Ep 149 Career: You're underpriced because you're under confident.

0:00So it's interesting. Not too long ago, I came across this really interesting survey. It was a survey of about 1 ,300 freelance designers and creatives. An interesting part to me was that in this survey, they told the truth to the survey that they won't tell their clients. That whenever they actually have to price something, whenever they need to put a value on what they do, only 12 % of them actually feel confident in pricing their work. Half of them are often afraid to ask for more. And this is something I've touched on in the past of knowing your value of how do you price it? Where do you draw the line?

0:42Where do you do those sort of things? And once again, we're back here because what we're talking about, it's not a design problem. It's not a pricing problem. It's a business problem. And so today, that's what I want to dig into. I want to take a look at this survey. I want to talk about what should go into how do you actually price and build a business as a freelancer. as an agency owner, and also just, again, sort of share some of the things that I've learned as I've gone through this. Because I think this is a conversation we all need to have that in what has been the gig economy for a while and things like that, these aren't nice-to-haves anymore.

1:17And if only 12 % of us actually feel like we have any grip on pricing our business, the rest of the results that are in there aren't going to be much of a big surprise. So welcome to episode 149 of the Crazy One Podcast. As always, I'm your host, Stephen Gates. This is the show where we talk about creativity, leadership, design, and everything that matters to creative people. Now, as always, always appreciate it. Subscribe to the show. See whenever you get new episodes when they come out. I've been trying desperately to do them more often. I'll be honest in confessing that I've definitely been derailed over the last couple weeks.

1:53For those of you who follow me on LinkedIn, you might have seen this. I think due to a series of events, I made the heartbreaking, frustrating, blindingly angry decision to leave ADP list as doing my free mentoring that I did there every week. You can go to LinkedIn and find out why behind all that. I've now transitioned on to a new platform called Hop, where I'm again doing free mentoring every week. but after seven years of helping advise and be on that platform every week and do that coming to that decision doing those things wasn't easy I'm not going to sit here and pretend like it was just business as usual it had an effect on a lot of things and I think that the show was probably the one that took the biggest one on the chin but here we are back here again working on this and so the the thing that I came across was that you know fast company is one of my usual sort of reads that I'll peruse through.

2:47And back in the end of July, they put out an interesting kind of article study, that sort of thing. And it was called the Design Pricing Transparency Project. And I think that for me, right, like this was one of the first real transparency studies that I've seen that got freelance, like got freelancer data, and they've done it at this sort of scale. And look, I know lately I've been doing a lot of more AI focused episodes on sort of like 138 through 146. This isn't going to be another one of those. Because I think as I went through this report, I think that this report proves a really big problem that continues to persist in the industry.

3:28And it's this crisis that I think most creatives have a hard time describing, have a hard time admitting, have a hard time admitting that they're actually in. Now, look, this is something I struggle with all the time. Whenever it comes to pricing and running the business and putting a value on what I do and drawing the line and holding clients accountable, look, I feel the doubt. Every quote, every negotiation, every time I candidly want to tell a client to just go take a flying leap because I'm so sick of all the ones that hire experts and then do everything in their power not to listen to them.

4:08But this is always the question, right? And I think for a lot of people, this is, it's more a question of like, what do I charge? Whenever I guess for me, this is more a question of like, what are you worth? This isn't a beginner problem. It's not a freelance problem. Like it's a creative problem. It's a business problem. And I think because to me, the thing that I'll find is that for most creatives, the thing that we seem to be the quickest at devaluing is our time where it's kind of like, oh, unless there's a hard cost of I need to do a photo shoot, I need to do something where I need to pay something, buy a piece of equipment, do something like that.

4:46We seem to be so willing to give away and devalue our time. Maybe I've done this long enough. Maybe I've done it too long. Maybe I've become too hardened or bitter or something. But for me, there is nothing that is more valuable than my time and my skill, my perspective, what I bring to the table. I don't want to devalue that because once you start doing that at a time when our value is already under siege, I may have to laugh at the number of conversations I have, if not every week, damn near every day, people are going like, oh, wow, like you, your AI was really good. And it's like, no, that was, that was actual talent.

