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The Problem with Answering, “What’s Your Hourly Rate?”

“What’s your hourly rate?” is typically the first question asked by potential clients. You’re expected to share your prices. However, answering their question doesn’t really tell them anything.

Jan 14th 2020
Price and Profit Coach Business Success Solution
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What’s Your Hourly Rate?

“What’s your hourly rate?” is typically the first question asked by potential clients. You’re expected to share your prices. However, answering their question doesn’t really tell them anything.

Here’s why:

  • You’re instantly judged.
  • If your rates are outside of her expectations, then she moves on.
  • You charge more than most, but you’re super quick. Your clients actually pay less than someone whose fees are lower, but require more time to complete the work. 
  • You no longer offer an hourly rate. But, unsure how to respond.

Culturally, we’re trained to immediately ask about pricing. Most people don’t realize that’s a hollow question.  Starting a conversation with your fees overlooks important, relevant information.

It’s similar to purchasing a new vehicle because it’s within your budget, but the vehicle fails to meet your specific needs.

Pricing Strategies

Competitively low rates: This pricing strategy backfires for accounting professionals. Subconsciously, people connect price with quality. Low rates mean sub-standard quality. As a result, your cheap prices cause internal alarm bells ring.

One client shared his expectations regarding my pricing. He said, “If you had low rates, I never would have hired you.”

You’re higher than my budget: Confidently decide to own your worth, stick with your rates and realize not everyone is your ideal client.

Some prospects simply refuse to pay high fees. Those aren’t your ideal clients. It’s easier to let price-sensitive clients move on before you start to work with them.

The price is right: According to Ron Baker, author of  Implementing Value Pricing, we constantly leave money on the table. You can tell it’s time to raise your prices when a high percentage of prospective clients quickly agree to your rates.

Not everyone’s an ideal client. When you’re priced right, a certain percentage of clients don’t turn into clients.  Your ideal client; however, recognizes your value. She’s excited to get started.

The Goldilocks Approach

A client who runs a million dollar firm proudly stated, “Every consult turns into a new client.” This proves she’s under-charging.  We then rolled up our sleeves to upgrade her pricing strategy.

We started to separate her fees from time by packaging her services. Packages bundle a variety of services together.

Basically, it’s the Goldilocks approach where one option’s too cold, another is too hot and one is just right. Potential clients were given three ways to work with her.

We labeled the packages silver, gold and diamond. The silver, or low price, package offers minimal support to clients on a tight budget. Most clients opt for her gold, or middle, package. The diamond, which is her premium package, includes done-for-you services.  

Your Hourly Rate is Unfair

Your hourly rate isn’t fair to you or your client. Even if you share an hourly rate, she’s still in the dark about the total cost. If you’re a fast worker with a high hourly rate, your final bill can be half as much as the person who works slow but quotes a lower rate.

Renting your time overlooks the value of knowing how to solve your client’s problem. It is like hiring someone based on their location instead of their expertise.

Confidently Answer the Hourly Rate Question

  1. Ideal Response: Consider these answers to the common hourly rate question.
  • Let’s first talk about what you need.
  • I offer a complimentary consultation first to find out exactly what you need.

With these responses, they quickly start describing the project in detail. At that point gently interrupt them. Let them know scheduling a consult is the first step. Then share any necessary instructions.

  1. The Consultation: This is your opportunity to ask great questions.

Key information to gather:

  • Find out what she wants to achieve.
  • Ask about her current situation.
  • Explore the obstacles and bottlenecks in her business.
  • Then learn what’s possible once those things are resolved.

Remember to listen carefully to her answers. Ask about her frustrations and challenges. During this time together, decide whether her problem interests you. Most important of all, decide whether this is someone you want to work with?

Some consults simply seek free advice or low-cost solutions. It’s okay to let them move on.

  1. Solution: Once you gather all the necessary information, share your solution. Don’t go into too much detail because it leads to overwhelm. Instead, give her an overview which emphasizes benefits and outcomes.
  2. Options: Here’s an advanced move – offer more than one way to engage your services.  Share your three packages and price options. Packages shift the decision from IF to work with you to HOW to work with you.

Remember to emphasize the benefits and outcome as you explain each package. Focusing on her future potential, known as the transformation, has greater value than the nitty-gritty, tactical steps.

What if They Keep Pushing?

Some people simply want to know your hourly rate first. If she insists you share that information, then respond with:

Because I focus on results, I don’t have an hourly rate. I need to know if I can solve your problem before we discuss pricing.

Now if she still wants your rate, stand your ground. Don’t cave into the pressure. Wish her well and let her move on.

Separate Fees from Time

Clients hire you because of what you know; not what you do. Your ideal client values your expertise and insight. She’s primarily seeking solutions to her problem.

Offering an hourly rate causes her to make a snap judgment based upon your pricing. Since the final cost remains open-ended, she’s unable to determine if your services truly fit her budget.

Value pricing emphasizes your expertise; not your time. With this paradigm shift you need to own your value before you can expect others to recognize the value you offer. This pricing strategy takes time to implement.

The best response to “What’s your hourly rate” is an invitation to schedule an initial consult. Ask great questions which clarify her needs and reveal her desires. Then decide if you want to accept her as a client. If so, focus on the benefits and outcomes as you discuss the various packages you offer.

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