Don't Underprice Yourself

Guest post by Laura Ospina

Don’t Underprice Yourself: Part 1

Every business needs to do it, and if they don’t then it predictably won’t be a business for much longer! It’s the assessment of profit and loss, because if you are a business, you lose money. If you are a successful business, you make more money than you loose, but even then, it requires the foresight in knowing how to find the appropriate resources to rationalize every loss and cover it.

How is this accomplished? A successful business plans not only their profit, but also their loss/expenses. There are a variety of different tools available for a smart calculation of the costs for each project. These tools and a smart business plan mean you can easily calculate and measure and adjust what the fair price of your work is.

As with every game, there are rules that should be followed in order to win. Use the following rules, in addition to your scoping tool and business plan, to make s ure you are fairly compensated for your work, to win at any business venture.

Observation - Don't Underprice Yourself

Rule 1: Fix a proper price/Don’t underprice yourself

Losing money may be the result of not pricing according to the market, or fixing a price without taking into account the resources needed to accomplish the project. We now live in a time where technology makes it possible for us to have actionable data that informs, and we can cater the information a million different ways. This, and the fact that human resources and chargeability are now defined based on knowledge and proficiency, creates an economy where clear deliverables are harder to define and establish. It’s not predictable like selling bread where all that’s needed is the cost of salt and flour to determine the price of your product to make a profit.

Each client is very diverse and so are the needs that they come with. Developing a customized solution for each client and surprise scope creep creates an unstable environment and is often where many of the losses can come from. Take a look at the following ways to prevent scope creep and plan for or prevent loss.

The 3 different types of project scoping, and what to look out for in each category:


  • 1. Per Hour


It is easy to assume that as long as you bill for the time a project takes, you can avoid scope creep. However, it is important to note that not every hour is worth the same! Take for example this situation for an agency dedicated to web solutions that prices their projects hourly at a fixed hourly rate:

Project X

    takes 20 hours to complete, and requires a complex skill set to code and set up on AWS. It involves the agency’s best experts.

Project Y

    also takes 20 hours to complete, but uses a template already created and is already set up on WP. It may only need expertise of a more generic basic understating of web development.
    It is easy, as the lead of the project, to charge only per hour at the agency’s fixed rate, however Project X will use human capital resources that are much more expensive than project Y. Although it may take the same amount of time, the price of these projects shouldn’t be priced the same. They both use different levels of expertise changing the overall cost for the project. This is where it’s needed to fix a price project by project depending on who works on the project. You can avoid losses if human resources are planned out before the project is quoted.


  • 2. Per Task


Now if a business chooses to price by task with the purpose of selling a predefined list of services, this simplifies the project scoping as there is a single model of truth for every project taken on based on the complexity of the task. However, this model only works if there are a limited set of tasks. You can easily lose profit if scoping and planning the project takes many days to calculate, and potentially lose the project/client in the long run. So a simple deliverability/task list is highly recommended with this style of pricing. Another con is that you can ultimately lose a potential client as you forfeit the flexibility for a customized solution. However, you may also serve an industry where customized solutions are not needed. To really get the most out of this pricing model, it really depends on which industry you are in for it to be worth trying out.

Observation - Flat Project Fee


  • 3. Flat Project Fee


Another popular way of pricing is to consider a flat fee. This can lead to additional revenue if done right with plenty of “padding”. However even with a padded quote, it can still lead to underpricing. Whether a task takes longer to complete than you originally planned, or a client extends requirements once the project is in progress, this model often sets you up for losses in one way or another—IF you don’t know how to handle scope creep or don’t manage your time wisely. If you set clear client expectation from the start on what is defined in your project quote and scope, and clearly establish that additional tasks will be billed hourly, then this is easily a great and simple way to scope.

Pro Tip:

There are cases where I throw this idea out the window. I find, sometimes, it’s wiser to take on a client and deal with the potential scope creep if it leads to a good client relationship (with consistent hourly or retained services afterwards) and a great piece for your portfolio. It also may be worth-while if you have freedom to grow in your skill set. This is only recommended if there is proven value provided elsewhere that makes up for any financial loss. This also doesn’t mean do work for free! Never underprice yourself or the market for what you could easily make money off of in a skill you already know how to do, or for a cheap client! Take into account the actual value added in replacement of the financial to see if it’s worth taking a chance on.

Come back next week to learn about Rules 2 & 3!

Laura Ospina

Laura is a graphic designer who specializes in B2B content marketing and is the owner of DO | Creative Content Marketing based out of Atlanta, GA. She is a driven creative who uses strategy, critical thinking skills, and her passion for communication and good, simple design to create promotional campaigns geared towards strategic growth for Marketing and Sales goals.