Value-based pricing is popular in the freelance world. The strategy says that rather than charging an hourly rate (or presenting a flat fee package based on the time it will take), we should charge a price based on how much money your client will make with your work.
The argument for value-based pricing is this:
- You bring more to the table than your time
- You will benefit if a client makes money with your work
- Clients are happy to pay more if you make them money
Sounds great, right? Somehow, I doubt that.
Why this strategy fails
Clients will struggle to understand why your price is so high, even when the case you put forward is a solid one. You might make your client a ton of money with your work, but are you the only one, that can make them that money?
Even if your ideas to make the client more money are good, those ideas are based on their business, not yours. They know what their needs are, and they are seeking a freelancer to fill those needs at a reasonable cost. Good clients are willing to pay market prices for quality work, but who is willing to pay more?
In other words: why should your client spend more on your work than he has to? After all, he still has the option to work with someone else who charges for the time they spend.
Charging an hourly rate is value-based pricing
You might not have thought about it that way, but your hourly rate already implicates the value a client expects from you. Beginners from low-income countries offer services for $5 per hour while high-class lawyers charge $1000 and more.
Is it time to increase your hourly rate?
During a project evaluation you will get a sense how much value you will give. You can consider to offer a higher rate as usual (with ValueTime you can define different rates for different projects). But don’t forget: you won’t be the only freelancer your client considers.
Since this view on value-based pricing is controversial, I would like to hear your thoughts. I will read and answer all comments.