The Value Equation Every Freelancer Should Know

All right, folks. Today we're going to be talking about how you can value your services. Not just pricing, but value itself. And it's a little more complicated than just your overhead or what it's costing you monetarily. So, let's get into it. I'm going to propose the value equation. I came up with this when I was talking to a buddy of mine trying to help him figure out how to price his own services and how to figure out what we actually want out of our clients and what they want out of us.

Let's talk about the value equation first from the client perspective and then from the vendor perspective which is us. When we're doing work for clients, it's always an exchange of goods for services. So, they're giving us money and we are doing a job for them. Really, it's an idea that there are services that the client doesn't want to do or doesn't know how to do themselves and we provide that service.

We fill in the gap and we get paid to close that gap and that's where the money is made. So, let's look at it from the client side first. I'm going to use value to mean an assignment of worth. So, how much is this worth to you or to me or etc. And for a client, it's quite value on one side. And it's really a simple equation. It's results divided by cost. What that means is that the results that you provide have to outweigh the cost or the downside of the relationship.

And let's examine the results and the cost in a little bit more detail because they're not as simple as they seem on the surface. So results, I don't just mean physical results or visible results. I mean all the intangible things that you provide to the client. Let's think of some intangible things. So things like, I feel at ease when I talk to this person. I know that I'm in good hands. That's a super intangible result and it can't really be quantified.

It can be proven or attested to with social proof, but it's really relationship based and it's an individual client to an individual vendor and it's very hard to say, "Look at my certification." You know, like I said before, it's hard to quantify. It's an intangible part of the relationship. In addition to the physical tangible results that you bring, hopefully delivering the project or building the website or designing the brand, you are also bringing along intangible results and emotional results and things that are behind the scenes a little bit more.

One of those examples might be that the client feels really comfortable with working with you and they can trust you that you are doing a good job with their brand or their website or whatever it might be that they can trust you and they have confidence that you're going to take good care of them. That's pretty intangible and it's extremely valuable. It also really adds to the results side of the equation because it's pretty hard to put into words, but it's very clear beyond just looking on the page like, "Oh, this is really high quality work." I also had a really great relationship with the person as they were building that work.

So, that's a huge result that's really important. One of the other intangible results could be internally, politically, they might bring in an agency to do the work that the internal team couldn't do. And there's some political movement there, but it creates a result that is overall beneficial for the company. That's important to consider. When we go onto the cost side of the equation, we're not just talking about the monetary the check that gets written.

We're talking a little bit more about friction and headache and things that you bring on your side of the table to make it harder to work with you. And especially if you have like a personality difference with the client, that can be a problem. Things like making them use your internal project management software can be a big pain. I've seen that quite a bit. Clients don't really like doing that. Sometimes it's beneficial if they're not very organized, but things like that can be hurdles and can be friction to the client.

Those all add to the cost of the relationship in addition to just the physical check that they write. So hopefully you're not charging more than you're worth because as soon as that equation flips and your cost outweighs the result that you provide, that's when you get fired. You got to really think about what kind of result you're bringing and how you're showing up for the client and how to keep the value always more than the cost that you incur on that side of things.

It's not a problem to charge for your services. we should be charging for our services, but really make sure you keep in mind that your value needs to be higher because you bring such a great result that of course they would keep you on. Why would they fire you? We get so much more like a positive result than we ever pay for. The next thing is to consider the flip side of that equation, which is my side.

How do I decide if a client is valuable to me and I want to keep the client? And there's a couple intangible things really the same equation. I'll just swap out the words a little bit. It's return on investment and then it's the headache. It's the same kind of thing. It's a result that the client gives to me versus the cost that I incur when I work with the client. Clients are always costing us time really because that's part of the trade that we sign up for as we do this that we're going to do the work and sometimes that can be a headache.

Not every client is a headache in that sense. But sometimes the work can be a headache or sometimes the work it takes time and it takes effort to do. So whether it's headache or effort, whatever you want to say, there's a negative cost on my end associated with doing that. It's time that I don't get to spend with my family or relaxing or whatever. That's the cost and the headache on my side of the equation.

Return on investment can mean a couple of things. Obviously, there's the financial return. Hopefully, it comes quickly and timely and all those things. And then there may be like a good relationship that you really like that person. You want to keep working with those companies that can be an important piece of the relationship to consider. And then there's other relationships that might come out of that.

So whether it's a good portfolio piece or a good connection to an additional team, those things can be a factor in that equation and they're not as tangible as well. Really, a great relationship can be a really big reason to stick with a client. If you have a great relationship with a client, sometimes it can outweigh the fact that it's not a ton of money. So, like I might do a job for a friend or for a favor that isn't a huge dollar amount, but because I have a relationship with a person, then it doesn't have to be a super high return because there's a return in the friendship or in something like that.

And then the last piece would be other intangibles like connections or portfolio pieces or other promotion. anything that gets you farther towards your goal in a long-term strategic way. That doesn't necessarily have to mean a short-term monetary return. Those are important to consider and it can change depending on your situation. So, those are the things on my side on the top of that equation. Why do I want to do that job?

Mostly, it's because I get paid well to do it. But there are some other factors as well. And then on the headache side of things, hopefully your clients are not causing you headache. Especially if there's like a negative relationship that can really sour the value for me, even if they're paying me well. Sometimes I'll just say, "No, this is not worth it. I'm not okay with how I'm being treated. I'm not sharing values with this person, etc., etc.

And even if it's a good relationship in other areas monetarily, I can do the work well. I just really don't want to work with this person. And that's okay. Better to identify that and then make the decision to end the relationship rather than to always feel anxiety when you're checking your messages from this person and saying, "Are they mad at me? Am I in trouble? Did I do something wrong? Did I do something they don't like?" So, those are the things that I factor into my decision as I'm deciding if this is a valuable relationship to me.

And I don't mean the people themselves, but I mean is this a good relationship between this business and my business? And that's really sort of the main ingredients for how I decide that. Just like the client can fire me if I'm not providing enough value, I can fire them if the headache outweighs the return on investment. So, I hope all of these things have helped you decide how to make your own pricing decisions for your company and how to choose which clients you work with because it's really important to have not only clients that pay you well, but that you enjoy working with and that produce good results for your business.

And if that's not happening, it may be time to re-evaluate those relationships because we don't just sign up for headache after headache after headache. And if you do, hopefully you can change your offering slightly and get into a different line of work because if we don't have our freedom as entrepreneurs, then what else do we have? I encourage you to evaluate your pricing. Evaluate what value you provide to the client.

Always be trying to give them more value than they are paying you for. That's what's going to keep you employed long term is that they always feel like every time I work with this person, every meeting is super valuable. It's always good relationship. even if they make mistakes, you know, and that's really important to a client. Keep that value relationship strong. Keep your return for them high and your cost can be high as well.

But as long as you provide more value than what you cost, you'll always have a job. So keep that in mind. And then as you're evaluating your own client relationships, make sure that they're not causing you more headache than they're worth. And if they are, move on. Try to find new clients or try to fix the relationship. Honestly, sometimes it's better, sometimes it can work if you have a connection with that client to try to change some of those friction points and try to solve some of those headaches.

Just be aware of that and make sure that you're regularly evaluating those things because sometimes it's just not worth it. I hope that helps and thanks for watching.