Increase Your Profit Margin
There is just one thing you need to know from this chapter:
Raise your prices.
When I started freelancing in 2006, I set my prices based on what my competitors were charging, $35 an hour, and then I discounted that rate by $10.
Yes, I charged $25 based on a bunch of things that had nothing to do with my business or the value I was creating for people, and I was charging for my time.
Basically the opposite of everything we covered in the last chapter.
10 years later my prices had risen to $100+ per hour, because I'd learned some of the lessons I'm teaching in this book, and because I was running a company, rather than charging as a vendor.
When you run a company, you have expenses - taxes, overhead, operating costs, and, yes, profit.
While profit isn't an expense, it's still something that your business needs to make on every project and every sale whenever possible.
Again, there are rare times that you'll discount your price or even work for free, but the standard pricing should allow for a decent profit margin that allows you to grow your business.
Yet, I still see too many creators operating like freelancers instead of business owners.
As the subtitle of this book states, the secret to shifting into six-figure work is by going from creator to business owner, and a big part of that is charging like a business.
So, at the risk of sounding redundant, here, again is the important insight from this section:
Be profitable from the start.
The way to do this is to raise your prices.
If you are charging $25 an hour as a freelancer, you can instantly, today, raise your prices to $40 per hour. Because you're a business that pays YOU $25 an hour and therefore needs the other $15 to cover profit, taxes, and operating expenses.
Take the hourly rate (or monthly rate) that you want to pay yourself, and perform this equation to determine the hourly (or monthly) rate for your business:
Your Pay ÷ 60% = New Rate
If you need to pay yourself $2,000 per project, then you need to charge your client ~$3,500.
Not $2,000.
How to charge more for your work
The immediate question that inevitably pops up when I talk about this is, "how?"
"How do I charge more?"
Here's the mindset shift, and then an example of language you can use to raise your rates with your existing as well as future clients.
Shift Your Mindset
First, put an end to seeing yourself as a freelancer, and instead start to look at yourself as a business owner.
A partner, not a vendor, remember?
As a partner, you're covering some of the downside, or the risk, for the client, and deserve to be paid more in return.
Embody this new persona, put on the entrepreneur hat, and make the change.
Once you've done that, here's how to raise prices with your current and future clients.
Raise Your Rates With Your Current Clients
With your current clients, you can send a simple email explaining the realities of the situation:
"Hello {client}!
I'm reaching out to let you know that I'm dedicating more time and resources to my creative business. This means that I'll be working with you more as a partner, rather than a vendor.
As you may expect, this comes with an increase in overhead, as well as taxes and investment in the business, which means that my rates are increasing.
Any current projects will remain at the same rate, but going forward my new rate will be [fill in the blank for your business].
This will allow me to serve you at a deeper level and provide even more value to the projects that we're working together on.
I'm excited for this progress and that I get to continue to serve you in this way. Thank you for the opportunity to serve you and your business!"
And for future clients, it's even easier:
Raise your rates.
That's it. Update your pricing page, quote the new rate in any estimates, and change your product pricing tags.
They don't have the context of what you used to charge, so you don't need to work about them thinking that you "raised" your rates.
It's just "the rate".
But what if raising your rates makes you more expensive than your competitors?
That's what we'll cover in the next section on marketing, which includes positioning, and the section after that on sales.