5:26That was work. That was a sitting down and doing something, not doing an AI that it's funny how quickly everybody's run to just assuming that if it's good, oh, it must have been AI. No, there's still talent in the world. I hate to break it to you. But that's the part that for me, and I think as I started this, as I started doing my own agency or freelancing or whatever it is, and I think this is the twist in the data, is that the rates designers charge and what companies pay, are willing to pay, actually aren't misaligned. This isn't one of those things where they're kind of saying like, oh, look, you know, I should charge$150,$175 an hour, whatever it is.

6:05And companies are like, oh, I want to pay like$20. Whenever you look at the data, they're actually saying, look, the companies will pay if they see the value, if they see what that is. And to me that I think that's the biggest part that we keep coming back to over and over again on the show is that the gap that we're talking about here isn't in numbers. It's a gap in confidence. It's a gap in knowing your value, of actually believing your value, of standing up for it whenever it matters, a pushing back of doing those sort of things. Right. Again, I think to the numbers I cited at the top of the show, only 12 percent of people are very confident in pricing their work and half of people are afraid to actually ask for more.

6:44Right. And I think that the hard part is in the parts. This is where the surveys fall off is why. And I think that this is the challenge. And I think as you look at this, there really isn't much information shared about this. So I think everybody just sort of starts guessing alone. And you look, I talked about this back in episode 147, we're sort of like, right, like busy and effective aren't the same thing that you're measuring and valuing the wrong thing that you think the problem is your rate. Whenever I think the problem is your understanding or your value and your certainty, because I think, right, like what's the difference between somebody that charges$1 ,000 for a flyer and somebody that charges$50 ,000 for a communication system, right?

7:33Like a series of flyers, of templates of those sort of things, right? Like what's the difference? That big range, it's not random, it's not chaos, it's not luck, it's specialization. And I think for the people that are charging the$1 ,000 on that end, I look at that and think, one, they're selling their execution. They don't understand what their value is. They haven't picked a tier. They aren't doing systems thinking. They're doing executional thinking. And I think that's where a lot of the value has shifted. And again, this is something I've talked about in the past, that as we talked about working on design systems, as we talked about design thinking, as we talked about a lot of these things, it is the ability to do systems thinking.

8:15To say this is not just a one-off, this is part of a bigger system. This is going to provide value. This is going to have an ongoing value to your business where people can pick it up or be able to do those sort of things. And that's often the difference is that the individual execution gets paid$1 ,000 while the system gets paid$50 ,000. And this is often the hard part because I think there's a lot of clients that just want the execution. There's a lot of times where you have to push back against them and argue with them and get them to understand what that value is because they want to make it simple and cheap and do those sort of things.

8:52And look, I'm not blind to the fact that for a lot of them, there is real business pressure. There is real budget pressure. But at the end of the day, I also know what my time is worth. And as soon as I start giving that away, then it's a chase to the bottom. And I think that this is why for so many people, you need to actually develop a rate card. You have to stop pricing out of fear and you actually have to price from a system, a system you can share, a system that is transparent, a system you can defend, a system you can set what the point is for why it costs what it costs. And again, like, cause to me, that is just, you know, the continuation of, of this conversation around what do we do?

9:35What are we worth? What's it worth? Because look, I think that what a rate card actually requires is knowing what is your actual annual target income, right? If this was a full-time job that you were doing for a company, what would they pay you? What is a reasonable amount? Not some crazy, like, look, we're not buying a boat or a Ferrari, but again, like, what is the reasonable place where you could expect to earn that? You need to also then have the conversation on what is your billing capacity? Meaning, are you willing to work seven days a week, five days a week, three days a week? Is it eight hours a day, 10 hours a day, whatever it needs to be?

10:12What is your tier and your level of seniority, right? What's the minimum that you are willing to do to be able to say, look, under this amount, under this amount of time, under what this is, this is not worth my time. This is not going to be successful. Because I think that's the other thing that I find is so many people set themselves up for failure before they even begin. They agree to budgets, to timelines, to things like that, where you know going into it that what you're going to do is not possible. And the answer often internally in your head is, well, it's better than nothing. Well, but I think that this is the problem, right?

