Money: Making More And Creating Value For All (For Freelancers And The Self-Employed)


I had dinner with a good friend the other day—a highly respected professional who is outstanding in her field. Over chips and salsa, she confided that after 25 years of living hand to mouth she finally enlisted the help of a business coach who helped her to organize a budget and review her cash flow. ‘As it turns out,’ she exclaimed in between bites, ‘I’ve been subsidizing my clients to the tune of about $23K a year, for years!’

Now, her clients do not need subsidizing. Most of them earn six to seven digit salaries, and besides, she is not running a non-profit (not deliberately anyway). And in addition, Maureen* is one of the finest mentors in her field that I know. When she works with someone for 60 minutes, they receive not time, but the culmination of all of her wisdom, experience and creativity that took her 35 years to accumulate.


Maureen’s situation is sadly common, especially among professional women who are freelancers or self-employed, and especially among those who are in the caring, mentoring or teaching field. The more I listen to people, the more I see some very uninformed relationships to money that undermine success. Not only that, it contributes to lack of abundance for everyone, not just the professionals, but their clients as well.

Let me confess here that I am only just learning better financial management, through the road of some very hard knocks. But I believe that my glacially slow awakening puts me in the unique position of being very close to appreciating how easy it is to remain inside unsustainable practices without realizing it.

First of all, we are not taught about money as kids. We are not taught about it at school, unless in college we take economics, which bypasses just every-day finance, or we entered business school. But most of us who are now self-employed professionals did not go to business school. Most of us were guided by our passions and created a business to serve that passion. And girls, more than boys, were denied conversations about finance even more, unless we had very enlightened parents.

Second of all, money is harder to talk about than sex. Our human relationship to money can be rational and logical, and it can also be complex and rife with symbolism and meaning, bringing up issues of guilt, hostility, terror, burden, resentment, abandonment, sadness and immense denial. It confronts our sense of self and others, and provokes confrontations internally and externally around power and worth. As author Kate Levinson writes, money is not only legal tender, it is emotional currency. Phew! No wonder we treat it like a hot potato!

We were not warned about how money represents value and self-worth and that the two often effect one another. If I don’t value what I do, then I won’t charge what I am worth, and people won’t value my work or my time, and I’ll consider that a justification of my lack of value. Round it goes.

In our ignorance we also tend to stay very in the ‘now’ about our finances. As long as ‘enough’ is coming in, we don’t feel the need to know anything else. It usually takes some kind of crisis to push us into financial wisdom—a health issue, an accident, a sudden economic downturn—something that pulls the rug out from underneath our usual stability.

And lastly, if we love what we do, and we are really passionate about our craft or service, then some of us unconsciously charge less than what we are worth, because we feel we gain so much just by doing it! We feel grateful nearly every day and it can be that some small part of us decides that we need to ‘pay back’ for the privilege of loving our work.

It can take years of doing business as usual before one begins to experience the consequences of poor money management. It can look like the balance sheet is working short term. But it isn’t. And often we don’t discover it until too late. Like water over stone, poor management gradually erodes sustainability.

So, I thought I would share some things I’ve recently learned, and with them wondered, ‘Why didn’t anyone tell me this sooner?’

How to charge for your services
If you are self-employed, a freelancer, and charge by the hour, it’s vital you know how to charge for your services. Once I learned this little formula, I understood why I too was subsidizing my clients, and why profit margins were eluding me. Here’s how it goes (with much thanks to one of my mentors, Gordon Hawthorne):

These are the things you want to include in your ‘hourly’ price:

• The coaching/professional fee on an hourly, session and daily basis—this is your actual hands-on time. Say you are $75 an hour.
• The facility fee – ie, a percentage of your actual operating costs, to be able to turn on the lights, walk into an office, studio or other work space, turn on your computer, answer the phone, etc. To do this, come up with a monthly ‘operational’ cost for yourself and then divide it by the number of hours you work each week. You’ll see how much it costs you per hour to operate. That cost should be passed on to your client.
• A prep fee is usually a percentage of your original hourly. It accounts for any kind of thought process or planning you may have done in preparation for your ‘hands on’ time. You might think of something between 10-20%, which is the time you spend preparing for the session or call and processing and documenting your work after.  In other words a 1.5hr session may actually be a 2hr session of your time in reality.
• Administrative fee is 5-9% of your hourly and goes to cover the cost of the back office such as a working student, your accountant, bookkeeper, assistant etc.
• Credit card fee – if clients pay with credit card / am ex is expensive – those percentages cost you and should be handed off to the client.
• The other aspect you need to build in is a ‘content’ fee.  This is where you begin to recoup the sweat equity and thought leadership you have put into developing and designing the core program or your ‘core’ work you’ve put into being able to do what you do (ie, all of your training, professional development, experience).  Again, just add a percentage, say 5 – 10 % of your hourly.

So, with this example, your hands-on hourly is $75.00. Lets say you work 30 hours a week and your operational costs are $1000 a week, divided by 30 is $33.00. I add that to my original hourly and get $108.00. Add prep fee of 10% is $7.50, now we are at $115.00, an administrative fee of 5% is $3.75, bringing us up to $118.75 and a content fee is another 5% ($3.75) totaling $122.50. $122.50 is my REAL hourly rate.

