TT#006 - How low rates cost you more than money (and what to do about it)...Apr 12, 2022
When I was getting started as a solopreneur, I thought charging less would help me win more clients and grow my business faster.
I learned later how flawed that logic was. Not charging enough slowed the growth of my business.
But not charging enough came with a far more significant - and hidden - cost that I didn't fully appreciate until later, which was...
Underpricing your services has a deep impact on your mental health as a solopreneur.
I know this from experience. And I know this from talking to solopreneurs I now coach every day.
Here are just a few ways not charging enough affects your mental health:
- You aren't making the income you want or need.
Charging less means you make less. Obvious, right?
What's less obvious is the impact a lower income can have on your mental health over a sustained period of time.
I talk to solopreneurs every day that are making less than they did in their 9-5. They're struggling to take care of financial responsibilities, have stopped making investments for retirement, and are generally stressed about finances.
That’s not just a distraction, it leads to feelings of self-doubt, inadequacy, and anxiety.
Over time, those self-defeating feelings create a mindset of scarcity rather than abundance. And the scarcity mindset perpetuates the problem.
2. You make up for lower rates with more work.
The most common way to compensate for lower rates is to get more work. More work leads to more money. That's simple enough, right?
But the cost of working more oftentimes gets ignored.
Every hour of work requires sacrificing an hour of something else. That may have been quality time with your partner or with your kids. It could've been the time you should be taking for yourself.
Stacking up clients to make up for lower rates leads to overcommitment. Overcommitment leads to burnout. And burnout leads to insomnia, depression, and chronic fatigue.
What's worse, you get so damn busy with client work that you don't have time to work on your own business, which perpetuates the problem even further.
3. You make up for lower rates with mediocre work.
Another common way of "overcoming" low rates is by not delivering your best work. After all, you're not being paid premium rates, so you don't need to deliver premium work, right?
(This is also an unintended - and incredibly common - consequence of taking on too much work to compensate for lower rates.)
But what I see most frequently from solopreneurs that are delivering mediocre work to offset lower rates is... guilt.
They know they can do better work... if they only had the time.
They know they can deliver better results... if they only have the headspace to dedicate deep thought.
The guilt leads to anxiety, which often leads to offering yet more time to clients. And it leads to lost opportunities for referrals. All of which perpetuates the problem.
These are just a few examples of how not charging enough as a solopreneur can impact your mental health.
So, what's the remedy? How do you start charging more for your services?
1. Build a brand.
Without a strong brand, you're a commodity. And commodities are priced according to availability and lowest price. Strong brands, on the other hand, command a strong price premium. Start building a brand by creating assets you can use to demonstrate your knowledge, like an ebook, podcast, course, or even consistent social media content.
2. Separate what a client is buying from your time.
If you're like most solopreneurs, you got started with hourly rates. This is a lose-lose situation for you and your clients. Most clients want work delivered faster, not slower, right? But with hourly billing, the faster you get at delivering work the less you make. Separate what a client is buying from your time by productizing your service, which I write about here.
3. Find clients somewhere else.
If you are consistently getting clients that can't afford the rates you need to charge, find clients somewhere else. Third-party platforms like Upwork and Catalant may help you land clients, but they intentionally commoditize the product (i.e., you) in order for clients to perceive the platform as the source of value. Break that cycle by creating your own client acquisition system. (If you need help, I have a very simple and affordable course demonstrating how here.)
The impact of lower rates on your mental health is real. And avoidable.
Don’t sell yourself - or your clients - short.
I’m on a mission to help 10,000 Solopreneurs & Executive Freelancers discover and enjoy a new lifestyle by creating income they deserve from wherever they choose doing work they love.
For a limited time, I'm offering a free audit of your client acquisition system and will personally help you clarify what’s working, what isn’t, and what to focus on right now to start winning your best clients - on demand.