Why You’re Undercharging Clients (And How To Fix It)

If your workload is staggering but your bank account is still anaemic, the problem isn’t about productivity or time-management – It’s about pricing. You’re undercharging clients for your time and expertise.

The reluctance to change your rates may be rooted in a basic misunderstanding about the relationship between price and value.  If you believe there is a concrete value to the services you provide, it becomes complicated to make adjustments because you need to capture that exact value with your pricing.

But in reality…

There is no exact value, especially when you are pricing a professional service.

(Read that statement a few more times because it’s VERY important)

If you ask for $50/hour and clients pay you that amount, then you are worth $50/hour. If you ask for $250/hour and clients pay you that amount, then you are worth $250/hour.

It’s that simple.

“Price is what you pay. Value is what you get.” – Warren Buffett

What if I charge too much?

If you ask for more money, you may not get as many jobs. That’s the truth. But undercharging clients is a far bigger problem for your business!

Let’s look at the $50 versus $250 example again:

If you only ask for $50 an hour and you need to earn $2000/week to cover all of your business expenses and support your lifestyle, you have to perform 40 hours of billable work just to make ends meet.  That’s on top of the daily stuff you do that isn’t billable, like marketing, networking, meetings, paperwork, etc.

Even if you can squeeze all that stuff into 10 hours, you’re still looking at a 50 hour work week. And you aren’t thriving. You are just surviving.

If you charge $250/hour, you only need to find 8 hours of billable work to get the same results. And all that extra time can go into developing the strategies and tactics necessary to GROW your business, SCALE UP, and make more money.

So how do you get from $50 to $250?

Obviously, you can’t just jack your fees to an astronomical level and assume that people will pay it! You have to work hard, build your brand, establish a history of successful projects, and so on.

But if you’ve done those things, and you’re still undercharging clients, it’s time to look at the emotional triggers that may be holding you back. To reach your financial goals you may need to de-construct some of your beliefs so that you can set prices that reflect your level of expertise and experience.

Are you struggling with Imposter Syndrome?

The term “Imposter Syndrome” was coined back in the 1970s by psychologists Pauline Clance and Suzanne Imes. They found that, despite having significant accomplishments, some people still felt unworthy of their success. They felt like imposters.

If you suffer from Imposter Syndrome, you are apt to give undo credit to good luck or good timing. And you struggle with the nagging feeling that you’re not as competent as other people in your field – even when the facts demonstrate that you are excelling.

Imposter Syndrome sabotages your self-confidence. It saddles you with an overly-critical inner voice that incessantly tells you that you are unworthy. And until you convince yourself that your work is worthy of greater compensation, you are going to remain stuck in a pricing rut.

Recommended reading: The Reality of Imposter Syndrome (Psychology Today)

Does money-talk make you uncomfortable?

Do any of these scenarios sound familiar to you?

  • The scope of a project expands but you don’t bring this up with the client. Instead, you just do the extra work and don’t bill for it.
  • You are asked to deliver a workshop or talk. The organizer doesn’t bring up the subject of compensation so you don’t either. In the end, you do the presentation for free.
  • You casually tell a client about your new fees but they keep paying you at the old rate. And you don’t say anything.

FYI: I have done ALL of these things.

Sometimes, talking about money feels “icky”.  The aversion to money-talk is especially common for those of us who work in creative industries, or provide services rather than concrete products. When the value of your work is subjective, or hard to quantify, conversations about pricing can seem especially awkward.

You may also be carrying around emotional baggage from your childhood. As an example, in my husband’s relatively affluent family, talking about how much things cost was considered “tacky”.  And in my family, where some relatives struggled financially, money was a taboo topic.

But here’s the thing. YOU NEED TO GET PAST IT.

Each time we face our fear, we gain strength, courage, and confidence in the doing.- Theodore Roosevelt

The only way to become comfortable about charging more money is to do it.  So if the idea of talking to clients about a fee increase is giving you a tension headache, take an Advil.  But plunge into that conversation anyway!

Are you easily manipulated?

Do any of these scenarios sound familiar to you?

  • A new client is referred by someone you know. You wind up giving them a “friends and family” discount even though they are neither friend nor family.
  • A client raves about how amazing your work is and how much they need you. But they also reveal that “money is tight” for them. You reduce your rates even though they don’t reduce your workload.
  • A start-up convinces you to give them a “deal” now and promises to pay you more when their great business idea skyrockets.

We all want to be liked. But business relationships are NOT friendships. They are based on mutual benefits.

Your clients work with you because your skillsets match their needs. Your expertise helps them succeed and make more money.

You work with them because this is your livelihood. It is not a hobby. If you’re undercharging clients then you can’t turn a profit and grow your business. In effect, your relationship is NOT working!

A client who can’t afford your services can choose not to use them. That’s how business works.

Giving discounts and doing “favours”  may be good for the ego but it is deadly for the bank account. And undercharging clients doesn’t guarantee that they will give you more work or be more loyal over the long-term.

People value what they pay for. When you stop settling for less than you deserve, you may find that client relationships actually improve!

How to stop undercharging clients without losing them…

Even if you’re worth more money (and they know it), existing clients may balk a little when you change your fees. Here are a few tips to keep everyone calm and happy:

Don’t jump too far, too fast!

A client who is paying you an average of $50/hour may justifiably lose their mind if you suddenly ask for $250.  While new clients may accept a significantly higher price point, existing ones may need to be eased in, with smaller increases implemented over the course of a year or two.

This doesn’t mean your existing clients should enjoy “grandfathered pricing” forever.  Ultimately, there are better ways to show your appreciation for long-term customers that providing your services for less than they are worth!

Shift to project-based pricing

One of the easiest ways to stop undercharging clients is to change from hourly billing to project-based billing. In effect, instead of charging for time, you begin charging for “deliverables.”

This makes more sense anyway.  Hourly pricing rewards the slow and punishes the efficient. Project-based pricing focuses on the value you are providing and what clients are getting for their money.

Explain WHY

You don’t need to justify your pricing to anyone. It’s your business. You get to decide what you are going to charge.

That said, if you change your fees without providing any explanation, existing clients are apt to craft their own story, which may not be flattering. They may think you are just being greedy, or taking advantage of them.

Take time to explain that you have expanded your staff, outsourced additional expertise, created new package deals, etc.  Whatever the reason, your existing clients will appreciate your honesty and accept the change more easily.

Conclusion: Undercharging Clients Is Unsustainable

You read this article. That tells me you have a nagging sense that you are undercharging clients.

Maybe you undervalue your worth. Or money-talk makes you uncomfortable. Or you’re easily manipulated by fast-talking clients.

Whatever the reason is, you need to overcome it. Because undercharging clients is bad business, and it’s not just your bottom line that’s suffering.

I’ve been where you are. It’s stressful.  Until you start charging what you are worth, you are doomed to continue working too many hours on too many projects. And neither your workload nor your stress level is sustainable.

You need to push past the discomfort. Do the necessary market research. Then make appropriate changes to your pricing model and your fees.

Changing your rates doesn’t have to be a big deal. It’s just part of business.

When you charge what you are worth, your business will prosper and you will have the mental bandwidth to do your best work!

“Quality is remembered long after price is forgotten.” – Aldo Gucci

FYI: Raising your rates isn’t the only way to make your business more profitable. You may want to read 4 Practical Ways to Grow Your Business (Without Spending More Money)

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