10:46Is that most freelancers, most people like this, they don't do the math. They just simply react and they jump from project to project without a business, without a baseline. Now, I've gone over this in the past, but let's do a refresher. If you do not know what your hourly rate is, the simplest way to calculate it is, again, let's go back to what do you think your target annual income should be. So whatever that number is, let's say for the sake of argument, and here I'll get up my calculator because I am a designer by profession and a writer and accountant by extreme necessity. So let's say that number is$150 ,000 a year.

11:23Now, what we want to do is then divide that by, let's say you're willing to work every week, so there's 52 weeks in a year. That means I want to be making somewhere around$2 ,884.62 per week. So generally, that's about what I need to be able to bring in. So then let's divide that number by 40, 40 hours in a week. That means to make$150 ,000 a year, if I'm going to be able to be booked all the time, my base rate is$72. Now, do not make the mistake of thinking that that is the rate that you need to charge, which is the other massive mistake that I see people making, because that's not the rate that you should be charging.

12:06That is the minimum amount that you need to make. If you want to pay for insurance, if you want to pay for your computer or software to keep the lights on or anything else like that, guess what? You need to then factor that in, which means you take all of those expenses and divide them by 12, or again, divide them by 12, then by four, add that number onto what that is. That is what your base rate is. And that is what you need to price things from so that whenever you go to a client, you are not sticking your finger in the air. You are saying, this is what my hourly rate is to do this. This is how long it is going to take to do this.

12:39That is how I have arrived at this number. And again, if you're doing anything less than that, then you are in that 88 % of people who have very low confidence in pricing what they do. But that is why a rate card is so important. Because at the base value of that, you have got to know what is your work worth. Because if not, then you let the clients dictate it. And that you let them set what the hourly rate is. Now again, you can negotiate it, you can start higher and negotiate your way down. But again, that I think this is the other place where people get things conflated, right? We're not hired hands.

13:19We're not somebody that is just showing up to do executional work. You show up as a thought partner, as a partner to what you do. You bring value and perspective and pushback and experience, right? That your freelance status does not equal production resource status. And I think too often those get conflated. Whenever people see freelancer, they think cheap. They think that's somebody I can push around. They think that that's somebody that, and look, that's why for me, like I would say, even if it's just, just you, you are an agency. You are not a freelancer because again, too often freelancers are the things that start to get into trouble.

13:59And again, as we go back to the report, nearly 40 % of the companies that use AI to start creative projects now. Clients are showing up with AI sketches as a brief. They're starting to be able to do a lot of this sort of stuff. Now, again, it's backfiring a lot of ways. We've talked about it being a yes machine and the plausible noise in episode 142. But again, that work is walking straight into your inbox. And if you are just going to execute an AI sketch, you're not going to continue to get projects, right? Basically what you've done is if that's the way you work with people, you have confirmed that you are just a production resource.

14:34That is how they see you. That is how they treat you. They do not see you as an equal or a thought partner, anybody that's going to contribute to that. Now, and look, I know that I'm in a privileged position that I talk to a lot of those people and anybody who wants me to just be a production resource is not the work I'm interested in doing, right? I am not the one who just shows up as like the hands and whatever that is. And you can say that you worked with me and that those sort of things, right? Like that's, that's not what I'm here for. Again, I am very clear. And to me, that is often the most interesting moment, right?

15:05You people have really strong convictions and really believe in this stuff and they really talk about it. But in the moment when a bill's due, in the moment, whenever like it actually matters, when you have to work with a potential worth a client that won't pay what you work, doesn't align with your values, demeans you, degrades you, whatever that is, are you going to give up your value and do it? Or are you actually going to say, no, look, I know what I'm worth. It's not an easy conversation. I don't know that I have the right answer to it. It's one that I struggle with all the time because look, there are people that I work with that there are days I would, like I said, I would love to tell them to go suck an egg, right?

