Value-Based Pricing is where you price your services on the value that you’re creating for your clients. A lot of people charge by the hour. Essentially, they set an hourly rate and they sell their time. For instance, if your hourly rate is $75, a project that takes you 10 hours is billed at $750.

However, if your client realizes $20,000 of value in the first month as a result of your work, you don’t see any of that upside.

Hourly-based billing simply trades your time for money.

Imagine you’re redesigning a logo for a small, mom and pop shop. Let’s say you give them your usual rate. Let’s also imagine that Coca-Cola approaches you and asks you to redesign their logo. Why does it feel weird to charge them the same amount?

It’s because the value they receive isn’t the same. Value-Based Pricing is different in that it acknowledges that the value of the work that you do varies from project to project. This means the way you price would also vary. With Value-Based Pricing, the quote ends up being a percentage of the expected value you’re creating for the client.

Expense vs. Investment

This can be uncomfortable at first. You may feel like you’re not worth it. You may be wondering how you even go about discovering the value that you create for your client. How do you find that out? What questions do you ask? What if you’re dealing with value that’s intangible or emotional? How do you come up with a number?

Part of why this is so uncomfortable is a lot of us are used to positioning ourselves as a commodity to the client. We compete on market rates and therefore, we open ourselves to comparison We’re essentially positioning ourselves as an expense to the client.

Expenses are things that people try to keep down. Nobody likes expenses, you want to minimize expenses. The way you know that you’ve positioned yourself as an expense to the client is when they’re trying to pay you less.

You want to position yourself as an investment.

Investments are something that clients want to maximize.

The place you want to set the foundation is in the preliminary discussions you have with your client. When you’re positioning yourself as someone who asks the right questions, solves the right problems—not just someone who does a task they’re told to do—and is able to create real, tangible value for your clients, they see you as someone who’s on their team. You’re there to help them maximize value. They win, you win, everybody wins.

Learning to Price on Value

Those of you who listen to the seanwes podcast may know that recently I did a 3-part series on Value-Based Pricing. In 145–147, we go into detail on how to get started with Value-Based Pricing:

We covered so much in that series, one of the episodes is about 2 hours long and there’s over 10,000 words of shownotes. Yet, we still have so much more to share!

There’s a lot of preparation that goes into attracting the right type of clients for Value-Based Pricing. It’s a great deal more involved than just setting a rate. You have to have a conversation with the client to discover the value that you’re creating. That takes time!

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I have good news: In addition to the podcast series, I’m also working on a course at ValueBasedPricing.com. If you go there and subscribe, I’ll send you a PDF guide of 7 Value-Discovering Questions to Ask Your Client. I’m also going to have the podcast episodes and shownotes available for download there.

You haven’t seen me on seanwes tv this week is because behind the scenes, I’m working on a new 3-part video series in addition to the course I’m releasing. These three videos on Value-Based Pricing are going to be sent exclusively to people who subscribe at ValueBasedPricing.com. I’m only going to be posting them privately. They won’t be on YouTube or anywhere else.

I’ll also be on sabbatical this next week—for those that don’t know, I do what I call Small Scale Sabbaticals which is where I take off a week every 7 weeks to rest and recharge. After the sabbatical, I’m going to be working exclusively on my course and the three new videos. I won’t be recording seanwes tv until I’ve finished producing the entire course, so there will be a bit of a break here while I work on that, but for those of you who are subscribed, I’ll be talking to you soon!