Eric Siu argues freelancers and agencies should ditch hourly billing for value-based pricing. Take 10% of ad spend, tie payment to results, or claim a share of revenue generated. Hourly rates limit income, burn out staff, and don't scale.
Have you ever wondered how much you should be charging your clients? It's like, God, you provide so much value to them, but you know, they tell you they can't pay or they don't have the budget for it. What's going to happen in this video is I'm going to tell you how you can charge clients, whether you are a freelancer or whether you are an agency. And I remember my early days, you know, just to give you an example, I was trying to get clients. I was doing a lot of work. I was prospecting. And then they'll ask you, you know, how much are you going to charge? Right? And then I was actually on Upwork, which is, which was Elance at the time, and my rate was like $20 an hour, $25 an hour, right? And I was basically charging on hours. What I want you to know is you should not charge on hours because basically what's happening at that point is you only have so many hours in a day and so many hours where you can do good work, okay? So there's a lot of agencies out there, you see the large agencies of the world, the ones that are doing billions and billions of revenue. The problem is they're on an outdated model. Because they charge by the hour, their people are extremely overworked. You hear about these people committing suicide working for these large agencies in Asia or even in America too. They're overworked, they're flying all the time. It's because that business model is broken because they're charging on hours. They can't get more hours out of their day, but they're trying to squeeze more hours out of their people and the turnover is just extremely high. Even as a freelancer, that's very difficult. Okay? As an agency, you're going to lose people. There's gonna be a lot of turnover. So if you're an agency, you got to think about your people. Same thing as a freelancer too, because you're going to be using subcontracting work out. You got to think about how your people are going to react. In our agency, you know, we actually work in the office, like we're in the office 3 days a week and then we work from home 2 days a week. And I try to make sure that people aren't overworked. When I hear people working on the weekends, like, I don't like that. When I hear people are saying, oh, you know, I'm super stressed right now about these clients, I try to make sure that we are doing the things we can to make sure that we're not working people on hours. We're not overworking people because what happens is they're going to come into work, they're going to come in unhappy. Now you might be thinking as the freelancer or as the owner of the agency that you are going to work all day and that's totally fine. That's your thing. Sure, work all day if you want. If you have no other obligations, work all day on it. But that doesn't mean other people can do that. The way that you can charge is based off of pricing or commission as well. Let's say for example, someone's spending $100,000 a month on advertising. You might say, okay, I'll charge 10% of the ad spend. So they'll pay you $10,000 a month, okay? So that's just an extreme example. That's actually a lot of money for that amount, but some people can get away from it, right? The other way you can do it too is based on performance, okay? So you might say, hey look, you know, you don't pay me anything until I bring you results. So an example of that might be, okay, you don't need to pay me anything, but after 3 months, If I get you, if I help you make $3 million, you're gonna pay me $300,000. And you can also price based on value too. So if I say, hey, if I can guarantee you $10 million, would you give me $1 million? They're gonna say, of course, yes, right? And then you can price based on how confident you think that you are gonna be with that campaign. Any type of campaign, could be web design, you could be doing some development work, then you're pricing where you're creating a lot more leverage, and that's gonna give you a lot more room to grow your company and help you achieve the goals that you want. So those are just a couple ways. The one thing I will say is, look, You might start out with hourly-based pricing, but I implore you, get away from that and then figure out how you can start to move into these different pricing tiers. Let us know what you're, what you're kind of doing right now as a freelancer or as an agency in the comments. And by the way, we do have a program that actually helps you get more clients. Let us know in the comments if you'd like to see that. Just type clients into the comments. I hope you enjoyed this video and check out the next video.
