Aaron Velky is a fellow side hustler (he calls it “side-streaming”) who runs a website for entry-level professionals who aren’t earning enough, guiding them on how to make money from pre-existing skills.
Aaron’s passionate about empowering young professionals to find financial freedom, and coaches them from idea selection to finding clients and setting up business systems.
Visit his site, sign up for his email list, and start Side-Streaming today at www.aaronvelky.com.
And yes, he really was on The Price is Right, which makes him the PERFECT person to discuss pricing here on Side Hustle Nation.
So there I was in my entry-level job earning barely enough to cover car, gas, home, and all the necessary stuff, yet my friends were out 3 nights a week without me.
My income just wasn’t good enough for my lifestyle.
I started coaching youth soccer, pulling from my playing experience (not coaching) from college, and I was getting a side-stream of income.
The biggest obstacle of mine when I started? Pricing.
- How much do I charge?
- I just started, so how much is too much?
- What if others are offering the same thing for cheaper?
I searched high and low for guidance, but my search only led to more questions, not answers. I found little on where to start, how to start, and what was next.
If I could go back, I would get some guidance on this before I started, and that’s what prompted me to write about it.
Today, my side hustles include:
- Prezi presentations
- Graphic art
- Soccer writing
- Business coaching
All in addition to my full time job, which grants me the financial freedom to tackle big goals like opening a non-profit after-school academy in East Baltimore.
If I am decent at the skill, I’ve probably earned from it.
Now, it’s my hope to outfit you with just what you need to get started from scratch.
Enter the Pricing Guide.
Goals of this Guide:
- Give you an above-average understanding of why price and value are different.
- Outfit you with ONE technique to find your side-hustle starting rate.
- Teach you 4 effective techniques to increase the VALUE to your clients.
- Demonstrate a strategy for INCREASING your rate once value is established.
Let’s do it!
Price vs. Value
Which one do you think has more VALUE?
Folger’s Classic Roast coffee: 33.9 oz, $7.76
Starbucks French Roast, 36 oz (3-12oz packs) $35.95
Milestar Tire $ 66.53
Michelin Tire $149.99
This graph is an example of the effect of value on price. As the chart moves from left to right, value moves by units of 1, and price starts to increase rapidly, sometimes doubling. Our Folger’s coffee is the point furthest left, our Starbucks coffee is furthest right.
In many cases, small additions to value can double your price.
Note that the Starbucks coffee is 3x more than the Folger’s. The same goes for the Michelin over the Milestar.
As you explore brand differences, you may notice there are varying levels of this price and value battle happening. For example, if I need graphic work done, I have three options:
- Do it myself (which is “free,” aside from my time)
- Hire a freelance designer (anywhere from $5 – $500 per hour)
- Find a graphic design agency to contract all my graphic work ($500-$50,000+ per month)
Interestingly, agencies can charge anywhere from 10x to 1,000x the amount compared to a freelancer. How can they charge THAT much more?
The high pricing from such a company stems from their assertion that the product or service they offer is worth what they charge. Not only does the graphic design agency need to showcase that it can produce earnings at high levels for major companies (since you and I probably won’t use them), but it also needs to keep a high caliber clientele. They need top performing staff, top software, and top everything – but that all adds to their value.
Big companies that charge exorbitant rates have established and consistent value in a specific field or area of interest. The separation between big companies is a repetition of increased value, followed by increased price, allowing them to grow. The more value they are able to provide, the higher their price will climb.
Our goal, as we start to analyze skills that can earn on the side, is to analyze how we can provide value. How can we think like an agency, instead of like a freelancer?
Anyone can collect money for a job, but we want to provide value to clients. That will generate return customers, profitability, and the opportunity to expand.
Now that you understand what value can do to your price, and how the two are related, let’s talk about some of the components of value.
6 Components of Value
Companies like Apple, Gucci, Dyson, Mercedes and Starbucks are masters at these 6 value components, which allows them to command premium prices for what some would argue are commodity products.
These components are often subtle, and have some overlap between them. Take a moment to reflect on how you can apply these marketing mechanisms to your Side Hustle:
Think of walking into an Apple Store versus when you go in a RadioShack.
Reflective Question: What do your clients feel, receive, and talk about when they hire you, that they won’t get somewhere else?
Correlated Resource: Check out Ramit Sethi’s 4 Ways I Started Believing in Myself, and my conversation with Jessica Lawlor on personal branding. First impressions matter, and your first impression online is often your website design.
Certain companies make a ton of different items across categories, while others only make one product, period. That sliding scale of specialization creates inherent value as well. Think Dyson.
Reflective Question: What do I offer that no one else can?
When you’ve got something no one else does, price can go up, whether justified or not. This also happens when you “belong” to the brand or social group it creates.
Reflective Question: How do my clients stand out after my service?
Correlated Resource: Check out 4 Smart Ways to Find Out Exactly What Your Customers Want.
