Setting Your Rates by Finding Your “Resentment Number”

If you’ve ever resented how much you were paid, it is time to get in touch with your “resentment number”. Similar to the bottom line, this is a gut check.
 

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  Posted by Julian Michael, Seattle, Washington | May 06, 2008

  Mikelann,

  Lovely. Just lovely.

  As a blossoming photographer I find myself asking this question of myself on monthly basis the past few months leading up until present. Everyone around me keeps telling me my work is worth every penny, and then some. I've felt modest about asking myself about a bottom line, but you're right...you should present yourself at your 'happy number'...which is exactly what I've done lately. And sure enough by putting my foot down and through talking with industry professionals and agency reps, I've had several people schedule appointments and many others to follow!

  What is comical, is how this all goes back to 'creating value in your product or service' and being able to share, inspire and present yourself in a winning package that sells. I feel like I can no longer work with that 'extra' gal, or do a 'favor' for some model, it's just not worth my time. Great example about opportunity cost as well (time away from clients, away from your family, etc), as I am always weighing how my creative time can be spent designing a website, marketing my business or keeping my health up!

  Anyhow, really got me thinking. Thanks for the pep! -Julian

  Photographer, Experienced portrait artist
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  Posted by Karen Rosenzweig, Edmonds, Washington | May 06, 2008

  Love this concept - thanks for sharing!
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  Posted by Sue Holm, JD, CFRC, Kenmore, Washington | May 06, 2008

  Thanks for the reminder to check in with my body when making decisions, and not just staying in my head.
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  Posted by Carol Skolnick, Santa Cruz, California | May 06, 2008

  This, along with other factors, is how I determined my fees. If it makes you grit your teeth, or makes you feel like you need a nap every time you sit down to work, it's too darn low! Thanks for a great article.
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  Posted by Joanne Victoria, Silverdale, Washington | May 06, 2008

  You are so right. I was recently invited to speak and decided the bottom line amount that would get me to travel to the location named, plus my expenses. Got the gig. People love being told what to do, and it was great to say, "this is my fee for this presentation"

  It worked.

  Thanks!
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  Posted by Elge Premeau, Portland, Oregon | May 06, 2008

  Any advice on how to work this into writing proposals? The vast majority of the work I do is on a proposal basis. Part of the work is discrete projects and some is ongoing so billed hourly. Although I've gotten better at knowing what a job is going to take, the rapid changes in my industry make it a moving target and sometimes I wind up feeling like I'm making $5 an hour in order to really deliver results to clients.
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  Posted by Joanne Victoria, Silverdale, Washington | May 06, 2008

  Elge,

  If possible do not charge an hourly fee. If it is a small project, and you have a good idea of the time it will take, get a (monthly)retainer. Then you won't lose money because you will charge for everything.

  Trust your value and charge accordingly. And I bet you can raise your fees as well.
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  Posted by Mikelann Valterra, Seattle, Washington | May 06, 2008

  I agree with Joanne, Elge. And sometimes it is totally appropriate to charge by the hour- Especially when you are doing most of the work face-to-face with your clients. But this goes back to the old question: hourly vs. project. In your case, if you charge by the hour, would you be penalizing yourself for being really fast? (Or feel stressed if taking too long?) Of course project pricing means you’ve got to be careful about your estimate. I always recommend coming up with the best bid you can and then adding 20%. (Call this a combination of project management- read “client communication” and potential cost overruns.) This may sound like “padding” but if you’ve had the experience where it feels like you are making five bucks an hour, my gut is that this 20% could save you. We all know it’s really about the value you provide. But it still comes back to resentment. How much do you need to bid in your proposals in order to not resent the work, if you land the project? And thanks for reading my article, everyone.
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  Posted by Elge Premeau, Portland, Oregon | May 06, 2008

  Hmmm....Good food for thought.

  I'd love to move away from hourly pricing but I'll have to think about it a bit. Part of the dilemma is that one of my main bread and butter services can vary widely from client to client in terms of my time investment based on the "ready to print-ness" of the content they send me. For some clients, their content is ready to go. For other clients, it needs some work! It's tough to know which camp a client is going to fall into until I've worked with them for a while.

  It seems like it would be weird to change horses mid-stream (i.e. go from billing hourly to flat rate). Maybe it's a matter of asking better questions before writing the proposal?

  Thanks,

  Elge
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  Posted by Kathie Nelson, Portland, Oregon | May 06, 2008

  Mikelann, using the resentment factor as a barometer is brilliant! What a fresh way to look at setting fees.

  I typically illustrate pricing and packaging as a value exchange. For example; when your customers buy from you they want to receive value in exchange for the money they give you.

  Elge, I hope this helps as you think about repositioning yourself and updating your packaging.

  Your product or service has value. Money has value. It is a simple exchange based on your pricing. Here is what I've discovered.

  1. If you don't charge enough the value exchange is heavily weighted toward the client receiving the greater value and you...not so much. This type of exchange creates a couple of outcomes:
     a. leads to "customer chasing"; you go after anyone as long as they can pay, b. you feel desperate and doesn't improve your self esteem, c. you feel taken advantage of, and d. your client may wonder if you really know what you are doing.

  2. If you charge more than you deliver, the balance of value exchange is weighted toward you, not your client. The outcomes: a. you feel like you've gotten away with something, b. your client feels taken advantage of (even subconsciously),
     c. your client may feel cheated and I guarantee, if they do, they will talk about it.

