Charging Too Little Is Costing You More Than Just Money

Charging Too Little Is Costing You More Than Just Money

Dustin Lien
March 5, 2020

If you believe that charging lower than the competition is what you have to do to get clients, this post is for you.

I think we can all agree that charging more and working with great clients who believe in our work, trust our methods, and refer us to other great clients is the ideal situation.

Yet, so many freelancers feel like that’s not possible for them (even though it totally is).

So, they pitch low amounts, juggle too many clients at once, and constantly feel stressed about time and money, all to realize that you’re no longer running the dream business you wanted, in fact, your life is more complicated than just working a day job.

Or, they pitch low, get a client, and when the pay seems not worth the effort, they think client work just isn’t for them, so they stop trying :/

It’s possible to get paid what you’re worth, have amazing clients, and still have plenty of time for family, friends, and the freedom you want.

The Problems With Charging Too Little

1. It’s a Race to the Bottom

If you’re constantly trying to be the cheapest option, you’re going to be constantly negotiating your price down lower. Don’t play that game. You should be increasing what you charge over time, not decreasing it.

2. You’ll Attract Demanding, Worried Clients

When I first started doing client work, I remember one of my first clients paid me $600/mo to help with email marketing. Although the quality of my work was high, the reality was that it would take us at least a few months to start seeing meaningful revenue for his business.

Unfortunately, he didn’t have the cash flow or the patience for it to play out, so we stopped working together after 1 month, so he didn’t get a return on his investment in me, and he wasn’t very happy.

He also was constantly calling and emailing me to “check how things were going” and sending me lists of work he needed done right away (because, well, he was pinched for cash, so what I considered a small amount of money for a month of working together felt like his life’s savings to him).

I took that same service, increased the price to $2,400/mo, and pitched it to a more established business, and revenue had a dramatic increase for them over the 12 months we worked together, and it was a great partnership.

Some people/companies aren’t comfortable with a high rate, or simply can’t afford it, but instead of lowering my rates to meet their low budget, I find clients who can afford my high rates, because they’re out there. In turn, I make more money working less hours, and my clients are happier.

Also, in my experience at least, clients who pay more trust more because they value your expertise.

Moral of the story:

Don’t lower your rates and devalue your service to meet the budget of a potential client who simply can’t afford to work with you yet. Find clients who are ready, and can afford you.

3. You’ll Start to Resent Your Clients

Sure, you might land a new client by pitching low, but at what cost?

If you’re like me and you’re human, charging too little for your service has a negative psychological effect on you.

Eventually, you’ll start resenting your client for asking for things, for emailing or calling you, or for giving you feedback, because in the back of your mind you’ll know you gave them a bargain (especially if they don’t know that!).

Little by little, your work quality will suffer, you’ll rush through things, the results won’t be as good as they could be, and your relationship with your client will suffer, which means they won’t refer you, and they might choose to discontinue working with you.

Don’t put yourself in that situation, and don’t put your clients in that situation, because if it’s not a win/win, it’s a lose/lose every time.

A Better Approach: Charge More

The common fear of charging what your service is really worth is that you’ll lose out on sales from customers who won’t pay a higher price, even though you know your service is worth WAY MORE than you’re charging.

Do the math…

What would happen if you had 10 clients paying for a $200 service compared to 5 clients of a $1,000 service?

You can spend a lot more time delivering an exceptional service, and focusing on your actual clients instead of having to constantly try to balance client attention and new business outreach.

You 100% WILL lose out on some customers, but you’ll still make more money, and be able to better serve your customers, and they’ll rave about you for it.

There’s obviously a point where increasing price too far will hinder sales depending on your service and what value you’re providing for your clients, but you can do your own calculations for that.

This is a common problem with the way a lot of freelancers think (I know firsthand). They charge less because they feel bad or are scared of getting a “no,” or want to be “fair”—let me explain why that’s a problem.

Let’s say you charge a flat fee of $500 for a logo design. The mom and pop liquor store down the street that will use it only for their sign outside gets one, and makes no money off of it, but a software company that will use it for their national re-branding campaign with projections to increase profit by $1 million after the re-brand, gets a logo from you too for $500.

