You Charge How Much?!

Back when I was getting my speaking business off the ground, I also made ends meet as a graphic designer. One day I was on the phone with a client, and I made a costly mistake.

Client: Could we try a different font on the site?
Me: Sure! *couple clicks* Refresh the page.
Client: Whoa, that’s amazing! *Does mental math. I’m paying him HOW MUCH, and he’s doing all this with a couple clicks?! That’s crazy! He’s robbing me! I need to make a million changes so I feel like I’m getting my money’s worth.

And the project dragged on for months.

Now, I accept 100% responsibility for my part in that dance! I did a poor job of managing expectations, setting up guidelines early on about acceptable number of revisions, etc. But, I do want to address the idea that “You can do this quickly, therefore you should charge me less for it.”

It’s a common mindset with people; especially people who trade their time for dollars. What they don’t realize yet, is it’s the very fact that it happens quickly that makes it so valuable!

You wouldn’t get on a plane and say,

Because you’re getting me to New York in a couple hours, I should pay less than if I took this trip in a Greyhound!

That’s absurd! The world is simple: you either spend time, or money. You can’t save both.

Nowadays I help my clients understand whether it’s for a performance, a consulting session, or training engagement, I charge a premium because of the fact that I can help them get the results they want FAST.

I might be on stage for only an hour, but I can connect with that audience in a way that nobody else can. People who see me speak literally can’t forget what they’ve seen me do, and that’s valuable to a company! I weave their message into my demonstrations and now the audience is fundamentally connected on an emotional level that nobody else in the world can help them feel, like I can.

Picasso’s Lesson

“It took me four years to paint like Raphael, but a lifetime to paint like a child.”

Think about a doctor performing surgery. He’s not getting paid thousands of dollars for the hour he’s in the operating room. He’s getting paid for the decade he spent learning how to get you healthy in an hour. That’s what Picasso was talking about. He could make a couple pen strokes and it’s worth $50,000 because he’s the person who dedicated his life to being PICASSO.

Wages vs. Value

What we’re really talking about is the difference between getting paid for doing something versus receiving fair compensation for the results you can provide for your client.

In your business, you absolutely have to focus on how valuable the results you help your clients get, and help them get there quickly that will help you charge what you’re worth. If, instead, you focus on what you’re doing (the actions you’re going to take), then you’re talking about trading time for dollars, and people want to get as many hours out of you as they can for your wages.

Marginal vs Full Cost

Gregory (Scotland Yard detective): “Is there any other point to which you would wish to draw my attention?”
Holmes: “To the curious incident of the dog in the night-time.”
Gregory: “The dog did nothing in the night-time.”
Holmes: That was the curious incident.”

That’s an excerpt from Sir Conan Arthur Doyle’s “Silver Blaze,” a Sherlock Holmes novel, and it highlights a particularly curious hiccup in how our brains work: we’re exceptionally bad at noticing what’s not there.

In the story, detectives search everywhere for clues. They dust for fingerprints, look for fibers, etc. They’re looking for the presence of evidence.

Sherlock is the genius because he identifies the absence of a clue; thereby making it the most important clue of all. The dog’s silence means it recognized whoever was committing the crime.

What this costs you

Every time you’re making a choice, you’re evaluating what it is going to cost. There’s the marginal (or face value) cost, and full cost.

Here’s how it plays out, and trips you up.

Consider you’re starting a business, but you don’t have a big budget so you get free business cards from VistaPrint.

At face value it’s very low cost. There are no dollars involved.

You hand them out to prospective clients who you’re perfectly suited to work with. They have a huge budget, want the service you’re providing, and you guys would do amazing work together.

They look at your card and see the watermark on the back.

Get your free business cards from VistaPrint, too!

They’re considering putting you in charge of a massive project involving a lot of money, and you’re showing them you’re not willing to invest in the essentials.

They never offer you the job.

You won’t know why. The phone just won’t ring.

The dog’s not barking.

You’re paying the full price of your decision, but you’ll never see it.

Every choice you make is paid for in full whether you know it or not.

Every time you choose to do it the cheap way instead of the right way, you wind up paying more.

