Your Pricing - Charging What You're Worth

The most common mistake I see displaced workers make is underpricing their services. They feel uncertain about their new business, they worry about being rejected, and they think a lower price makes it easier for clients to say yes. In reality, underpricing does the opposite — it can make clients less confident in you and more likely to nickel-and-dime every deliverable.

Here is a truth that might surprise you: most buyers do not want the cheapest option. They want the option that gives them confidence the problem will actually be solved. When you price too low, you send a signal — intentionally or not — that you are either not very good, not very experienced, or not very confident in what you deliver.

The Psychology of Pricing

Before we get into the formulas and frameworks, let us talk about what is really going on when you are afraid to charge what you are worth. Because this is almost never about math. It is about psychology.

When you have just been laid off, your confidence takes a hit. You might be thinking:

• "Who am I to charge $5,000 a month? I was just let go."
• "I should start low and prove myself first."
• "What if they laugh at my price?"
• "I would rather get a client at a low rate than no client at all."

Every single one of those thoughts is understandable. And every single one will cost you money if you act on them.

Here is the reframe: you were not laid off because you were bad at your job. You were laid off because of a business decision — restructuring, budget cuts, a strategic pivot, a merger. The skills you built over years of professional work did not evaporate the day you got your severance package. Those skills are worth exactly what they were worth the day before you were let go. Maybe more, because now you are bringing them to companies that desperately need outside help and cannot afford (or do not want) to hire a full-time person.

Why Underpricing Hurts You

Underpricing is not just about leaving money on the table. It creates a cascade of problems:

1. Clients do not value what they do not pay for. A client paying you $1,000/month will treat your recommendations as suggestions. A client paying you $5,000/month will treat them as strategic priorities. The same advice, delivered with the same quality, gets implemented at dramatically different rates depending on what the client is paying.

2. You attract the wrong clients. Low prices attract price-sensitive buyers who will question every invoice, resist every scope change, and demand more for less. Higher prices attract clients who value expertise, respect your time, and are focused on outcomes rather than costs.

3. You burn out faster. If you need to serve 10 clients at $1,000/month to make a living, you will be working 80-hour weeks and hating your business within 6 months. If you serve 3 clients at $5,000/month, you work reasonable hours and have energy to deliver excellent work.

4. You cannot raise prices easily. Once you set a low anchor, clients expect that to be your rate forever. Raising from $1,000 to $5,000 feels like a 400% increase. But if you had started at $4,000, a raise to $5,000 is just a modest annual adjustment.

The Core Principle: Value-Based Pricing

Your price should be based on the value you create, not on how many hours you work.

This is the single most important concept in this chapter. Read it again. Your price should be based on the value you create, not on how many hours you work.

Hourly billing is a trap. It punishes you for being efficient. If you can solve a problem in 5 hours that someone else would take 20 hours to solve, hourly billing pays you less for being better. That is backwards.

Value-based pricing flips this: you charge based on what the outcome is worth to the client, regardless of how many hours it takes you. If you save a client $100,000 in annual costs and you charge them $15,000 for the engagement, everyone wins. The client gets a 6.7x return on their investment, and you get paid fairly for your expertise.

The Value-Based Pricing Formula

For any service you offer, estimate the value it creates for your client:

1. What problem does this solve?
2. What does that problem cost the client right now? (in dollars, time, or risk)
3. What percentage of that value is fair to charge?

A general rule of thumb: charge 10-20% of the value you create. This gives the client a 5-10x return on their investment, which is compelling enough to make the purchase an easy decision.

Worked Examples

Example 1: Compliance Consulting
- Problem: A company is at risk of a compliance penalty
- Cost of problem: Potential fine of $50,000 + 40 hours of management time + reputational risk
- Your solution: Monthly compliance monitoring and support
- Value of your solution: $50,000+ in fine avoidance
- Fair charge: 10-15% of value = $5,000-$7,500 per month

You can charge $5,000/month and still be creating 10x the value you are charging for. That is not overcharging. That is sound pricing.

Example 2: Sales Process Consulting
- Problem: A company is closing deals at 15% when industry average is 25%
- Current revenue: $2M/year from 200 deals at $10K average
- If you improve close rate to 25%: that is 133 additional closed deals = $1.33M in additional revenue
- Fair charge: 10% of incremental value = $133K/year or about $11K/month

When you frame it this way, $11K/month is a bargain for the client. They are paying $132K to generate $1.33M. Any rational business owner takes that deal.

Example 3: Operational Efficiency Consulting
- Problem: A team of 20 people is spending 30% of their time on manual processes that could be streamlined
- Cost: 20 people x 2,000 hours/year x 30% = 12,000 hours wasted at $50/hour loaded cost = $600K/year in waste
- Your solution: Process audit and optimization over 4 months
- If you recover even half of that waste: $300K in annual savings
- Fair charge: 10% of annual savings = $30K for the engagement, or $7,500/month for 4 months

Simple Pricing Tiers to Start With

While value-based pricing is the ideal, you also need practical starting points for conversations. Here are three tiers that work well for most expertise-based consulting:

• Entry-level: $1,000-$2,000/month — For smaller companies or narrower scope. Use this to get your first clients quickly while building proof. Be cautious about staying here too long.
• Standard: $3,000-$5,000/month — The sweet spot for most expertise-based consulting. Target mid-size companies with real budgets. This is where you should aim from the start.
• Premium: $7,000-$15,000/month — For enterprise clients, specialized niches, or high-stakes outcomes. You will earn this tier as you build case studies and a reputation.