Deliver superior quality than your lower-priced competition. Think BMW and Mercedes. (At least that’s what they want you to think.)
Reflective Question: Am I offering a higher quality service than those in my price range?
What do your 5 closest friends think about the product? Marketing that comes from customers is the best ammo you can have.
Reflective Question: What do my clients say about my service?
Correlated Resource: Check out Rob Cubbon’s proven method for collecting 5-star reviews. Hint: there’s no shortcut to delivering big value.
Every customer touch point falls under this category: your ads, website, emails, social media profiles, etc. Are you presenting yourself in a professional way that justifies your rates?
Reflective Question: How is my world (media, person, materials) representing my service and skills?
Correlated Resource: Ryan Holiday’s A Winner Does…
Remember – Value is determined by your buyers, price is determined by you.
Determining Your Starting Rate in Fifteen Minutes
To price my service, given that I didn’t have much experience yet, I decided to go with an hourly rate. It gave me a way to learn how much time and work my projects would take.
After a few projects, I decided to look up what a “fresh out of school” graphic designer (similar skills sets) might make. I found an average salary of about $39k per year.
Then I found the hourly rate for that salary like this:
Rate = $39,000 / 2,000* = $19.5/hr
*assuming 50 weeks per year (accounting for 2 weeks’ vacation) × 40 hours per week.
PRO TIP: An easier way to do this – chop off the 3 zeros, and divide the yearly salary by 2, or 39 2.
Quickly, I had my starting rate: $20 per hour.
You can use this method to price your service quickly based on your experience. Don’t be afraid to find job postings above entry level and compare, even if you’re just starting.
Find a few postings for that type of job, and look for industry averages. If you can’t find something that fits, look for services that you consider competition and see what they charge. Compare the services they offer before you take their rate into consideration.
Remember, when you’re starting out you’re not looking to maximize your rate just yet; you’re looking to find an acceptable hourly rate and you should come in lower than someone with experience and reputation.
My first clients started within my personal network. They all started something like this:
- “Hey, can you train my kid?”
- “Hey, will you help me design a logo?”
- “Yo, can you help me with a presentation?”
But from there, word spread when I delivered an above-average service. Soon friends of friends asked for work, and before I knew it, I was getting work brought to me without marketing, just based on recommendations and my previous work.
Nick’s Notes: Word of mouth is so cliche, but I’ve seen it firsthand in both my painting business and in Bryn and Brooke’s photo business. Personal recommendations are huge, and they happen naturally when you do great work.
As I grew, I had a hard time raising my price though.
What if I wasn’t worth it?
What if all my clients left?
The one thing I DID know: I couldn’t ask for higher rates until my value justified it.
After a lot of failures and mistakes, I tackled the things that have worked best for me to establish that value. You’ll notice I tagged them for the categories from the top.
When it comes earning higher pricing, it all starts with the experience your clients have with you, so your clients’ EXPERIENCE is an aspect of every single technique below!
Focus on what your client is experiencing and give them the opportunity to notice it by pointing it out subtly throughout our process.
1. Sharing the Vision: (Experience, Presentation, Exclusivity)
Your clients may not be creative types, or they may think differently than you entirely. Remember that they are hiring you for your knowledge and expertise, so choose your words and share your insight using language that they can understand.
Making things simple for them is a win for you.
They don’t need to know you’re a genius at it, they just need to understand it. Swallow the ego of it all, invite them to your ideas, and welcome theirs.
When you can engage a client with your idea, you can share the progress, the development, and the journey and it no longer feels exclusively like an exchange for cash. In my experience, this has built a lot of excitement as I go.
I always share design shots from about a week earlier, so that I’m ahead every time if they have questions.
How to Build Excitement: I snap a screenshot of my work every so often, if it’s digital, and share one of the shots from a few days ago with my client. In an email it looks like this: “Just wanted to share where I am so far. No response needed, much more to come!”
[Disclaimer: This can spark conversations regarding content and making changes. It can also hurt you if you’re on a time deadline and behind schedule. Be mindful of dates, and if necessary, share the up-to-the-minute glimpse at your work or project. Don’t be afraid to receive feedback from this. Feedback during the process actually SAVES you wasted time.]
2. Offer a Guarantee (Experience, Quality, Recommendations)
It’s true that you can’t refund everyone, but I learned my lesson early – don’t take money if they are unhappy.
For large projects, I’ll take a non-refundable deposit, but if someone is unhappy, or doesn’t feel there is value in my work, especially after 3 or so attempts to address their concerns at no cost, then I amicably part ways without funds. It hurts, but it’s best to let it go.
99% of the time, issues are correctable and the lost time is negligible, so I always offer them a quality guarantee, stating something like, “It’s assumed that my first draft might not be perfect, so 3 corrections come with no cost. If there are further revisions needed, we will discuss remediation terms separately.”
This alone has helped with recommendations AND saying it upfront helps manage expectations – expectations that drive my “client experience.”