15:40There are a lot that I deeply love. There's a lot like for some of them, it's just days for other ones. I'm not going to lie. It is my goal to find a client to be able to replace them in our portfolio. Cause again, I got bills to pay and do what those things are. But look, I think that this is where we need to get to sort of what is the honest and almost harder truth. And I think that this is probably the part that stings the most, is that about 70 % of designers will say that AI is hurting the quality of creative work, while only 41 % of hiring managers agree with that. That gap should terrify you more than any pricing stat.

16:19And I've talked about this in the past, is that part of this conversation that we have to acknowledge is that saying, I know my value and I know what quality is, is that you also have to be working with people who understand what quality is, who understand what the difference is, who don't just think that cheap and shipped is the goal. And look, I'm going to say, it's not that I don't think that clients don't care about quality. I think it's that a lot of them can just no longer tell the difference that they do something that again this is the plausible noise it looks good enough I get emails multiple times a week of like hey we did this thing and you can tell it's Claude or ChatGBT or whatever it is and we think it looks pretty good I have to sit there for 20 or 30 minutes going through and explaining to them all the things that is not on brand the colors aren't on brand the types not on brand this isn't how we do it.

17:12Like, you know, look, I know that. And I think this is why for me, this continues to be even more imperative and why I feel like this is a crisis moment, because if you're not showing your thinking, if you are just showing up as an execution partner, you aren't giving them anything that AI can't fake. You aren't pushing, because again, we know that AIs are yes machines. They're good at getting it close. And, you know, look, for a lot of them, they're going to need to ship bad work. They're going to need to let their brands fall apart. They're going to need to recognize that like, oh yeah, quality does actually matter, that fast and bad isn't an improvement in most cases.

17:47But I think that that's going to, we need to go through that process. And for a lot of it is that, yes, there's going to be a lot of bumps in the road and that's going to be a real pain in the ass whenever we get there. But the question is going to be, what sort of shape are you in when we come out the other side of this? And it is about showing our thinking, knowing our worth, knowing what we should be able to charge, right? Like, and again, I think this is, for me, what is that ultimate frustration because we will bitch and whine about why don't we have a seat at the leadership table? Why don't people take us seriously?

18:14Why are we left at the end of the process? And then we don't learn business. We don't actually have anything to say when we're there. We act like an executional resource and then are somehow shocked that that's the way we get treated. And if you are somebody that has made it this far into the episode that is still listening and is this is something you are struggling with, this is something you don't want to admit. If this is one of those things that is going on, there are three things that I want you to do this month or this week or whatever. Like this can't go more than like three or four weeks, but there are three things you've got to do.

18:47I think the first one is you have got to build an actual rate card, a real annual number with real tiers, with real minimums, with a real understanding of what your business is that you can be transparent about, that you can again, you can defend, you can show. You can't just keep quoting big flat numbers and thinking people are going to go okay for what that is, right? I think that that is the first thing is that you actually have to have a real understanding of what your business is and what you are worth, not in an abstract intellectual way, but in real defendable numbers that if somebody pushes you on, you can back up.

19:21The second thing you've got to do is stop fucking apologizing for what that rate is. Say it once, don't flinch, don't over-explain it, don't back it down. You've got to hold the line because look, I have a lot of those clients who candidly drive me insane because they constantly want to play. Let's make a deal, right? That somehow they think that they're the only client and there aren't other people who don't want our time or whatever it is. And look, and I get it, right? They don't want to spend more money than they have to. But like I said, I, my talent is not negotiable. My impact is not negotiable.

19:55I know what I can do for a business. The number is the number. And I will send them quotes that break it down line by line, hour by hour, what it is for me, for my team, what the rate difference is, what that is actually going through all of that. So they can see exactly what it is. And if they don't like the number, then we either need to talk about how we reduce the scope. We do this differently, or like I said, or that this project candidly isn't for us. But that is the number one rule of negotiating, right? Like you need to go watch Chris Voss's masterclass by his book. Don't split the difference.

