Why “Charge What You’re Worth” is Horrible Advice (And What to do Instead)

A lot of advice for pricing your products or services goes like this:

• “You should charge premium rates!”
• “You should charge what you’re worth!”
• “You should find your happy price!”

And I agree – I even wrote a blog post on what it takes to charge $1,000/hour.

But there’s a twist.

When you’re trying to land your first few paying clients, charging premium rates can hurt your business.

That’s where most new freelancers, coaches and consultants get it wrong.

They read a blog post or take an online course about charging premium rates, love the idea of it (who doesn’t love the idea of making more money with the same amount of work?), and they’re all excited about charging hundreds of dollars per hours to become the next Scrooge McDuck:

And some people make it.

Every once in a while, you’ll hear this massive success story from someone who started charging $500/h and built a 6-figure business practically overnight.

But most people don’t.

The harsh reality looks more like this:

You define a product or a service you want to offer.

You find a few potential clients.

You talk to them about how you can help them.

You create one or more packages for them.

You think about pricing, and read articles online / ask other entrepreneurs about it.

Eventually, you settle on a rate you’re happy with.

You present your rate to the potential clients.

And then you either don’t hear back from them, hear them say that “they’ll think about it”, or just get a clear “this is out of my budget right now” back.

This sucks.

It sucks because this whole process usually doesn’t take a few minutes. Finding your potential clients, talking to them about what they want, preparing different packages, coming up with pricing… Can potentially take days, weeks, or even months in some cases.

And when you get to the point where you share your price and they reject it, it hurts.

You’ve spent all this time and effort landing a new client, and it was all for nothing.

You need to start again at square one.

I’ve seen this happen over and over again with my clients and friends.

Consultants, photographers, designers… You name it.

They set out to get their first few clients (or try to launch a new service), get all hyped up, then belly flop into the harsh reality and are left with no clients at all.

Here’s the problem that most experts don’t talk to you about:

You have to EARN the right to charge premium rates.

In my post about charging $1,000/hour, I talk about different ways of raising your rates, like:

• Growing your knowledge, expertise, and results you can deliver to your clients
• Improving the quality of your products or service you deliver to your clients
• Building your reputation as a credible expert, and becoming fully booked

And when you’re starting out, you just haven’t done all the hard work to deserve charging premium rates yet.

If you don’t have a ton of client success stories and happy clients referring you to other people they know, you have no business raising your rates.

I’ll even take this a step further.

If you’re not fully booked yet, you shouldn’t be charging premium rates.

Here’s what I mean.

Let’s think of 2 aspiring designers – Jack and Tom, who both want to start a freelance business.

They both want to charge $100/h.

They both manage to find 5 clients that are interested in working with them.

They both spend plenty of time understanding their customer’s needs and come up with proposals for them.

But when they think about pricing, they take different approaches.

Jack uses the “charge what you’re worth” approach and charges $100/h.

Tom uses the “undercharge and over deliver” approach and charges $50/h.

Here’s what happens next:

Jack has high hopes and is excited to get his first paying clients, but ends up being rejected and hearing crickets.

He’s “too expensive” for the clients, and ends up with 0 clients, 0 success stories, 0 referrals, and a whole lot of time wasted.

He’s back to square one.

Tom, on the other hand, manages to land 3 of the 5 clients at $50/h. The projects aren’t huge, and they bring in around $250 per client, which is less than he ideally wanted, but it’s a start.

The flip side is that he now has his first few paying clients, and his hobby is turning into a real business.

He does amazing work for the 3 clients and receives raving testimonials from them that he can put on his website.

But that’s not all. One of the clients is so happy with the work that he decides to hire him at a bigger project for $1,000, and even agrees to pay him a higher hourly rate.

Another client doesn’t have more work for Tom but has a friend who desperately needs a designer, so he recommends Tom to them. Tom lands another project for $600 and this time charges $60/h with no pushback.

After 3 months, Jack is still in the exact same place. He’s putting in a ton of work trying to land new clients, but always gets rejected. His business doesn’t move anywhere and he’s discouraged. He doesn’t understand what he’s doing wrong and why people won’t just pay him “what he’s worth”.

On the other hand, Tom’s business is slowly but steadily growing. He has now landed over $2,500 in client work, has more work coming his way from his existing clients, as well as more clients asking to work with him because of the amazing work he has done for their friends.

As you can probably guess, Tom’s business is likely to continue growing, while Jack’s business will likely crash and burn – all because of a simple pricing mistake.

While this is a “made up” story, this exact story happens all the time, and it likely happened to you or someone you know in the past.

So many people try to charge premium rates before they already have a strong client base and end up empty-handed.

To avoid this from happening, you can follow these two simple pricing rules:

• Always “undercharge and over deliver” with your first few clients
• Don’t raise your rates until you’re fully booked

The second rule should be pretty straightforward – but let’s look at the first rule in more detail.

The “undercharge and over deliver” pricing strategy

If you’ve read the above story, you already have a vague idea of how this strategy works.

In essence, it’s pretty simple:

Whenever you’re launching a new product or a service (or want to get your first paying customers for a business idea), you should intentionally charge less than your “ideal” rate and focus on over-delivering for your customers.

Just how much less than your “ideal” rate should you charge?

50% is a good benchmark to start with.

If you believe your services are worth $100/h, you can charge $50/h. If you’re developing an online course that is worth $500, you can sell a “BETA” version of it for $250.

