t promise this changing, just tell the customer no.
Once you start valuing your own work, your confidence grows, enabling you to find the right prospects.
Market Toward Your Goals
When you raise your prices, you need to let people know you have valuable services to offer. Go through your current list and look at how many leads you have.
Are they the right ones? You may need to let your marketing expert help you target the right prospects.
If you want to raise your rates, you must get your business in front of the right people who will respect your rates.
For instance, if most of your current customers live in low-income senior communities, you may need to market your services to different areas. Target prospects who have a bit of disposable income available, as those prospects are more likely to look for quality versus a cheap deal.
You may also wonder how to retarget your marketing while you raise your rates. If you’ve been charging $25 an hour and need to raise rates to $50 an hour, that can be intimidating.
When it’s time to raise rates by such a large amount, some contractors raise rates slowly over time for their current customers while marketing to new prospects at the full price.
You must do what’s best for the business. You need to build the life you need and what you must bring in to provide value to your customers.
If you can’t afford the right tools for the job or can’t afford the vehicle upkeep to make sure you get to the job, you can’t stay in business very well. Smart customers understand that you must earn a decent dollar.
These customers exist, and they’re out there. These are the customers you want to find.
Conclusion
All self-employed business owners and freelancers face the problem of how to raise their rates without sinking their business.
If you need more business courses to further boost your knowledge and confidence, invest in yourself.
In summary, by following the five steps I’ve laid out in this article you’ll be able to raise your rates and find customers with confidence.
- Develop the right mindset about setting your prices.
- Develop an optimized pricing strategy.
- Develop the right mindset about other people.
- Get comfortable with the word 'no'.
- Target your marketing so you have the right leads.