20:28But again, the ability to actually negotiate. Because that's the thing is there are a lot of other people in this that I know that they do have a rate card. And as soon as the client pushes back, they fold like a cheap chair. And that's the thing. You say it once, you don't flinch, you don't over explain it. Again, you can defend it. You can say where it came from, what it is. But again, I can go through all of our estimates line by line and explain it to people. And the biggest thing that I want you to do is in your next project, in your next meeting, whatever it is, is that you bring an opinion, you bring a point of view, you bring like what it is that you have done and what your process is before you bring a design or a copy deck or a file, right?

21:14Disagree with the brief if it's wrong. You know, if it's a client that has to have it that way, do it that way, but then show them the other way that it should have been done. Offer to A-B test the two of them against each other and see which one will win. But that's the thing is stop leading with your execution. Stop leading with like stop creating portfolios that are just screenshots, right? Like all of this stuff is the telltale part of what our problems are. But again, bring a point of view, bring a thought, actually show up with an opinion, because I'm going to tell you what, that's what clients continue to hire.

21:45That's the stuff that they will actually pay good money for. That's the thing that they are looking for is somebody that actually shows up and has a point of view. Now, again, not all of them may love it. Not all of them are going to want it right away. With a bunch of them, you have to earn it. You've got to push back on it. You have to continue to earn it all the time. You don't get to do it once and go, cool, they think I'm smart. Right? The old joke, yesterday's home run doesn't win tomorrow's game. You have to keep doing it. But I think that's the thing. Like, look, you can go to Fast Company and you can go through the whole report.

22:15Like, I don't need to sit here and read it to you. It's called the design, it's called the design pricing transparency project. But the report just didn't tell us what freelancers charge. For me, whenever I look at it, it told us where we're stuck. And like I said, it's not where I think most of us think that it is in the confidence of us knowing our value of knowing what this is. This continues to be like the thing that I want to harp on. Because look, there's a lot of other easier answers out there. There's a lot of other people that look, if you take my course or give me money or do whatever it is that I'm going to tell you sort of how to be able to do all this.

22:53And at the end of it, if you don't have the confidence, if you can't do these things, like, yeah, you're going to have some new buzzwords, but you're still going to have the same old problems. And I think that's the part of it is that these people to me are almost preying on these insecurities. And like I said, it's just whenever I look at studies like this, you can see that the numbers are real. And I think that's the part of all this is that I know that whenever you were in this place, the pull is to appeal to everyone, to take on every project, to get every dollar. I feel it all the time, right?

23:32Like I'm going through a moment with a client right now that I'll be honest, I got very little sleep last night because there's a big part of me that really wants to fire them. But at this point, it probably isn't the brightest idea to do. So I need to take a longer term view of what this is. But again, it is the ability to weigh this stuff out, to be able to understand what the value is, to be able to say that, look, you know, yes, the easier answer is to tell them to go fly off a cliff. But what I need to do is to work with them to go back to restate the value to understand what it is to not just be executional to a lot not let them diminish us, to be able to continue to hold the line on this stuff.

24:08And look, I've got to admit, like there are days and especially have been weeks lately where I'm just exhausted of the amount that I have to do this. But for me, this is the cost, right? This is the cost of doing what we do to get the opportunities to do the good work to push this sort of stuff. But again, for us, we have got to realize that we have to do the hard things. We have to figure out the business stuff. We have to understand our worth because, again, this is the universal truth. Should everybody see it? Yes. Should they understand the value of it and see the impact of it? Yes. Should you show up and be able to show them great results and great work and rises and everything and then they will come back and reward you?

24:49Should that happen? Yes. Does any of that happen? Hell no. And that's our fight to fight. And look, I think for a lot of people, this is often where the rubber meets the road on if they do want to do their own agency, if they do want to go freelance. because they just, they can't take the swings. They don't want to have the arguments. They don't want to have the fights. It wears them out. They would rather go work for somebody because it's just easier. You don't have to do all this. But to me, then the upside isn't there. Like that possibility isn't there because that's the thing at the end of the day is that it is that balance of finding the right opportunity.