Do you want to earn more, work less and be a more fulfilled freelancer?

No? Then carry on billing hourly 😀

No offence. I know there are plenty of web designers and developers out there who use hourly billing and make a decent living.

But I firmly believe that switching to value-based pricing is the better move.

I’ll start with some common truths about hourly billing.

4 Ways Hourly Billing Is Hurting Your Business:

1) It caps your income

The number of hours you can physically work in a year puts a concrete ceiling on your earning potential. To significantly increase your income, you’re forced to significantly raise your rates. Good luck convincing clients to pay double for the same output.

2) It incentivises inefficiency

The faster you work, the less you earn. You’re actively discouraged from getting better at what you do, investing in helpful tools to make your work easier, or getting more innovative and creative to boost your productivity. You can see how that’s bad for you and the client.

3) It puts strain on client relationships

If a project isn’t planned correcly, things can really turn bad if you realize you’re losing money and then tell the client it’s going to cost 30% more. Would you give repeat work or referrals to a contractor who upped the cost two-thirds through the project?

4) It wastes time and effort on admin

You weren’t hired as an admin clerk to track hours, chase invoices, and deal with payment disputes, but you can literally spend days of billable time doing this when you’re charging hourly. Instead of being free to focus on your creative work, it can feel like you’re being micro-managed by your clients and the clock.

On the other hand…

Value-Based Pricing Helps Grow Your Business By:

✅ Removing the income ceiling since your income is tied to results rather than hours

✅Rewarding efficiency, innovation and creativity

✅ Giving clients transparent pricing and avoiding surprises

✅Freeing up more of your time and mental space to focus on the parts of the work you enjoy.

The key thing to realize is this:

Ultimately, clients don’t care how much you make per hour. (Just like you don’t care how many tiles your contractor will need to redo your kitchen).

They only care about results.

Value-based pricing shifts the focus to what truly matters to clients.

So, you’re probably thinking this all sounds fancy. But how do I actually put it into practice?

Here’s a short summary…

The Value-Based Pricing Method

Find out the potential value of the project to the client (increase in their sales) over a year.

Base your price on this potential return.

Example #1 – Existing Business Website:

A business sells agricultural drones via their website. They ask you to redo their website focused around getting more sales.

Aside from other basic questions, your 2 main questions should be:

1. How many sales do you currently make each month?

2. What is the average sales value of a drone?

They answer with:

10 sales per month

$8,500 each

Which means they’re making $85,000 per month.

You look at their current site and see where they are losing sales, then work on a low estimate of how much sales could increase by once you’ve made a conversion-focused website.

Let’s say you’re confident it would at least be 2 extra sales per month.

This would mean the business could make an additional $16,000 per month = almost $200,000 in one year.

You put these figures in your proposal, stating why you feel this is a low and realistic estimate, then give your website cost based on the potential annual return.

For this example, your price could be $10,000 - $15,000.

Would you, as the business owner, be willing to pay around 5% of what you could potentially make after one year?

Of course.

Don’t forget: your proposal needs to help the business see this as an investment and not a cost. And you need to explain why you’re the right person for the project.

By breaking it down like thist, you instantly stand out from the crowd of other freelancers who say things like:

I estimate that this project will take about 120 hours X my hourly rate of $45 = $5.4k.

The bottom line is that value-based pricing is a win for you and for the client.

Of course, this model is simple in theory, but in practice you might stuff up in some areas at first.

That’s OK… don’t have a narrow mindset.

Learn from your mistakes, see where you can improve, and each year you’ll get better at estimates, handling objections, how you pitch your services, and more.

Remember you’re running a marathon, not a sprint.

Final thoughts:

Stop selling hours. Start selling results and see your business grow.

That’s it for this week.

Cheers!