I have a theory about providing services and charging fees. As you become a better master of your domain, you must charge more because you have become worth more. Clients don’t realize that you have become much better at your work, that you make less errors, that you get more done in less time, and that THEY benefit immensely from that. That means they typically do not know that you gave them a service worth what they paid, and now your service has become worth more than they paid. Typically, because you do better work in less time, clients will spread your fame and more clients will come to you for help. Then you will become overwhelmed, overworked, and your quality and relationships at home will suffer as you head toward burnout.
It should go without my saying, but I’ll say it anyway, that the work you do today must provide you with an income close to double what you need to live on. Ideally, you will work until you have accumulated sufficient savings from your earnings to live independently, without working for a living, for the rest of your life. Your work will become a labor of love because you will have the ability to work at anything you please, for money or for free. I estimate that in order to accomplish this, a teenager should put 20% of all earnings, off the top, into cash reserves, and live off the rest. Cash reserves should go into very secure investments that earn dividends, interest, and grow in value. You should never, ever, NEVER spend your cash reserves. And you should never, ever NEVER borrow money for something that won’t earn you more money by improving your ability to deliver high-quality, high-value services.
When working as an independent contractor running a business, the worker should go through this sequence:
- Set your fees to match your quality and quantity of results
- Deliver your service to paying clients and collect the money
- Economize, pay all bills, and invest sparingly in whatever improves the ability to deliver better service
- Master the job and refine the mastery
- Update your advertising to reflect your improvements – this will bring you more customers
- Raise your prices – you will lose those customers who won’t pay, but you’ll keep the others
- Improve your services by enhancing and adding
- As you get both, cycle back to #1
- Otherwise, migrate to a new business
When working for a company as an employee, that means the worker should go through this sequence:
- Master the job
- Economize and spend time and other resources wisely
- Update your resume and send it around to new prospective employees
- Demand more money
- Demand more responsibility
- When you get both, cycle back to #1
- Quit and take the new job.
The biggest raises I ever EARNED came when I changed jobs, even after getting fired 4 times. At my last firing I started my own corporation and made WAY more money than I ever had before.
As your skill improves, raise your fees and promote aggressively to cash-rich prospects. After all, we are not Communists. You will always lose clients who wish you were a Communist who understood “middle class economics.” But the ones you keep will pay more to make up for the loss, and eventually you will make enough to go on month-long voyages to Shangri-La, etc., with your lover, stopping off in Tahiti to polish up your French.
And in time you will die happy and prosperous like a good Capitalist should, you will go to Heaven, and you will hear God say, in her own soothing voice, “My Child, you have done really well down there. Now look what we have in store for you.”
You see, it’s all about “good stewardship.” All of us get 24 hours a day for as many days as we can live. If we use them wisely, we’ll flourish and prosper.
My wife did housekeeping when I married her. She charged her clients $10 per hour. She followed my formula above. When she retired a few years later, her rates had grown to $30 to $40 per hour. She cleans house impeccably about twice as fast as anyone else, so the client received full value for the money. At first she felt so horrible, like a greedy cheat, when I first encouraged her to raise prices in order to cull out the Communists from her customer list. Later, she felt just fine, and she had more money for life’s necessities.
Here’s a bonus truth – many people love paying a lot for their service, especially when they have the BEST service provider and others have to stand in line and pine for that service. That needs to become part of your promotional information. Imagine yourself standing confident and professional while hungry prospect hands reach up, yearning to touch you and receive your attention and your service. What a picture!