If you’re an independent consultant, chances are, you’re undercharging in some way. It’s a common issue among independent consultants, and it can be tough to overcome.
I work directly with independent business owners, helping them increase their revenue while working less. When working with my clients, we almost always find:
- pockets of their business where they are undercharging, or
- evidence that they are undercharging across the board.
It’s important to understand the most common reasons why you’re undercharging so that you can take steps to correct the root cause(s).
Here are the three most common reasons you’re undercharging, and what to do about each.
1. You’re not confident in your abilities
How to determine if #1 is impacting you and your business
If you don’t believe in yourself, it’s going to be difficult to get others to believe in you. Lack of confidence often leads consultants to price their services too low, which can result in lost revenue and fewer opportunities.
Independent consultants frequently admit to me that they think:
- They don’t know enough
- They haven’t been a consultant long enough
- They haven’t done this type of work before
- When it comes down to it, they’re just a glorified project manager
I hear these types of things every day.
From people with incredibly unique backgrounds and specialties.
From people who have had tremendous success in their corporate careers.
From people who have gone to Ivy League schools.
When you look at people on paper, you would think that there’s no way they aren’t 110% confident, and that you’re the only one who suffers from this. You are wrong. Almost everyone second-guesses themselves.
Overcoming gaps in your confidence
The best way to combat this is to implement a daily routine that builds up and maintains your confidence.
First, find those thoughts where you’re questioning your abilities—whether they’re blatant or sneaky. (Usually both.)
Because when you have thoughts about yourself that diminish your expertise and your capability, you undercut yourself, your pricing, and the way you present your pricing.
You try to make up for what you perceive as lacking by charging less and you end up giving your clients a discount without even realizing it.
Remember, you can’t sell something to someone that you don’t believe in.
One of the cornerstones of this type of confidence practice is to consistently ask yourself (and answer) high-quality questions.
- How have I already done this?
- What do I already know?
- How is what I already know more than enough to help the client?
- How is what I provide valuable?
- How is this valuable (even when it comes easy to me)?
The key here is to consistently sell yourself on yourself so that you’re able to convey that value to your potential and current consulting clients.
2. You are making false assumptions about your ideal clients
How to determine if #2 is impacting you and your business
If you don’t think your ideal clients are able to pay or that they don’t value what you do, you’ll likely price your services lower than they’re worth.
When I dig into this with my independent consulting clients, we uncover that they’re having thoughts about their current and potential clients that are creating barriers to their business success. They share they’re thinking things like:
- Clients can’t pay me that much
- Clients don’t want to pay me that much
- My clients are on a tight budget
- My clients have a budget that’s already set for the year, I’d rather take what I can to get my foot in the door
- My clients will only pay that much money for one of the top consultancies
- My clients won’t want to pay more, they’re already used to the current fee structure
I hear these types of thoughts about Fortune 10 and non-profits and everything in between.
And, these thoughts all sound so logical and rational.
But really, they’re very logical-sounding excuses that most independent consultants lean on because they’re uncomfortable presenting pricing and that they might get into a negotiating scenario.
So, when your thoughts about your client aren’t what I call “clean”, you end up:
- Avoiding discussing pricing
- Negotiating with yourself and undercut your pricing before you’ve had a conversation with them about their range
- Not finding a way to co-define the pricing as you build out the engagement approach
- Justifying a lower rate to yourself
- Delaying, delaying, delaying until you feel like you’ve painted yourself in a corner
- Not getting creative about defining and articulating ROI
Overcoming false assumptions about your client base
To change your mind set about what your clients are willing to pay you (or not willing to pay you), start by separating out true facts from your own assumptions.
Do you see how the way you’re perceiving your client is holding you back as you build up your pricing?
- It usually isn’t the client’s situation. It’s that you’re using what you believe to be their situation as an excuse to avoid this topic.
- Now look, I’m not saying that clients don’t have budgets or real constraints. But what I am saying is that (1) most of the time we don’t really dig in to find out what the constraints are. Instead, we make assumptions and (2) we use our thoughts about the client’s willingness to pay as excuses to not build up the value of what we’re offering so the ROI a no-brainer.
To overcome your low-quality thoughts and assumptions about your client, shift into high-quality questions.
To get started, here are several questions for you to answer:
- What will the client’s financial ROI be for this project?
- What will the client’s intangible ROI be for this project?
- What will the lifetime impact and ROI be for this project?
- Why would paying more (versus less) benefit the client?
3. You have low-quality thoughts about money.
How to determine if #3 is impacting you and your business
If you don’t think money is important or that it’s bad to make a lot of it, you’re going to have a hard time charging for the full value of your work.
To determine how #3 is impacting you, ask yourself about your thoughts on money. I often hear responses such as:
- Money is amazing
- Money enables great experiences in life.
- I shouldn’t have too much.
- I shouldn’t take more than I need.
- I don’t want to be greedy.
- I’m making plenty.
- I shouldn’t be driven by money.
- It takes too much time to make more money.
I find this is usually a sneaky bucket. We have great thoughts but lurking under the covers are thoughts that keep us always making the same/similar amount over and over again.
So, for you, this is an important area to dig into, to uncover where your thoughts about money could be leading you to undercharge.
Overcoming low-quality thoughts about money
To change this mindset, start by sorting through your money thoughts to uncover the high-quality thoughts that are creating your current results and also the low-quality thoughts that are causing you to undercharge.
Then, go through each of the low-quality thought to find out how they’re not true.
For example, if you’re thinking “I shouldn’t be greedy,” Notice how that thought causes you to feel hesitant, which causes you to offer lower pricing or not to make offers at all.
This isn’t your personality or just how things are.
It’s a belief system you’ve built over time. It causes you to under-earn and to make less than you’re capable of. It compounds your under-earning over time as well.
You can change a belief system, even if it’s been deeply ingrained over your lifetime.
To change it, you need to purposefully replace the thought with one that does serve you.
For example, you could replace “I shouldn’t be greedy” with “there’s enough for everyone.”
Go through each of your money beliefs, and start building a new relationship with money in this way.
When you do, you’ll address the root cause of your under-earning.
The most common reasons for undercharging include low confidence, false assumptions about your clients or capabilities, and/or negative thoughts about money. By addressing these three common root causes for undercharging and using the tools I shared, you can start to change the way you think about your services.
Shifting these thoughts can have a bit impact on what you do, both tangibly and intangibly. Overcoming your undercharging is an important step in building a successful and profitable consulting business.
For more on this topic,
- Take the Independent Consultant’s Business Scorecard. It will rate your independent consulting business against the 4 IC Business Success Pillars, and give you a clear diagnosis and implementable action plan in order to tackle your risk points.
- Listen to the Grow Your Independent Consulting podcast with Melisa Liberman.
- Episode 050 – The 5 Methods to Uncover If You’re Undercharging
- Episode 051 – The 4 Root Causes of Undercharging as a Consultant
- Episode 052 – The 5 Steps to Overcome Undercharging as a Consultant
Melisa Liberman is the host of the Grow Your Independent Consulting Business podcast and creator of the IC Bootcamp where she helps her clients transform you from a contractor-consultant into a consulting business owner so you make more money, make more impact, and have more flexibility and freedom for yourself. You can find her in the MBO app store.