Say it Proud: Mention your terms in your meeting, and be prepared to include that same detail in writing, whether that be a contract, agreement, or email. This is 1000x more professional than dealing with issues with, “Well I don’t usually….” and making it up as you go.
3. Create Synergy: (Experience, Quality)
I always struggle with this one. The relationship we want to develop is of someone in service to their client.
Yes – we are sharing the vision, but their needs always come before ours, and as a freelancer (or anyone with more knowledge on the subject), we tend to be pretty cocky/confident about our idea, our work, and our creation.
While it’s difficult to continually put their thoughts, opinions and ideas first, it is critical to the relationship that you build.
I keep a notation of key points the client makes in a design request, or any subsequent conversations, and constantly refer back to them so I stay on track.
Ask Two Really Simple Questions:
- What are your expectations for a finalized product?
- Is there anything small you can think of that would make my product really special?
4. “You’ve Been Lapped” Approach: (Experience, Specialization, Presentation)
What do you think would happen if you got to start a 100-meter dash 10 seconds before everyone else?
Commonly, meetings start as emails or phone calls. Inside of those phone calls are tons of cues that you can note about a client’s objectives and vision, but if they don’t give you anything, ask questions to get information that can get you started on the project.
Take an hour to develop a sketch, a sample, or a draft — PREPARE. 99% of freelancers show up empty handed, and this will set you apart and show that you’re already thinking for your client. You’ll be a whole lap ahead of any competition.
Lap The Competition: When you show up for your meeting, be prepared to share a draft or some kind of concept. It should not be digital, it needs to be something they can be handed and touch.
Once you ask your questions about the project, get their vision, share your thoughts and your prepared work. The key is to do this after you’ve discussed their vision. “This is all preliminary, but I thought of a few things before our meeting and though I’d share my vision as of yesterday.”
You’ve just set yourself apart.
[Disclaimer: Virtual meetings are more and more common. A twist to this approach is to email them DURING your meeting with the file. Before you mention that you’ve emailed them, discuss the content you’ve developed, then invite them to take a look at it with you. It’s important to engage them before they open the file when you do not have the luxury of handing them something tangible.]
Raising Your Hourly Rate Once You’ve Established Value
Whenever I completed work with a client, I would ask a few questions about my service.
Among the standard, “Are you happy?” “Would you be comfortable recommending me to your friends?” and those types of questions, I would always ask, “Was my product worth more than what you paid for it?”
I not only had to listen, but I also had to watch for body cues and detect honesty. It took some practice, but the times I failed at recognizing their response taught me more than the times I got it right.
Eventually, I got to the point where I knew my value was up, and my price was below my established value. Time for a raise – strategically!
1. To clients I already had, I managed expectations and sent this email:
Starting in _______, (month, certain # of days, etc.) my hourly rate will change from x to y. The increase is a result of some new technology I’ll be incorporating into my services and the increase of my bottom line costs. I want to continue to drive the relationship between us, so any work booked before that date will be billed at the current going rate.
I look forward to working together,
Don’t surprise people with an increase, it’s rude and shows you don’t value them as a return client. This can drive near-term sales (for those looking to continue the relationship and save a bit now), it can lead to a discussion about having a discount for them (which I’ve done for clients that book a LOT), and it can ultimately cost you a client.
That’s part of it. No construction happens without demolition first.
My first increase was from $20 to $60 per hour after establishing good value with great work. The loss of a client billing 3 hours per month was negligible – I could make the same amount back in just an hour with a new client. Working smarter, not harder.
2. To new clients, marketing material, website
On my promos, emails and in all my quotes, (I didn’t have a website for the longest time) I always made mention of the rate when it was asked, and when it wasn’t. Managing expectations is important for new clients, and by sharing my increase plan and when it would take effect, it gave them the option to move forward once they understood the rules.
No surprises! Using similar language, I would insert this when someone asked for a quote:
Starting in _______, (month, certain # of days, etc.) my hourly rate will change from x to y. Work booked will be billed according to the schedule above. If your project is booked before the increase, and work has already started, billing rates will remain consistent throughout project completion unless discussed separately.
Your Turn: The Cost of Experience
I learned about most of this pricing guide’s components through trial and error; probably more error than trial, too! I see the value in sharing what I’ve learned and what I would do looking backwards. Hindsight is 20/20, and sharing my hindsight to better others is win-win.
A little bit of guidance on pricing, value, how to pick a rate, and how to raise your rate, may just be what you need to START earning on the side, or to start earning MORE on the side.
Why do athletes pay for one-on-one coaching, or for a team coach?
Often we avoid action until we have all the right information. I know I did.
This is why entrepreneurs have mentors (coaches). Guidance is valuable.
Topics like pricing, clients, advertising, when to give your stuff away for free, and others can be real challenges whether you’re just starting or you’re experienced.
What topic would you like guidance on RIGHT NOW? (Be specific)
Want more from Aaron? Be sure to check out his site focused on Side-Streaming today.