Marketing Entrepreneur. Day Trader. Business Contrarian.

You Don’t Get to Decide Your Worth

Posted on May 11, 2016 in Business Estimated reading time: 5 minutes


This was a lesson that I learned very quickly as I took a vested interest in the stock market, and when I transitioned from a salaried employee to starting a consulting company. I’ll be very honest here. Up until a few years ago, I had always assumed the mindset that I got to determine what I was worth in terms of compensation for the value I provide through my work. In the back of my head, I’d always repeat phrases like “You’d have to hire 2 different people to cover the skillset that I bring to the table,” or “I’m worth x amount because I’ve already paid back my salary in terms of new revenue generated for the company.” These beliefs were never rooted in self-entitlement as you’d typically expect from gen-Y. No – instead, they came from strong sense of inner self confidence, that I was always able to deliver and exceed expectations.  This was because nobody could set a higher expectation than the one I put on myself. Now, there’s a right way and a wrong way to handle ensuring you’re fairly compensated for the value you bring to the table. However, when you work for yourself, the right way doesn’t come in the form of a structured process or review. You must take matters into your own hands. Here’s how.

If you provide a service like I do, it can be difficult to figure out where you should set your price, especially if you’re just starting out. That said, there’s one overarching concept that’s starting to garner more attention, and that is,

At the end of the day, you’re only worth what someone is willing to pay you, and to go a step further, you don’t even get to cherry pick the highest number. If you take a cross-sectional sample, you’re only worth what the middle 50% of the market is willing to pay you. Now don’t take this literally. If you put out a number of proposals, you have to gauge the response and see where the market settles at. You might not like the number, but you have to accept the reality of marketplace dynamics.


Where do I start?

I almost hate to suggest that you should start with a significantly higher price than what initially comes to mind. Double it. Triple it. Let the market tell you no. Providing a service myself, I see many people who can’t get out of the freelancer rut because they aren’t generating enough cashflow to scale beyond themselves. To that end, it’s equally important to make sure you’re selling to the right audience. You must consider the size of the company and scope of the project. If you want to build a business, you need to make sure you’re generating enough revenue to maintain healthy margins after your expenses, which are predominately payroll based if you’re providing a service.

Now, I’m a bit more methodical than most. I know what my target margins are if I want to align myself with industry averages in my space. In fact, I’m able to push for better margins because I’m a smaller operation. To meet my targets, I built my own gross and net margin calculator. For any new client, all I need to do is plug in my revenue, expense, and tax figures to help me gauge where I’ll end up.


So what if I don’t like where the market prices me?

If the market is only willing to pay you significantly less than what you think you’re worth, there can be a number of reasons for the delta.

First, you may have done a bad job communication the value you provide. In lamen’s terms – you’re bad at sales. If you have the self awareness to recognize this, find someone to balance your weakness in this area. Let’s get real practical. As an example – I’m bad at planning and logistics. I simply move too fast to take the time to plan projects in advance. I would never try to assume these responsibilities if I can afford to pay someone to balance my weakness in this area.

Second, you may need to accept the fact that you provide a service that’s been heavily commoditized. If you aren’t providing a speciality service and there’s a lot of competition in your niche, prices may have been driven down due to oversupply and you haven’t effectively innovated to differentiate yourself or provide additional value. As another practical example – I began my career in the SEM space. I’ve been doing SEM since 2005 when AdWords was first introduced. Since then, it’s been heavily commoditized. It’s unrealistic for me to charge anything over $100/hr. for this service due to rising skill levels of others willing to provide this service for far cheaper. So taking my own advice, I package SEM into an overall demand generation service, and have also added marketing operations capabilities as well.


Wrapping Up

So that’s it. Easy in theory, but more difficult in practice. You must quickly drop the entitlement mentality and adjust to your market. If you must accept a lower price as a result, it’s up to you to find the operational efficiencies in your business necessary to meet the target margins that will allow your business to continue growing. At the end of the day, the market will decide what you’re worth. You can certainly respectfully say no, but by doing so, you’re accepting even less. As your business grows, gains recognition, and accrues referral business, you’ll be able to move upmarket in price, but only as a result of going after larger companies with larger project scope. Just don’t forget the importance of the sales function from the standpoint of communicating your value clearly!