- Kimberly Lucht is a business coach who helps women make their first six figures doing what they love.
- She says that the biggest mistake a female entrepreneur can make is giving away their services for free or for a discount.
- Don't discount your rates — instead, figure out how to offer more value. People want the best option, not the cheapest one.
- Remember that your time is your most valuable asset.
- Visit Business Insider's homepage for more stories.
"Do you really think someone would pay me that much?"
That's what one of my coaching clients said to me as we discussed a rate for her coaching services. She was new to the game and when I asked her what price felt good to her, she told me "$2,000 a month," to which I said, "Then that's what your rate is."
Easy right? Supposedly, except for one small detail holding her back: She didn't feel like she had enough experience.
I see this so often as a business coach for women. A client will land on a price that feels good to them — and then find various reasons not to charge that amount. They might even say that they'd rather give their services away for free or at a massive discount — especially in the beginning — which may be the biggest mistake any female entrepreneur could make.
Even so, I've seen countless well-meaning female business experts advising other women to do work for free or at a lower cost in the beginning to help them start and grow their business — but I never see men telling other men the same thing. This might be a factor that contributes to the results in this recent study that found self-employed men earning 28% more than self-employed women.
Twenty percent of self-employed women think they have to charge lower rates than their male counterparts to get and keep clients. Why? Partly because we've been socially conditioned to underestimate ourselves, while men tend to overestimate themselves.
But here's the truth: When someone begins with free or discounted offerings, it usually increases the chances that their business will fail.
Let's say you're just starting out. If you give your time, products, and services away for free or at a deducted rate, there most likely won't be enough capital to run your business in the long-term, provided that you want to make at least six figures a year.
Even though this strategy may attract clients at first, it tends to lead to what I call profit margin inversion, when the costs eat up 70% of your revenue, leaving only 30% for profit. It's recommended that entrepreneurs have at least 70% profit to keep their business healthy.
And if you charge lower amounts, you attract a different clientele than the people who would pay you a higher rate. When you eventually want to increase your rates, your current clients might either drop off or convince you to keep it the same for them.
So, if you want to make at least six figures a year and have a stable salary with your business, be sure to follow these tips so you don't end up scraping for cash in your first year:
Don't offer free or deducted rates, even if you're just starting out
Think of a service you want to offer and a price for it that feels good to you. Whatever you land on first is probably the right answer — not half that rate, no matter how much experience you think you need.
You can offer some things for free; just nothing long-term. I recommend offering e-books, trial products, webinars, or one-time workshops. These tester services can be great for market research, and can lead to offering long-term products or services that your audience might be interested in.
So how do you choose what's free and what's not? Here's my rule of thumb: Anything that eats up more than a couple hours of your time should be charged for.
Avoid offering a lower price than the industry standard
New business owners tend to think that if they charge lower than their competition, people will want to hire them more. I've found the opposite to be true. People don't want the cheapest option — they want the best option. And if the value that you provide is clear, they'll pay whatever price you decide on.
Instead of reducing your rates, find a way to offer more value to your audience. Focus on being the slam dunk in your field instead of the mega steal.
By charging a full rate for your services, you'll be able to do so much more for your clients because you won't be overstretched. You'll have more than enough time, money, and energy because you charge what you're worth.
Remember that there will always be people that say no and there will always be people that say yes, no matter the price tag
Another big fear that my clients have is that no one will hire them at their desired rate. But here's what I know to be true: There will always be people that say no, even if the investment is $25. There will also always be people who say yes, even if the investment is $100,000.
So don't get stuck in the undercharging trap of early entrepreneurship just because you're new. Your time is your most valuable asset, so charge accordingly.
Kimberly Lucht is a business coach who helps women make their first six figures doing what they love. She's been featured in Money, Well + Good, The Select 7, Create & Cultivate, and more. Click here to get her free Six-Figure Business Roadmap.
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