Don’t freak at the new number and tell yourself that you’ll now lower your original hands on hourly! Take a look at the market out there for others who are providing similar services. You can nudge your numbers a little to fit the market, but remember it’s not a problem that you are among the top 25% price-wise. People appreciate that kind of confidence, especially if the service you are providing is valuable. I’ve even had clients tell me that if I were in the lower 25%, they would not have even considered me.

For example, in Maureen’s case, one hour with her is the equivalent to two hours with another instructor, because of the depth of her knowledge. Find a way to position your service as different and know that taking care of yourself financially allows for the quality of your work to continue to improve and sustain.

I’m not suggesting you gouge your customers. Make sure you are worth your price by providing excellent customer service, being ahead of deadlines, and staying on the front lines of your craft. I’ve never had a legitimate client complain about my prices, because they know I’m worth it.

I am also not saying to offer services outside of your scope of excellence. Know yourself, know your work, and know where you have your gifts. This takes time, and honesty. But with women in particular, I find they more likely to underestimate their gifts, rather than over-estimate.

A freelance friend of mine once confided that he discovered he unconsciously kept his prices low so that ‘he wouldn’t be accountable for poor quality’. He wanted the right to be late, to not be present, to provide less-than-quality work—just in case. As it turns out, it was just a self-esteem issue for him. His work was in fact visionary, professional and consistent. But he was scared he couldn’t measure up, and keeping his prices low would hopefully prevent him from crashing against the rocks of others’ expectations.

The problem was that this set up a vicious cycle. His prices prevented him from being seen, and his clients were lazy and unaccountable, which kept his work at a certain mediocre level. When he turned it around, everyone stepped up to the plate and in turn everyone received more.

I hear many professional colleagues tell me that the reason they keep their prices low is ‘because they do not want to wear the expectations of others’. But over time I’ve decided that as a professional, I want those expectations! Those expectations put me on the edge of my game. And while it can be scary to say, ‘I can do this, and do it excellently’, it is much worse for everyone (you and your clients) to say subconsciously ‘I can’t.’

Boundaries around your time
If you charge by the hour then boundaries around that are important. Late cancellations, no shows, late payment and client tardiness require specific, clear policy. If your time is wasted because of a client’s choices or circumstances and there are no financial consequences, you are subsidizing their time with yours. There are some pretty standard practices out there you can find within client agreements in your field. Look around and steal their words if you like them and create a Letter of Agreement for your clients that clearly outline your policies. Then, stick with them. In spite of people not particularly feeling comfortable with such boundaries, especially if they have to wear the consequences, they feel safer and trust more those who are clear, consistent and not a push-over. They would after all require and expect that you are that way on their behalf as their hired professional.

But charging by the hour is just the tip of the iceberg.

You may soon discover that charging by the hour, over time, creates a financial glass ceiling for yourself. Because it does. The solution? Charge by the project. Mike McDerment, founder of Freshbooks writes, ‘I (used to run) a small design agency. I felt like I was on a treadmill, billing by the hour, and not earning as much as I thought I was worth.’ Read his great blog post about how he moved from an hourly price structure to a ‘value based’ one, billed by the project. I highly suggest you read his great easy-read (and free) book Breaking the Time Barrier here. It’ll take you about an hour to read, max.

Essentially, it works like this: first find out what the client actually needs, rather than starting with what you offer. Then create a proposal for the project based on those needs. When you charge by the project, rather than the hour, you are shifting your emphasis from selling your time, to selling your value to the client, and positioning your service as an investment rather than an expense.

This changes the way people value your work because you are working together to meet their specific needs. You stop seeing yourself as a punch card.

You are not a collection of hours, available for sale. You are a unique culmination of wisdom, creativity and skill. In this way, you no longer compete with other service providers on hourly price. Clients will stop seeing you as a commodity, someone with an hourly rate that they could compare to somebody else’s.

Getting help
If you are self-employed or a freelancer, the best thing you can do to support your success is to find a mentor. I have two! And they help me in very essential ways. Look around for somebody who is successfully working outside the box, whose values you respect, and from whom you really want to learn. Sometimes these angels are generous enough to give of their time because they are in a stage in their lives where they want to start passing on wisdom. Sometimes they are happy to work out some kind of a trade.

Check out your local SCORE (Service Core of Retired Executives), an organization that provides free confidential mentoring.
When you value your work by supporting yourself with wise, sustainable financial practices, you create a virtuous circle that in turn encourages you to offer more value to your clients. You cultivate your knowledge to meet their expectations and needs, you rise up to expectations, and develop your work so that you are worth more. You attract clients that are willing to pay you for the value you deliver. The whole game then changes to a win-win model that perpetuates financial levity and success for both you and your clients.

I imagine a world where we can all be abundant, not just a few of us. Where what we offer our clients serves them to also have a more abundant life, and those they serve receive in kind, and that a new model of value, abundance and doing our best for each other is created.

You can read more of Kelly’s writing at EQUUS, here.

*names have been changed

Categories: Wellbeing

Leave A Reply

Your email address will not be published.