You set the foundation of your value through the prices you offer, so you cannot be surprised when a client ends up not valuing your work because you sold it for cheap.
What do I mean by “underbidding”?
Most creative people will sell creative services at a very low price when they start out, usually because they fail to understand the value of their work. When you sell your work under the actual value it will lead to the final result being worth more than what the client actually paid for.
Sure you are offering the client high quality work at a low price point which could be your unique selling point, but I would not recommend it.
When we started our business we did this way too many times. We were not aware of our worth or skill level. While we lacked experience we learned very quickly on the job and applied our knowledge successfully. We delivered high quality products at a very low price. The client was happy of course, but we were not.
Resentment phase
Our failure to sell our work at the appropriate price for the value it had, led us to feeling resentful towards the client anytime they did not seem grateful for the amount of work we put it.
This usually happened when there were misunderstandings to do with the scope of work and the client needed more than what we thought we had agreed upon.
Little side quest here to explain that we were very bad at defining the scope with these low budget projects and it usually ended in the client and us having two completely different visions of what the scope was. No one was wrong and no one was right of course, and it was our fault.
Any time a scope change (in our eyes) would come up, it made us feel like they did not appreciate how much we had already invested in their project. We were like “how can they seriously be asking for MORE after they have already gotten so much for so little money”. I know this was not the client’s fault, and that it was entirely on us. We failed in two regards. We failed to define the scope and we failed to ask for the correct amount for what our services were worth. These two things made us feel resentful.
A client buying creative services should not be expected to understand the value of the effort you put into your work. Instead they should be told the value by you asking for an appropriate amount of money for your work. If you offer your work cheap you can’t really explain to a client further down the road how much the work is worth since their understanding of that value has already been defined by a low initial price.
You set the foundation of your value through the prices you offer, so you cannot be surprised when a client ends up not valuing your work because you sold it for cheap.
Drawing boundaries
Underbidding does not only cause resentment, but it also makes it difficult to draw new boundaries later on. Even in cases where we defined the scope clearly and communicated that scope changes will cost extra, the price we could offer for those changes had already been defined by the low price of the initial work.
In other words you can’t sell a whole website for €2.000 and then for a few small changes charge at an hourly rate of €100. I mean you could, but it makes no sense from the client’s perspective unless they believe you made that website in 20 hours.
I’m not saying your price needs to be defined by your hourly rate, but it should at least make sense in relation to it.
When to draw the line
I think it’s important to understand the implications of selling your work under its value and that underbidding and overdelivering can lead to resentment and being in the wrong network. Is there a time and place for doing it? Yes.
If you are trying something new and you have little experience, your services should not be as expensive as someone who has been doing it successfully for years. Sometimes you need to undersell to get your foot in the door and get a project in your portfolio. HOWEVER, and this is a big big one, there has to be something of value in it for YOU.
I would even go as far as telling the client you are underbidding. You should tell them something like: “this would usually cost X amount but I am selling it to you for less because I want this in my portfolio”.
Doing this means you can:
be sure the client won’t take advantage of your low prices later on
be sure they won’t refer you to other clients not able to pay for your work
IMPORTANT! If you do decide to do this you MUST negotiate complete control over the creative direction so that the final product really is something you want to show in your portfolio.
We have made this mistake too many times that we took on a project “for our portfolio” and it turned out terribly, because the client took over creative control and did not listen to our expertise.
Remember, you are the expert in your field, not the client.
Avoid spiralling into an endless cycle of low budgets
When we sold our work at very low prices we were not thinking long term. Our business model was not sustainable, because it led to too many projects at a time. In sum the money we made was good money, but we could have made that same amount with less work had we priced our work appropriately.
Having too much work wasn’t even the worst part. What made the situation worse was having too much of the wrong work. We were being referred within a network of low paying clients. Of course there is a market for clients that cannot invest a lot in creative services, but a two person agency with the vision to scale was not the right fit for those clients. It was not financially smart of us to be in that market. A freelancer with very little overhead can be in that market and thrive, but we could not.
Underbidding and overdelivering meant clients LOVED us. Who wouldn’t right? We were giving them products worth 5-10x more than what they paid. Of course they referred us to people in their network. And of course we took on many of those projects, because we needed the money and we needed projects in our portfolio. Do I regret any of it? Probably not. I think it was necessary for us to learn important lessons on value and pricing. Would I recommend doing it? Most definitely not.