Starting Point: Begin at the Standard tier ($3,000-$5,000/month). Getting your first 2-3 clients might require flexibility. But resist the urge to start at Entry-level — it sets a low anchor for your perceived value.

How to Structure Your Pricing

There are several ways to package your pricing. Each sends a different signal and works for different situations:

Monthly retainer: Client pays a fixed amount per month for ongoing access to your expertise. This is the most common model for consulting and the most predictable for your cash flow.

Project-based pricing: Client pays a fixed amount for a defined project with clear deliverables and timeline. This works well when the scope is clear and the outcome is measurable.

Day rate: Client pays for a full day of your time. Common for workshops, strategy sessions, or intensive working sessions. Typical range: $1,500-$5,000 per day.

Retainer + performance bonus: Base monthly fee plus a bonus tied to specific outcomes. This aligns your incentives with the client and can significantly increase your earnings on successful engagements.

Practical Tips on Pricing Conversations

The pricing conversation is the moment most new consultants dread. Here is how to handle it with confidence:

Before the Conversation

• Know your number before you walk in. Do not make up a price on the spot. Decide in advance what you will charge and practice saying it out loud until it feels natural.
• Prepare your value justification. Be ready to explain the ROI. "This engagement will cost $5,000/month, and based on what we have discussed, it should save you $60,000-$80,000 in the first year."
• Have a walk-away number. Know the minimum you will accept. If the client cannot meet that number, you are better off spending your time finding a client who can.

During the Conversation

• State your price clearly and then stop talking. "The investment for this engagement is $4,500 per month." Then wait. Do not fill the silence. Do not immediately start justifying or offering discounts. Let them respond.
• Always let the client react to a number before you lower it. Many clients will say yes at a price you expected them to reject. You will never know if you start negotiating against yourself.
• If someone says "that is too expensive," ask "What would make it work?" rather than immediately dropping your price. Sometimes it is about payment terms, not the total. They might want to pay quarterly instead of monthly. They might want a smaller initial scope.
• Never apologize for your price. "I know it is a lot, but..." is a credibility killer. If you believe your service is worth the price, act like it.

After the Conversation

• Send a simple proposal within 24 hours. While the conversation is fresh, send a one-page summary of what you discussed: the problem, your approach, the expected outcomes, the timeline, and the price.
• Follow up once. If you do not hear back within a week, send one follow-up. If you still do not hear back, move on. Chasing clients signals desperation.
• Raise your prices every 6-12 months or after landing a major case study. Demand reflects the market view of your value. If you are closing most of the deals you propose, your prices are probably too low.

Handling Common Pricing Objections

"Can you do it for less?"
Response: "I understand budget is a consideration. Rather than reducing the price, let us talk about adjusting the scope. What would a smaller version of this engagement look like that still moves the needle for you?"

"Our budget is only $X."
Response: "I appreciate you sharing that. Let me think about what I can realistically deliver at that level and come back to you with a proposal that works within your budget." (Then design a smaller-scope engagement that still delivers value.)

"We want to try a small project first."
Response: "That makes perfect sense. Let us do a 4-week diagnostic at [$X]. By the end, you will have a clear picture of the opportunity, and we can decide together whether a longer engagement makes sense."

"What is your hourly rate?"
Response: "I price based on the outcome of the engagement rather than by the hour. For a project like this, the investment is [$X/month] over [Y months]. That includes all of my time, recommendations, and support to get you to [specific outcome]."

Your Exercise: Set Your Prices

Complete this pricing worksheet for your initial offering:

1. Define the problem you solve in one sentence
2. Estimate the annual cost of the problem to your typical client
3. Calculate 10-15% of that value — this is your annual engagement fee
4. Divide by the number of months in your typical engagement — this is your monthly rate
5. Sanity check: Does this fall in the $3,000-$5,000/month range? If much lower, you may be underestimating the value. If much higher, make sure you can articulate why.
6. Set your walk-away minimum — the lowest you will go before declining
7. Practice saying your price out loud 10 times. Seriously. It needs to feel natural.

When to Discount (And When Not To)

There are legitimate reasons to offer a discount, and there are traps. Here is the difference:

Acceptable discounts:
- First client discount (10-15%) in exchange for a detailed testimonial and case study
- Annual payment discount (10%) for paying the full engagement upfront
- Referral pricing for clients who bring you additional business

Traps to avoid:
- Discounting because you feel bad about your price
- Discounting because the client said "it is too expensive" (negotiate scope instead)
- Discounting because you are desperate for any revenue (this sets a permanent anchor)
- "Friends and family" pricing that becomes your market rate

Key Takeaways:

• Price based on the value you create for clients, not on the hours you work
• The Value-Based Pricing Formula: estimate the cost of the problem, then charge 10-15% of the value you deliver
• Underpricing hurts you in multiple ways: clients value you less, you attract the wrong buyers, and you burn out faster
• Start at the Standard tier ($3,000-$5,000/month) — resist the urge to undercharge
• State your price clearly and stop talking — let clients react before you negotiate
• Let clients react to your price before lowering it — many will say yes at a price you expected them to reject
• Raise your prices every 6-12 months as you build proof and demand