Should you charge... what other people charge? Less? More? As much as you can?
If the goal is lifestyle and freedom, try starting from the goal and working backwards.
Pricing is a nuanced game, and it's useful to revisit and evaluate pricing often. But to go from "always looking for more clients" to a business that has control over its cash flow, is never desperately seeking clients, and affords its owner financial and lifestyle freedom, it's useful to start with pricing goals.
Instead of an arbitrary "as much as possible" goal, we've developed a formula that is a great start for any entrepreneur who wants freedom and flexibility. It's called the 50/25/25 rule.
First: Define Freedom
First: would you rather have 50 clients paying $1,000 per project, or 10 clients paying $5,000?
Both scenarios yield $50,000. But this isn't a trick question. In the first scenario, you’re working for 50 clients, which leads to extra churn created by having to manage and service a large number of accounts. In the second scenario, you are merely looking to delight 10 ideal clients that understand your value—and are willing to pay more for it.
This smaller workload would leave you with extra time—so what do you do with it? You could use the time to go out and get more business. Or you could take a psychic break, relax, tackle a personal project, or work on your business, rather than in it.
If fewer, higher paying clients sound like your speed, read on for my recipe to identify your pricing sweet spot and achieve freedom and flexibility in your lifestyle.
How to Use the 50/25/25 Rule
To integrate the 50/25/25 Rule into your business strategy, first figure out how much money you need to make annually to cover all your expenses and live comfortably.
If you need $120,000 a year, then your monthly goal is $10,000. With the 50/25/25 Rule, the first goal is to reach that figure by spending 50% of your time on client work—or two weeks out of the month.
Next, determine how many clients you can take care of within that timeframe. If you can complete four projects in a two-week span, divide $10,000 (your month’s goal) by four (the number of projects). In this example, you’d look to charge about $2,500 per client to reach your monthly goal.
Take Control of Your Business & Life
Now, this number may be drastically different from what you’re charging now. But this exercise gives you direction for how to increase your value for ideal clients—the ones willing to pay what you’re worth. When you begin reaching your monthly financial goal in 50% of your available working time, you have the luxury of pursuing other business goals.
With this newfound freedom, you can focus 25% of your time (or the equivalent of one week of the month) on branding and business development. Everything you do during this week— such as competitive research, content marketing, social media, and email campaigns— increases the value of your service, allowing you to charge an even higher rate in the future.
And the final 25% of your time? If you’ve done the proper legwork for the other 75%, you’ve earned the right to do whatever you want with it. Devote time to learning more about your industry so you can better serve clients, or take on more work to boost profits. You can even fill this last week of the month with your own creative hobbies that have nothing to do with your business. Travel, knit, learn to surf—the point is: When you build a Badass Brand, you have freedom, flexibility, and control over how you spend your time.
The only question is… What exactly should your brand focus on to achieve the 50/25/25 balance?