One of the biggest questions people have when starting a business or going out on their own to freelance is how to determine what you’re worth. How do you decide what to charge for your time, services, knowledge, or products?
Common advice is to determine what you’re worth to the marketplace, and then ask for the appropriate amount of money based on your findings. As wonderful as that sounds, what does that even mean?
There is something to be said for how worth, and in particular self-worth, leads to more money over the course of one’s career. In a study conducted by Kansas State University and Klontz Consulting Group, researchers found a considerable correlation between a healthy sense of self-worth and financial satisfaction.
There’s concrete evidence that determining your self-worth and acting accordingly can lead to better finances. Here are a few tips on how to determine what you’re worth.
How Do You Feel About Money?
While researching what other people in your market are charging or determining your rates based on experience can be helpful, none of it will matter if you don’t think you actually deserve the money. That’s why it’s important to first start with how much you value yourself and how that plays into your money.
In the same study mentioned above, researchers used the Money Attitude Scale created by Drs. Yamauchi and Templer. This is a scale used to measure someone’s beliefs about money in an effort to see what could be affecting their financial behavior. A common theme researchers have found is that a very strong belief about money can affect whether or not someone retains or disposes of money.
The same can be true of making money. If you have a strong belief that making money is difficult or that you won’t be able to make what you want, then that’s exactly how you will end up behaving.
So, before determining your rates based on your worth, first check in to see where you stand when it comes to your own worth. Do you have doubts that you’ll be able to get the money you ask for? Do you find yourself saying things like, “Who would pay me that much for my service?” All of these are important things to notice and be mindful of.
If you notice any repetitive negative patterns when it comes to money, then it may be time to do some self-reflective work around the issue. Money: A Love Story by Kate Northrup and Think and Grow Rich by Napoleon Hill are good places to start.
Do Some Market Research
Once you’ve identified and begun working on any psychological barriers that could be getting in the way, the next step requires a bit of research.
Some people may find it helpful to see how others within their industry set up their business models and pricing schedules. Just note that one person’s model or pricing may not actually work for you. Instead, try to use this research as a template or a jumping off point you can customize to fit your own business and financial needs.
It’s also important not to fall into the trap of competing on price. That strategy may work for Walmart, but it won’t work for freelancers and entrepreneurs.
You don’t want to undervalue your services because you’re afraid people you work with or buy from you will go to cheaper providers. Remember, research has found a correlation between self-worth and financial satisfaction, so underpricing based on what you see during your market research would be an example of short changing yourself.
Focus on Results and Value
This is the real kicker in how to determine what you’re worth when you’re a freelancer or running your own business. When setting your rates and selling your services, what your potential clients will care about most is the kinds of results you can get them.
Do they have a complicated situation you can help them sort out as a consultant? Have you been able to help customers achieve a tangible ROI? Have you been able to help people reach a particular outcome?
Freelancers and entrepreneurs often don’t give themselves enough credit for the incredible work they do. It’s usually because people aren’t accustomed to actually acknowledging their successes, and instead go straight for the next goal they want to accomplish. Not giving yourself credit (which means not acknowledging your worth) is then usually reflected in lower pricing.
How to determine what you’re worth requires both psychological and tactical exercises to help you find the numbers that work best for you.
About the Author: Amanda Abella is an Amazon bestselling author, speaker and personal finance expert who helps millennials make money their honey through online business. She has built an online brand that touches thousands each month and has been featured in Forbes, The Huffington Post, Seventeen Magazine and more.