The idea here is to make the price a true “no-brainer” for your potential clients, and to make them feel like working with you was the best investment they could have ever made.

Instead of trying to make a quick buck, you’re focusing on building the foundation for a long-term, sustainable business.

As a result, you’ll be able to:

• Spend more time getting paid than looking for new clients
• Collect amazing case studies and testimonials that you’ll be able to use to further grow your business
• Get more work from existing, happy clients
• Get referrals to other potential clients
• Gradually raise your rates to “what you’re worth” AND see clients happily pay them

Then, once you land the client, you do all in your power to “over deliver” and blow them away with your product or service.

This might mean:

• Proactively giving your clients new ideas for what you can help them with / proactively building those ideas out for them
• Sending project updates regularly, rather than waiting for your clients to check in with you
• Getting feedback on how well you’re doing, and what you could be doing better

And as a result, you’ll end up with happy clients that will love recommending you to their friends.

Now to make this even more real, I want to share a few personal examples of how I used this exact strategy in my business:

Example #1 – How I built my first ever coaching business

When I started my first ever online business (productivity coaching for online poker players), I charged my first client around $50/h for a 1-hour call with me, even though other poker coaches were charging as much as $400/h.

Then, as I got more and more paying clients, I gradually raised my rates to $75/h, $100/h, $125/h, $150/h, and eventually $250/h.

Throughout this process, kept improving my services and thought about how I could serve my clients better. I thought about how I could help them with not just productivity systems, but also things like learning, nutrition and sleep.

I started writing written call summaries for them after our coaching calls with them, with clearly defined action steps. I added weekly check-ins in-between our coaching sessions to see how they were progressing. And so on and so on.

The more I improved my coaching services, the more I could raise my rates.

Example #2 – How I turned Ultimate Guides into a 6-figure online business

When I got my first 1on1 coaching client for Ultimate Guide coaching, I only charged them $500 to help them create their Ultimate Guide. This was when I was already running a successful online business, and the hourly rate for this project was horrible.

But getting the first clients at a lower rate helped me build up the confidence, create the first few success stories, and charge higher and higher rates (I later charged up to $5,000 for 1-on-1 consulting for one Ultimate Guide, which was more than I even expected I could charge).

If I tried to charge $5,000 or $3,000 right off the bat, chances are I’d get rejected by my first few clients, and think that this is a “bad business idea” that I’d never fully follow through with. I probably would have never created a 6-figure out of Ultimate Guides.

Another example is Ultimate Guide System, my premium online course on growing your online business with Ultimate Guides.

I designed this course as a 1-year program with tens of hours of live coaching calls (as well as additional hands-on coaching support through an online community), and it’s the most hands-on online program I’ve ever seen.

When I first launched the program, I charged $997 for it, and some of my customers even complained about it being “too cheap”.

I knew that and I agreed with it – but I wanted to keep the price relatively low because I wanted to get as many paying customers (and success stories) as possible for my business.

Later on (also due to the amazing success stories and testimonials that the program got), I was able to increase the price to $1497 and later on $1997, which I believe is much closer to what the program is actually worth.

If I tried to sell the program at $1997 right off the bat, I’m not sure if it would sell as well and get me so many success stories – which would make the program a lot harder to sell in the future.

Example #3 – How I launched a 5-figure coaching program

Last November I sold a group business coaching program for the first time.

It was a 6-month program that included weekly 90-minute coaching calls in a group of 5-6 entrepreneurs, which is unlike anything else you can find out there.

Especially if you consider the opening price, which was $2,500.

Now don’t get me wrong – $2,500 isn’t cheap by any means – but to get this level and frequency of coaching from someone who runs a 6-figure online business, you’d usually need to pay way more.

When I launched the program, a lot of the clients told me that the program was way too cheap, which I knew and I was aware of. I intentionally undercharged with the intention to massively over deliver.

My clients ended up absolutely loving the program, and many of them said it’s the best business investment they’ve ever made – which is why I decided to launch it again 2 months later.

As I did that, I sold out all the coaching slots within 3 days, at a higher price point. What’s interesting here is that a lot of the new students that joined the program were referrals from old students that were super happy with the program.

Now I have two groups of amazing entrepreneurs in the program that I know will become amazing case studies that will help me grow this program (and other parts of my business) in the future.

If I charged something like $5k for this program right off the bat, I might have still sold a few slots, but I don’t think the experiences (or results) would be as good as in this case, so I know this was the right decision to make.

How to apply the “undercharge and over deliver” pricing strategy to your business

Ok, we’ve looked at the common pricing mistakes that most new entrepreneurs make, we’ve looked at a strategy that you can use to get much better results with your business, as well as a few examples of how I implemented this strategy in my business.

Now let’s talk about how you can apply this strategy to your business as well.

It’s really simple:

• When you’re trying to get your first few paying clients for a new product or a service, think about your ideal price point / rate and decrease it by 50%.
• Focus on undercharging and over delivering so you can create amazing case studies, testimonials, success stories and referrals for your business.
• Only raise your rates once you’re fully booked or when multiple people are telling you that your rates are WAY too cheap.

And once that happens, read this article on how to raise your rates to as much as $1,000/h.

That’s it!

What about you? Have you tried charging premium rates in the past (or undercharging and over delivering)? If yes, what happened?

-Primoz