3 Reasons You Earn Less Than You Deserve (And What To Do About It)

One of the biggest challenges I hear from self-employed people is that they aren’t earning as much as they want or need to.  They put in long hours, seem to be constantly engaged in work-related activities, and yet don’t have the income that reflects their hard work.  It’s ironic, isn’t it?  We become self-employed in order to have more control over our working lives—how we spend our time, where we work, who we work with, how much we earn—and yet, time and time again, I hear from people that they’re still just getting by financially, not really thriving or bringing in the income that they had hoped to when they became self-employed.  After working with many self-employed people and digging into what’s happening that keeps them earning a less-than-satisfying income, I offer what I see as the three most common reasons your earnings are not up to snuff.  1. Setting fees too low right from the beginning.  One of the biggest ways we undercut our own earning potential is by setting our fees unreasonably low right from the start.  Now, you might have what seem like very good reasons for this—I’m new, I don’t have enough experience yet, I don’t want to lose a potential client because my fees are too high.  Often, when setting fees initially, the tendency is to just look at what others are charging, and then use that as a gauge for setting our own fees—and usually set them lower.  You know, to be competitive.  Unfortunately, it’s not enough to just look at what others are charging as the measurement for how to set your fees.  Here’s why. First, there are those nagging little money beliefs that tend to drive how we set our prices—such as “I can’t charge too much right now, because I’m new” or “I’m not really very good yet, so I’ll start out on the low end and then I can always raise my prices.”  Yet those beliefs are often just your fears talking, and don’t reflect your actual ability or potential.  Second, it doesn’t really do a very good job of taking into account your costs of doing business. For example, do you know how much your overhead costs if you break it down into an hourly cost?What about hour billable hours versus your non-billable hours?  And third, it doesn’t consider the biggest question:  How much do you want and/or need to make?  Now, I’m not saying that you should just shoot for the moon with your fees right out of the starting blocks.  After all, there are some very real reasons that people with more experience, education, and reputation are able to command higher rates.  The problem is that we tend to shoot too low, without any kind of a strategy as to what that fee needs to be based on.  Our insecurities about our own experience and capability can get hooked into the fee equation, lowering the initial rate we set.  And before you know it, your fees barely cover the costs of doing business, and your income suffers. 2. No structure or plan for how and when to raise your fees. For example, how do you decide when it is time to raise your fees?  How much do you raise them by, and how do you decide that?  How will you communicate your fee increase to current clients?  Often, you don’t think about how or when to raise fees until all of a sudden you start to feel some kind of a crunch.  Maybe you have increased demand for your work.  Perhaps you’ve added new skill or tools to your repertoire.  Or your business costs are increasing.  Yet frequently, service providers don’t have a defined plan for when and how to adjust their fees, and many times it happens as an afterthought rather than as an anticipated and scheduled part of their strategic business plan. Thus, for many, this can mean several years or more between price increases, while meanwhile the demand for your services is growing, your experience and value is expanding, yet your costs are rising, and inflation is eating away at your earning power.  In addition, many service providers dread raising their fees, which means they don’t raise them as often or as much as might be needed in order to keep up with rising costs and increased skill and demand.  We anticipate resistance and perhaps even conflict when we have to tell clients about our new rates, which is about as appealing as pulling out fingernails. Again, fear shows up and drives the decision, because we worry we might lose business if we raise our prices too much, or too often.  We’re afraid we’ll lose longstanding clients, or that we won’t be able to sign new clients at a higher rate.   So we delay as long as possible…while that income continues to stay flat or even shrink.   3. Giving away your time.  You give complimentary consultations with no time boundaries. You don’t bill fully for the time you do spend working for a client.  You discount your services for any number of reasons:  a favorite client who you want to reward, a needy or demanding client—or sometimes, even a new client who you really are desperate to sign. You give free products, services, time because you secretly worry that your services aren’t valuable enough by themselves, at full price.  This, in turn, leaves you less time available to work for billable hours, unless you simply work longer hours.  The scope of your project creeps into something much larger than your initial quote, and rather than re-negotiate your fee, you just swallow it and tell yourself you’ll plan better next time. Now, I’m not against pro-bono work, or spending time working for free when it’s a cause you really believe in.  Unfortunately, when you make a habit of giving away your time, or discounting your usual fees, your client may make come to decide that your time is not what you say your time is worth after all.  And then, it becomes harder to charge your official rate, because you’ve set an expectation that in addition to your billable time, you’ll give the client an unspecified amount of extra time, just because you’re “nice”.  What happens with all of this is that it becomes harder and harder for you to keep your fees in line with your value, your costs, and your experience and expertise.  By setting fees low, giving away or discounting your services, and not having a game plan for creating your desired financial bottom line, you set yourself up to consistently struggle with not earning what you deserve, what you need, or what you want. So what’s a person to do?  Simple.  Here are three strategies to help you earn what you deserve.  <ol> <li>Set your fees appropriately from the start, especially if you are just getting off the ground.   Do your homework, not just of how much others are charging but your own business planning:  what do you want to earn, and how will you get there in terms of time spent, costs incurred, and so forth.  There are many resources available to help guide your planning, from books to workshops to coaches—use them!  </li> <li> Have a plan.  Know your business costs, your available billable time, and your desired income, as well as your competition.  Create some structure around how and when you will raise your fees in a way that reflects your current reality, and then be consistent with it.  Is it an annual adjustment based on a flat percentage increase?  A fee adjustment every time you add a new skill to your toolbox?  Figure out a system, and implement it.  </li> <li>Add value instead of giving away services.  In today’s market, it’s tempting to give away time and discount fees, because of the fear of losing clients to somebody whose fees are lower.  Rather than discounting your services, think of ways you can add value to what you offer, and then communicate that value to your clients.  Can you offer better service?  How about helpful resources, such as links to great articles, new business connections, or cross-promotions with complimentary businesses?  By getting creative about ways you add value, your clients benefit without you sacrificing your earnings to do it.  </li> </ol> In summary, one of the big advantages of being your own boss is that you get to be in charge of your income.  So do it right, take charge, and watch out for these sneaky ways you might be sabotaging yourself. You can earn what you deserve. 2009-10-28T22:57:20Z

2009-10-29T13:54:05Z

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3-reasons-you-earn-less-than-you-deserve-and-what-to-do-about-it

2009-10-29T07:00:23Z

2009-10-29T13:54:05Z

Afraid to charge what you deserve? Learn about the three biggest ways you sabotage your earning potential, and what to do about it.

3 Reasons You Earn Less Than You Deserve (And What To Do About It)

2009-10-29T13:54:05Z