Do you see how that doesn’t add up? You shouldn’t feel bad pricing higher and going after clients who can afford it, as long as the value tradeoff makes sense.

Believe it or not, people will often not hire certain people or not buy certain products if the price is too low because it seems of low value or quality.

If I want to take my wife on a date, I’m not taking her to a restaurant that sells $1 burgers, I’m taking her to a restaurant with higher prices because it seems better. Both options would feed us and make us full, but I feel like I’m getting my needs fulfilled more with a more expensive restaurant choice.

Value is a funny thing. Different things hold different levels of value with different people, and it’s not all based on whether or not the customers can make money off your product or service.

An ebook would typically be no more than $10, but if the ebook teaches people how to do something that makes them money, you can comfortably charge more, correct?

Alternatively, let’s say you’re a health coach. Your service doesn’t directly make your customers any extra money, but if health is something they value, they will pay you for it. People will pay high amounts if they trust you can get them the results they’re looking for, whether it’s better health or increased business profit.

The key is building trust with a quality product or service, and a good reputation.

Some people/companies aren’t comfortable with a high rate, or simply can’t afford it, but instead of lowering my rates to meet their low budget, I find clients who can afford my high rates, because they’re out there. In turn, I make more money working less hours, and my clients are happier.

How to Charge More

1. Discover and Leverage Your Unique Value

If you’re a carbon copy of a thousand other freelancers going after the same clients, then offering a low price is your only play, and we just talked about that. Stop it!


Instead, think about your unique life and work experiences that make you different from everyone else.

For me, when I started my business in 2016, I realized that I had 6 years of experience as a personal trainer, and health & fitness were deeply rooted in my habits and personality.

So when I was thinking of what type of businesses to help with their email marketing, I realized that companies and influencers in the health & fitness space would appreciate my unique value. I could speak the lingo, I understood the industry, and I lived it!

Because of that, I’m able to charge higher rates for my services and my clients will still pay it, because they trust my unique value over other marketers who don’t know anything about the health & fitness industry or lifestyle.

Consider what things give you an edge, and see where that path leads you.

2. Productize Your Services

Skills aren’t that valuable. Lots of people have skills the same or better than you. What’s valuable is a unique method, reliable systems and processes, and experience-based insight.

Package your skill into a service that results in predictable, scalable, and repeatable outcomes.

Have you ever noticed how fancy restaurants don’t let you customize your order? It’s because their chef has meticulously created that dish, and they won’t allow your opinion of what would taste better to ruin it.

So no, you can’t have ketchup with your $100 steak.

If you go to Burger King, you can “have it your way” because they don’t really care.

Customization is not premium. You’re the expert, so offer a packaged service that gets a specific result, and sell that.

If you’re not quite sure what I’m talking about, go read the book Built to Sell.

3. Solve a Big Problem

As a hired expert, you’re not just an extra set of hands waiting for instruction. You might be hands on, but you’re leading the way.

You’re the expert, and your job is to guide your clients to a desired destination that they haven’t been able to figure out on their own.

The bigger the problem you can solve, the more you can charge.

Final Note: Stop Trading Time for Money

It’s vital to understand and believe these few things:

Your pricing should have nothing to do with what YOU would pay for your product—only what your potential CUSTOMERS are willing to pay (you might not even need or would ever pay for your services, but they’re valuable to others, so price that way).

Cheap prices = cheap, overbearing customers 99% of the time (charge more, get better quality customers).

• If you never graduate beyond trading time for money, you’ll never experience the freedom you’re looking for.

When you charge by the hour, even if it’s a high hourly rate, it incorrectly frames your service to customers.

Instead of thinking about the awesome results they’ll get, they’re stuck thinking about how long something will take or not take so they can ask you to cut corners and argue with you when you take an appropriate amount of time to do something.

Ugh. Annoying.

The reality is, the value of your service has nothing to do with how long it takes you to complete it, so don’t price based on time.

Price based on value, and price what it’s really worth.

Charging more makes everyone happier. The customer who buys and gets the desired outcome is happy, and you are happy because you got paid an amount that you know you are worth.

It’s also a safe bet that you will work harder knowing you’re being paid what you’re worth. A win-win scenario (always the goal).