Setting Your Prices So That You Get Paid: A Guide

Why is it so hard to raise our prices—even when we want to, even when we know we should?!

So many entrepreneurs have told me that same thing. We take one look at the rates we’ve set, even when we’re making no profit or even when we’re barely paying ourselves, and yet…we panic.

Usually, it’s because someone else is charging less than you are, and that feels threatening and frightening (even if you know the product or experience you offer is better.) You’re worried that customers and clients will begin price-shopping and heading across town to your competitor. 

Or maybe you have inherent guilt about raising your prices or having people pay you for MORE time, MORE deliverables, etc. You think, “Maybe I should be giving this extra away for free or at least at a discount.” 

You want to please everyone, and setting prices inherently makes that impossible. So we’re forced into uncomfortable situations. 

But the truth is: you feel uncomfortable charging those prices because somewhere – deep down inside – you don’t believe you have any right to ask for it. 

Feeling that way is not your fault. You’ve developed these fears and insecurities as a result of your experiences and the messages we receive from our culture. (We could spend all day diving into that.)

Instead, let’s talk about how to change your mindset around money so that you can finally start charging what you’re worth. 

1. Dig down to the roots of your current money mindset.

Before you can start charging higher rates without the fear, anxiety, and discomfort, you first have to identify why you feel this way.

Do any of these sound like your thoughts about money? 

• Artists and creatives just never make much money. 

• Rich people are bad people.

• There’s not enough money to go around.

• Money doesn’t grow on trees.

The mindset we hold around money is often developed early in life, and it’s established based on what we were taught, what we saw, and what we experienced.  

Growing up, my family struggled financially. We often didn't have enough. To put it mildly, things were lean.

I remember waiting for my mom to come back with the box of food she would get after standing in line for hours and hours at churches and food banks. At the grocery store, sometimes, she wouldn't be able to pay for all the groceries in the cart. She'd try writing bad checks, but then I'd confess that she was giving the wrong information and ruin the whole thing for us. 

As a child, I felt both mortified for myself and a little sad for her. 

Any stress or fear we feel in childhood usually takes a long time to go away. Sometimes, it never leaves. But that isn’t all bad. The remnants of that stress and fear have inspired me to work hard. 

The good news is: If you can change your money mindset, you can change your money situation. 

2. Open your mind up to new financial possibilities. 

There was this study where they found that 97% of millionaires surveyed had actually believed that becoming a millionaire was a possibility for them before becoming a millionaire. 

Those results are interesting because they suggest that the attainment of wealth may rely more on mindset than it does on family wealth or higher education.

And I feel like that’s good news for all of us. 

Now we can try thinking:

• I deserve to be paid well for the work I do.

• I can make a fortune with my art. 

• The leads and opportunities never stop coming. 

• Money comes to me easily.

or at the very least

• I deserve to earn a living wage. 

Changing your money mindset from one of limiting beliefs and scarcity to one of growth and abundance may be the key to your financial success.

3. Recognize that you damn well deserve to get paid.

Outwardly, you might look like you have it all together. “Look at her, she’s running a business and killing it!” But, inwardly, it can be a very different story.

Perhaps you question your worth, thinking, “Who do I think I am to charge the prices that I charge?” When the kicker is that you’re still not even paying yourself.  

Any scarcity mindset you carry from childhood will still come back to the forefront of your mind from time to time. 

For me, I worry there will never be enough – not enough clients and not enough revenue – even when my business history doesn’t reflect that at all. But at some point, I finally stopped and said, “No. You deserve to be PAID.” 

And the same is true for YOU. 

The amount of work that goes into running a business is no small feat. You do everything full throttle for your clients – you don't need to do it for free.

You need to earn a LIVING wage. You need to earn more than the amount needed to pay the bills you have for your business. You need to be able to plan for retirement, to live and travel now (if that’s your thing.) 

You’re working hard, and you deserve to be paid for it. Period. 

4. Set your prices by following this simple formula.  

Setting the prices and rates and that will help you get paid is much easier to do if you've written out all your costs and average hours of work. 

Best of all, once you're following a logical formula, you don't feel as bad sending out the invoice. You know exactly why your rates are what they are. It’s not just some arbitrary number picked from the air. You know what you have to charge to be profitable, and you know that taking less will hurt you. 

Here’s how to begin:

1. Write out all your fixed expenses.

Fixed expenses are the things you have to pay for every project and the recurring annual costs in your business. Your fixed expenses usually include your supplies, equipment, tools to run your business, insurance, etc.

Tip: If you have to estimate it, it’s probably not fixed, so save that expense for the next step. 

2. Write out your variable expenses.

Variable expenses change based on the number of clients/projects you take on. For example, you may travel for jobs, pay for rentals (like our studio), send packages, or hire assistants. The expense varies because the cost directly correlates to the scope of each project. 

3. Write down how many hours you want to work per year. 

Hold on a minute. Don’t just multiply 40 hrs by 52 weeks. That would mean you are giving yourself NO time off and ZERO leeway for getting sick—and that’s an unrealistic goal. 

Instead, think about how much you’d like to work each week and how many vacations you’ll need to take for travel or holidays. 

Then multiply (a) the number of hours you want to work per week by (b) the number of weeks you plan to work each year to find (x) your ideal working hours per year. 

4. Estimate your project hours per year. 

Multiply the (a) average number of hours you spend on a project by the (b) average number of clients you serve each year to find (x) yearly project hours.

5. Solve for how much you want to make each year (after taxes).

Factor in all your expenses, and add in the profit you need to make. How much money do you need to take home in a year?

6. Determine your hourly rate. 

Using all the information you’ve gathered and this handy dandy calculator, you can now factor in your tax rate and determine your hourly rate. 

Want to charge per project? Simply multiply (a) your new hourly rate by (b) the estimated hours you spend on a project to find (x) your new per-project rate.  

Running a business can feel lonely, but you are not alone. 

We are a North Austin creative studio and community, bringing together small business owners as we learn to ask for help together. 

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