Becoming Profitable

5 Ways to avoid underselling your services

By January 26th, 2017 2 Comments

Image depicting strategy

It’s really difficult to get paid what you’re worth, especially if what you do is service based (like most Creative/Digital businesses).

But there are 5 sure-fire ways to ensure that you keep your average hourly rate where it should be.

1. Avoid ‘Ball park’ numbers.

There’s a saying that goes:

‘A ballpark always has a fence around it’.

It’s all very well giving an estimate of a job (the ball-park figure), but if you need to increase it, then you’ll probably find that it already has an upper limit (the fence).

So, next time you get asked for a ‘ball-park figure’, try saying, ‘I don’t know’.

By being honest, and taking that extra time to go back and work out a proper quote, you’ll find that not only do you get more respect from the vendor, but if you take on the job, you’ll make more money.

2. Don’t take on work that you can’t control

If you don’t have direct access to the client, then be very wary.

This means that someone else is determining the amount of work you’re doing and the amount of payment you’ll receive.

Subcontracting is fine, but the reduction in profit is outweighed by the certainty of payment and the fast that you don’t have to deal with the client.

Don’t get stuck in the worst of all worlds!

3. Turn your work into ‘mini-projects’

Instead of quoting one price for the whole project, try defining ‘mini-projects’ that cover sections of the work.

E.g. Rather than saying ‘Project scope – £1000’ you can split this down into actual components. This could include:

  • Meetings,
  • Background reading,
  • Phone calls,
  • Writing specs.

So your ‘product may look like this:

  • Project Scope – £1,000 Includes:
  • 2 face-to-face meetings
  • 3 phone calls, up to 30 minutes each
  • Up to 3 hours of background reading
  • Create one project scope document (maximum 1000 words)
  • One revision of the project scope document

This means you know what you are getting paid for. With cloud accounting packages (we favour Xero), this is easy – just create products and these are available on every quote you create.

4. Don’t negotiate on price – negotiate on deliverables

One of the best things about having set ‘products’, as discussed above, is that you can use them to negotiate without sacrificing profit.

For example, imagine a project that has a ‘Project Scope’ product as defined above.

If the client wanted to shave a £200 off the price, then you can easily remove the face-to-face meetings, plus ask them to summarise the background reading for you.

You’re now making the same amount of profit, but still fitting in with your client’s budget.

5. Don’t charge by the day/hour

You may have heard this before, but if you tie your salary to a set number of hours, then you’ll always have to work those hours to take home that money.

Instead, try to quote based on what the project will do for the client.

For example, a client may want a new app to track sales staff in the field.

By asking smart questions, like ‘How do you do this at the moment?‘ and ‘How many people do this?‘ you can estimate how much they are spending on this at the moment. (Lets say its £20,000 a year).

Lets assume you know this work will take you 7 days to create, plus 2 days to deploy & test, and you charge £300 per day.

You may be tempted to multiply £300 by 7, and add in some contingency.

But, instead, if you price your proposal at £25,000, then, in the clients eyes, it’ll pay for itself by month 14, but in your eyes, you’ve just made 10 times what you could have!

Give it a go!

Try this on your next project. If you follow tip 4, then there is no reason to fear over-quoting.

Bonus: Don’t assume the client is looking for the cheapest supplier. And, if they are, then find another client!

2 Comments

  • Raymond Anderson says:

    An interesting article. All too often I have seen many agencies fall into many of the identified traps. In many cases I believe that most would readily take the advice, however such are the pressures of a small creative agency, that the decision maker can make a choice that aligns with a shorter term strategy of getting money in through the door and managing cash-flow.

    It takes a bravery to go against your gut feeling and reap the rewards of those years of experience in delivering great solutions for one’s clients.

  • Paul Barnes says:

    Yes Raymond, that’s exactly what we see frequently. Business owners have a tough job to balance the day to day pressures whilst remaining focused on the underlying strategy. It can be a stressful position to be in.

    Without the right systems in place, that stress won’t go away. Systems guide you through the process of how you want to run your business – they stipulate how you will price a project, the milestones involved and even the type of projects/clients that you want. They take emotion and panic out of each scenario and enable consistency.

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