  3. If you charge what you are worth...and then deliver high value, the balance of value is equal. Everybody wins! Outcomes: a. you gain confidence, b. you build a sustainable business business model, c. you build credibility, profitability, and raving advocates which leads to referrals and new opportunities.

  Consider this picture of the "value exchange" when you create your packaging so your clients can have a value exchange from the smallest increments on up to your larger packages.

  This works for hourly as well as value priced packaging (which I am a proponent of as well).

  Kathie Nelson - Business Strategy for Busy People
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  Posted by Kathie Nelson, Portland, Oregon | May 06, 2008

  Elge, I hope this helps in addition to the other feedback above. Great comments!

  Kathie Nelson - Business Strategy for Busy People
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  Posted by Julian Michael, Seattle, Washington | May 06, 2008

  Great sharing!

  Photographer, Experienced portrait artist
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  Posted by Mikelann Valterra, Seattle, Washington | May 07, 2008

  THanks Kathie. Fabulous thoughts. Your post could be it's own article!

  Just another qucik thought:To be clear, I'm not telling people to dump their hourly rate. It can be appropriate, and it can make you more flexible, to have both. Lots of people whip up a great proposal, but when the client reaches the edge of the scope, you can switch it to hourly pricing to protect yourself from putting in too much time. Just make sure your clients know they've reached the proposal limits and will now be charged by the hour for additional work. (Feature creep is such a problem.) Otherwise- that resentment creeps back in...
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  Posted by Lori Richardson, Bellingham, Washington | May 07, 2008

  Mikelann, I also loved how you convey the "resentment" factor. In selling we call it "buyers remorse" or in this case, "sellers remorse".

  As a consumer we have all seen the results of a vendor being resentful at one time or another - for me, I remember hiring a charity auctioneer (before I became one myself) - he agreed to a lower fee based on our small non-profit's tight budget, but then later treated us poorly and this experience made a big impact on me.

  Thanks!

  B2B sales coach and fundraising auctioneer
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  Posted by Kathie Nelson, Portland, Oregon | May 07, 2008

  Thanks, Mikelann. I didn't realize I got on such a roll. You inspired me. ;-)

  Lori's comments remind me...the same challenges exist with trade. When doing trade, it is important to be clear about the value exchange or one or both parties can end up feeling cheated.

  Kathie Nelson - Business Strategy for Busy People
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  Posted by Nina Durfee, Sammamish, Washington | May 07, 2008

  Great discussion! Kathie, your 3-part barometer creates a great foundation for knowing what to charge. Here's another trick, especially when you're stepping into a new higher rate and you're faced with that "am I good enough?" demon:

  Throw in something extra for free. Go a little bit of an extra mile, something that has value for the client and is easy for you to give. The return on that little extra something goes a long way, and it feels good in the process.

  This practice is good whether or not you're changing fees. Try it and see what happens!

  Great article, Mikelann!
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  Posted by Mikelann Valterra, Seattle, Washington | May 07, 2008

  I like what you said, Nina. I always say "don't discount"! Nothing good comes from this-- and it conveys a message that you don't really think your service/product is worth it (and internally it says, "I'm not worth it"-- or "good enough", as Nina says.) But going the "value added" route is always nice. But again, don't throw in so much "extra" that you resent it. Then we are right back where we started! This stuff is really hard. I just finished writing a workbook called Emotional Money-- on dealing with all the feelings and beliefs we encounter when we charge people money. It took it a lot longer than my "how to" book on pricing...
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  Posted by Laura Foley, Hubbardston, Massachusetts | May 08, 2008

  Excellent advice! As a graphic designer, I spend a lot of time creating proposals, usually per project. I've always had trouble charging market rates for my work, since I feel like my one of my strengths is coming in at less than what a big agency with employees would charge. But after reading this article and its follow-ups I hope to make that self-destructive attitude a thing of the past! I'll only get paid what I'm worth when I demand it.
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  Posted by Mimi Pettibone, Seattle, Washington | May 08, 2008

  Mikelann, your advice is always right on the money! ;)
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  Posted by Richard Miller, Portland, Oregon | May 08, 2008

  I'm also a graphic designer, and this concept has really helped with project estimation. My strategy now involves multiplying the time needed for a project by my hourly rate, but then re-involving my gut -- evaluating the resulting figure in terms of my resentment number, and adjusting as necessary. (Turns out my gut is a genius!)

  Lori, I've also done quite a bit of pro bono or charity work, and noticed at some point that -- though I love doing the work, and am quite comfortable donating a percentage of my time and labor, I still occasionally felt resentment. I finally realized that this was because the recipient didn't understand the value they were receiving, and took me for granted -- because I wasn't making it clear to them!

  I simply began adding an invoice line stating what they would have been charged had they been a full-price client. This not only resolves my internal conflict and resentment, but since the client now understands the benefit/value of the gift, they are happier too.
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  Posted by Mikelann Valterra, Seattle, Washington | May 08, 2008

  I like Richards advice. If you have a pro-bono or discounted client (for whatever reason) you should still invoice them. The invoice should state what the full fee would normally be. Then what they are paying. That way they really appreicate the deal they are getting. And remember- you get what you "demand" not necessarily what you "deserve"-- so you've got to ask for it!
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  Posted by Dominique Johns, Seattle, Washington | May 09, 2008

  This is what i did. Works for me.