I need some advice on making the psychological shift from being a business employee to a business owner. I started a couple of businesses five years ago, and I’m surviving as it is, but I’m right on the lower limit. I can feel that it’s my own psychology that is holding me back. I don’t struggle with the practical running of the business, my problem is feeling like an exploitative schmuck because I’m charging people money for stuff. I can push just enough to let myself survive, but after that I freeze. It’s a big block for me, and I just can’t seem to get past it on my own.
I know there are tons of business self-help books out there, but I don’t have the time/money to sift through all of them to find the non-icky diamonds in the rough. And I figure there have to be at least a few people out there who have made this transition and faced the same problems. So:
- Have you confronted this problem for yourself? How did you approach it?
- Were there any resources you found helpful to wrap your head around the transition?
- Do you have any experience with business coaches and/or associations, and were they helpful (ie. worth the money)?
- Are there any Lemmy/Reddit/Discord/other groups you found supportive/helpful?
Thanks much in advance,
~Archie
There is no such thing as overcharging unless you’re charging people for something you don’t deliver. The market decides what something is worth. Nobody is forced to pay you more than they’re willing to pay you. Also, charge less and people will often perceive your work as being of lower value.
When I started doing private consulting I would pitch my rate at roughly 35× what my salary would have converted to on an hourly basis, and depending on the engagement would be open to negotiating down to 15× while seeking added values like referrals and access to benefits clients could offer at zero extra cost to them but which were high value to me. Nobody was ever forced to pay me more than they were willing, I worked hard to deliver, and clients felt good about what they got and would refer me to others.
Just remember, if you’re honest and upfront about what you’re charging and what you’ll deliver, there is no such thing as overcharging. There’s only pricing yourself out of the market or leaving money on the table, and it’s much better to start high while being willing to move down.
Hmm… I’m confused. 35x seems wicked high. You mean if the project was 100 hours, and you would have made $10,000 as an in-house employee for that number of hours, you would pitch for $350,000, and be willing to accept $150,000?
This is the part I struggle with, that meta-appreciation of the abstract concepts of “worth” and “market.” I haven’t learned how to believe that those things are real in the way that the person I’m “taking” money from is real.
This helps the above make more sense, though. Basically the question is: Did you do the thing you’re charging for? Did you do it well enough to justify the price? If so, you’re fine. It also assumes that the other person knows what fair market value is. I think my implicit assumption is that they don’t, and so I’m tricking them into paying more than they need to (even though I know that my prices are fair). Which is a bit condescending, now that I think about it.
Yep. Keep in mind, when I started, I really didn’t know how much to price my services. What I knew was that I was taking the most unique and high-value aspect of my professional skills and selling that, not all the other stuff that many more people could do and that would fill much of my regular work day. I also knew that I wanted to work with the highest value clients that I could, who would appreciate the value of those skills and have the executive authority both to make decisions on spending and to negotiate. So, I targeted CEO, owner, and board-level consulting and training. I also knew that no company pays their employees the value of their work on the open market, because if they did, they would make no profit, and I knew from my work the types of revenues and costs in the types of businesses I would be selling to. So, I went into my first sales confidently stating a figure that I thought was pretty high, and with a negotiation strategy planned in advance for how to adapt and how to use that initial high price positioning to get commitments on additional benefits that could be offered by the CEO and their company at no cost to them but which would have high value to me. That’s how I got things to work and to find not simply a fixed rate that worked, but a pricing and negotiation strategy that would lead to good outcomes for both me and my clients where we were both satisfied with the value we were getting out of it.
In effect, it’s a good demonstration of the market determining worth. I really didn’t know the worth apriori. My clients really didn’t know the worth apriori either. My clients had a budget, and I had a target. Pricing was ultimately a product of those two factors and the skill in negotiation and delivery. Had I only spoken with clients who had lower budgets, the pricing would have worked out differently, or wouldn’t have worked at all. So, there is no absolute value of something. Value in a transaction really comes down to the combination of buyer and seller circumstances and their capacity to reach agreement.