“If you need a machine and don’t buy it, then you will ultimately find that you have paid for it and don’t have it”. ~Henry Ford

Value

When I talk with potential clients who would rather do it on their own, I see that they’re signing up to pay twice for results they’re not going to get. They think, “Boy, that’s expensive! I bet I could do it myself!” Cut to 3 years later and they’ve missed out on all the payoff from investing in themselves compounded by 3 years. (You’re not just farther behind: You’re farther behind multiplied by how far you could have gotten with what you learned in those 3 years.)

Penny smart and a pound foolish.

Every time you consider investing in yourself, it’s difficult to identify the costs you’re not going to see. Trust the people who have been where you are & can tell you. They’re desperately trying to save you from making a costly mistake trying to avoid a marginal expense.

You can’t afford not to.

Make Better Decisions

“I am convinced that life is 10% what happens to me and 90% how I react to it.” Charles R. Swindoll

Whether it’s figuring out whether to take the job offer or not, who to date, where to go to school, or what to have for dinner, every day is full of choices.

The quality of our lives are the results of the choices that we make. We actively design our life with every decision we make.

No pressure, right?

We often have very little information on what the outcome of our choice will be, and we can have a difficult time weighing the pros & cons of a particular choice we’re faced with. That’s why it can be easy to get “paralysis by analysis.”

That’s why I want to share 3 psychological elements that influence the choices that you make, and once you understand them it will help you make better choices more quickly.

“One should make his decisions within the space of seven breaths.” Lord Takandobu

Element 1: Loss Aversion

As much as we’d like to believe that we’re noble creatures driven by logic & reason, we’re actually weak apes who are terrified of having things taken away from us.

When we think about the future, we’re much more concerned with what we could lose instead of being excited about what we could gain. Our motivations are more about what we can keep than what we can get.

This is why it’s easy to get stuck in negative mental loops about how everything is going wrong in our lives instead of appreciating all the amazing things that are actually going right.

When you consider a decision, ask yourself if you’re deciding to keep what you’ve always had, or if you’re opening yourself up to getting what you’ve always wanted.

Don’t (only) think about what could go wrong. Think about what could (also) go right.

Element 2: Intrinsic & Relative Value

Everything is relative.

“When you sit with a nice girl for two hours you think it’s only a minute, but when you sit on a hot stove for a minute you think it’s two hours.” Einstein

It’s the same 2 hours in both cases, but your perception of its value is different. The same goes for making choices.

Think about the proportional value of what you’re going to win or lose when making a choice. If you stand to lose $5 and you’re a millionaire, it’s a (relatively) low risk decision. If you only have $20 to your name, though, suddenly $5 is a significant amount of money.

The intrinsic value is the same (near worthless paper), but the relative value is much different.

If the stakes of a choice seem high right now, take the course of action that will increase your relative value the most.

Element 3: Anchor Points

Anchoring is a cognitive bias that deals with our tendency to rely too heavily on the first piece of information we have when making a decision.

Think about buying a car. What’s the first thing the sales person does? Takes you to look at the most expensive car on the lot.

He knows you’re looking for something sensible for your family of 5. He knows they’ll never all fit into that shiny sports car he’s showing you. He also knows that when you see the price tag of that sports car, your mind uses that as the set point for how much cars cost.

It’s now the anchor point.

Now, when you look at the minivan, its price appears much more reasonable, relative to the sports car (see element 2).

That technique is a powerful 1, 2 punch to your psychology, and it works.

This is why a sales person will help you buy your suit first, and then the little stuff later: your mind uses the price of the suit as the anchor point for making price-based decisions later (relative to that anchor point).

So when you’re evaluating a decision, and how it will play out, understand that your emotional connection is directly linked to the first piece of information you consider. Use this to your advantage by anchoring yourself to a positive outcome, and go from there.

Takeaways

Decision making is a messy system with a lot of fuzzy math involved. Our conscious brain plays a much smaller role than we’d like to admit, so take the time to really understand how your non-conscious mind influences your choices.

Take control of your choices, and you’ve taken control of your life.