No matter how long you’ve been in the business of freelancing, pricing remains one of the most difficult things to nail down. It’s not uncommon for freelancers to second guess their own pricing, despite the wealth of experience they have under their belt. 

This is where value pricing comes into play. Today, we’re looking at exactly what this entails, and how you can utilise it in your freelancer journey. 

What is Value Pricing?

Value based pricing is a strategy to price your services based on the value your deliverables will bring to your client. Like project pricing, it’s a fixed fee. The difference is in how you arrive at and justify that fee.

How Does Value Pricing Work?

This is probably one of the least practiced pricing strategies for freelancers, mostly because it’s difficult to justify how your fee can bring your client more value. Basically, you look at it this way. The project you create for your client might net them RM10,000 in new sales. You charge 20% of that (RM1,000). Any smart client will be willing to make that investment, provided that they understand how your work can help them achieve that. 

If you practice value-based pricing, the cost your client pays has nothing to do with how long or hard you work. It doesn’t matter how long it takes you to complete the job. The effort you put in is no longer part of the pricing equation.

This can be a huge shift, but not many clients can understand this. Suddenly that artificial ceiling of hourly billing is gone. Now efficiency is rewarded, and not to the detriment of your client. Your services are now defined, led, priced, and justified by the goals, outcomes, and overall value of what you create.

You will need complete confidence from your client. The shift in mindset to understand and accept you as not only a “worker” but an invested partner is vital. Remember, they’ve been used to paying hourly or flat rates forever, and just as it is for you, that’s a difficult habit to break.

Building Up Value Pricing

Value-based pricing means basing your project price as a percentage of the value you bring to your client’s business. You will need a lot of information from the client to ensure that this strategy works. This includes their goals and KPIs for the project, as well as the outcomes, and overall value. Your client must be willing to divulge the monetary value of what they are hiring you to create as well. 

Plus, the project goals must have quantifiable outcomes. Goals that are more emotional like customer satisfaction or better resonating with an audience group are difficult to put a value to. If you can’t convert goals to dollars and cents, how can you price based on that value?

Therefore, each proposal must be well-researched and unique. The project value for each client is different. It might be worth RM1 million to one, but just RM100,000 to another, even if the effort you put in and deliverables you complete are nearly the same. 

Think for a second about how much discussion and research needs to go into the project before you’re even able to produce a price quote. You may need to work with your client for hours or days to paint a clear enough picture of the project’s scope and value before you have the data needed to calculate a value-based price.

Once you’ve successfully completed a job with value-based pricing, you can’t turn to another client and quote them the same price. Their project scope, goals, success metrics, and monetary value of deliverables are highly unlikely to be identical. Value-based pricing must be unique to each client and each project, because that’s precisely how you justify the price. Value-based pricing takes a lot of work, assuming you even get buy-in from your client on the concept.

However, it is important to note that value-based pricing is not working on commission of earnings. You expect to be paid regardless of whether the job’s projected goals are achieved. You’re pricing based on an idea of what may happen as a result of your work. That is why your client has to be completely in line with what you can deliver, or value-based pricing will not be worth anything. 

Conclusion

Discussion of pricing shouldn’t be considered taboo. Instead, you should consider it to be something that can help you improve yourself. Afterall, no two clients are the same, and no two pricing can be completely similar. Value based pricing is exactly that, and we feel that it can help with the future of freelancing moving forward. 

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