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January 24, 2011

Rookie mistake: undercharging

Almost exactly one magical year ago, I started a freelance writing business. I work with companies in San Diego, writing their web copy, marketing materials, Twitter and Facebook pages, and figuring out creative ways for them to reach their customers. The good news is

1) I'm loving it. It's challenging in ways I would not have expected and the people I'm working with are fantastic.

2) It's going well!! My goal is to be in a place where I need to hire my first employee within the next three months.

3) It's really forcing me to sharpen my negotiation skills, because every project, client and task is different. The more time I spend on this job, the more I know exactly how much time A or B will take me and what service Y or Z is worth to clients. I've started standardizing and creating packages, but there's still a lot of variation.

Well. A few months back, someone asked me to submit a proposal for something I'd never done before. I had nooooooo idea what to charge. I looked online, and prices there started at $1500 and hit $5000 for that project.

And you know what I did? I charged $1500. Figured, "I've never done this before, so it's fair to the client if I keep things on the lower side. That way, I get experience and the next time I do this kind of project I'll be justified in charging more."

Here's where things went awry. Very awry.

1) First, the client negotiated! Asked for a discount because of his budget. I caved. I thought, "You're a small business, my heart goes out to you. I totally get what it's like to try to maximize every dollar. In fact, I respect you for asking!" Foolish entrepreneur.

2) Second, the project took longer than I expected. The actual writing time wasn't out of control, but all those emails. And meetings. And research. And phone calls. And delays. If I add everything up, I think my hourly rate drops by a factor of three.

You can imagine that this was not my favorite project or client -- and it's a pity. The work was interesting and our personalities meshed. But I shot the whole thing in the foot by being so damn cheap.


1) I was wrong to think of myself as a newbie. Sure, I've never written that kind of document before, but I've written hundreds of thousands of words, meaningful words, that got the job done. If someone asks me to make a souffle or fix a jet engine, I will charge bottom dollar or better yet, refer him to someone better. But for any kind of writing task, in the English language for the U.S. market, I've realized that I should charge more than bottom dollar. A lot more.

2) I was wrong to simply look online. Those quoted rates were tragically unidimensional. Even if the services were described in detail, I have no clue: who are that consultant's clients? How professional is she? Does he cut corners? Is that work actually farmed out to India? etc. A better move would have been to call a handful of seasoned pros in San Diego or similar markets, explain who I am and what I do, and ask for advice on pricing that service.

3) From now on, I've factored in a project management fee. People who don't want to pay it must have never worked with a contractor before or are more trouble than they're worth.

4) I will never EVER offer a dirt cheap quote again. Ewww.

5) On the flipside, as a buyer, I'm reminded that sometimes it doesn't make sense to negotiate. If you're getting a great deal (aka good quality for low price) from the start, it means that service provider is being generous. By trying to push the fee even lower, you risk souring things and... getting your money's worth.

Next post: a negotiation that went great.

A question to all who set fees for projects: Has this ever happened to you?? And, curious: do you factor in a negotiation buffer, in case people try to shave off 10 percent or so?

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