At some point in your career, if you are going to ever quit your day job, you will have to charge for your services. But how much should you charge a client? How do you know when to start charging and stop giving away your services for free?
In my book, Mastering The Music Business, I discuss the importance of a marketing plan and how to write one. Part of the importance of writing a marketing plan is to set in place a fee structure that you will use for your services. If you do this correctly, you will have all the arsenal in your bag of tricks to properly get yourself to a paid level in your creativity. Because you will need to have different fee structures for different points of yourcareer, it is of the utmost importance to pre-plan for all of the scenarios you will encounter.
When you are just getting started in your new creative career, most likely no one will want to pay you. This isn't because people are cheap, well ok people are cheap, but because no one knows who you are. Most savvy consumers won't give their hard earned money to just anyone, let alone someone they do not know without a proven track record. The entertainment business is no exception, if you are not established and have a good portfolio, don't be surprised no one wants to give you money. Would you pay $5,000 for a song by someone who has nothing to show you of their past work and without a long list of clients? That is a lot of money to give someone who has no track record.
But, you say to yourself, this is what other producers are charging for songs, so why wouldn't I charge this amount?
My first question to you, in rebuttal, would be: is this what the top producers are charging in Hollywood, or is this what producers in your town are charging? My next question would be: do you have any celebrity clients (hometown or bigger) that you have produced for with success?
Unless you live in Hollywood, and especially if you live in a small town, you can't put yourself in the same fee category as a major market. It just doesn't work like that. If everyone in your town is charging $2,000 for a song, what makes you so special that you can charge $3,000 more than everyone else? Do you have the only 3 million dollar professional studio in town? Do you have lots of celebrity clients? If you answer yes to both of these, that $5,000 fee is reasonable, but not really in the grand scheme of things.
You can't be so money hungry that your fee is so blown out of proportion it isn't even in the same ball park as everyone else. If your fee is 150% more than everyone else, without some serious competitive advantages included, your never going to sustain an income, at least not for long if you do happen to get it. And the reality is, if you do get it once or maybe twice, but it took you 6 months to get it that amount of times, it isn't a sustainable business model. You should be getting work at least twice a month, not every 6 months.
But I'm worth it, you say to yourself. I applaud your ego. Maybe you really are worth it, but remember, the amount of work you get, and at a high frequency, is what counts. Wouldn't it be better to get work every week at $2,000 a pop for 4 weeks, than $5,000 for every 8-16 weeks?
If you want to do your creativity for a living, you need high frequency of work. You want consistency and repeat clients. You want to be booked regularly, not booked just occasionally.
We have established it is better to get work more frequently at a fee that is comparable to the rest of your competition, than to charge to much and never get work. Like everything, however, this is only part of the equation.
If your new to the entertainment world and want to start charging for your services, it is best to keep your fees the same as everyone else in this field or to even charge less than everyone else. Keeping in mind though, you shouldn't charge so much less that no one wants to work with you. If you charge to much less, than other people will see your service as not good enough, to amateur, and they won't see the value. This is a double edge sword.
When you look at rates, we by human nature perceive higher prices as better quality, to some extent. If a couch is $3,000 we see it as very exquisite and posh, very high end. The same looking couch at $500 is viewed as cheap, basic, and not really that great when you compare it to the $3,000 couch... But it will get the job done. This same idea can be, and is, applied to your service rates.
Having some basic ground rules, we can tweak them to better ourselves, and our perceived value. Since the idea is to get work and clients, a lot of them, we need to create a competitive advantage for ourselves. We can aid in our competitive advantage by adding value to what we charge.
One way to add value is to do exactly this, add value: you hire me and not only will I do this recording, but I will give you a mix of the song as well at no additional fee. Or maybe it's something like: I will design this flyer for you at x amount, and I will print 250 of them at no additional cost. This is the fun part of figuring out how much you should charge, getting creative.
One of the best ways to get a true competitive advantage is to research all of your competition. What are things they are doing for their fee? Do they have any free things they offer for working with them? What kinds of additional services are they offering? Do they have celebrity contacts who they will share this stuff with if it meets certain requirements? At the core, what is it about your competition that makes people keep hiring them? Why do clients keep going back to them?
This type of research is a long and intensive process. It should never be taken lightly, ever. You have to research every company that is going to be your competition. But, you also have to research other companies similar in nature, and also other companies who are not. This research should be something that takes you at least a month to complete. You simply can't do it in one day and expect to get all of the information you will need. Phone calls, emails, referral calls and questions to them, going into the location and talking with them, creating a spreadsheet to punch in all the information you are gathering, etc. takes time. You essentially become a spy. You can never, in most circumstances, let them know you are doing research to start your own company to compete with theirs. Even if it's a close friend, you should be wary of letting on that this research is to create your own company. You have to act like a potential client in their eyes, doing this will garner better results.
After the process of doing all this research, you will have a plethora of valuable information you can use to craft your pricing structure. You will have the information you need to know what everyone else is doing that sets them apart. Even knowing what type of equipment they use is valuable because it sets the tone for what you should have, or not have. Maybe you need to buy some more equipment, or re-think the location of your business.
Knowing all of this will help you create a competitive advantage. It allows you to tweak your business model and offer, not only some of the same services or added value, but to create your own unique services and added value. If you see that no one is doing something, that you thought everyone did, you can now offer this to truly separate yourself from everyone else. And since you now know what other people are charging, it allows you to have a standard for what you can charge. It lets you see, before you even start trying to get clients, how many potential clients will want to work with you and pay you at the rates you want. It also lets you know what the professionals are charging versus the amateurs.
Here is a pro tip to take all of this a step further. Product and services are only part of the overall pricing structure. You can also charge for your wisdom, guidance and knowledge.
Simply put, if you are able to coach clients, help them with being their mentor, offer extended consultations, be the reference book they will want to use to ask questions in the future, you will make more money. This is part of your added value. It extends beyond the initial service you provided. If you are an engineer and made the song sound professional, chances are the client will have questions in the future about something. If you let yourself be open to answering these questions, without necessarily charging, your added value goes through the roof. People want to work with others who can guide them throughout their career. Anybody can record a song, but not everybody is willing to take that phone call and answer a question. You can certainly charge for these consultations, but the real value is in making it part of the other services for free.
In this case, by free I don't really mean free. The idea is to be able to charge a little more upfront and include this into the fee. Say if everyone else is charging $75 for a mix of a song but that's the extent of the service, you could charge $80 for a mix, but it comes with continued, or limited, free consultations for x amount of time. Maybe you keep it $75 for a mix, but add the consultations in for no additional charge. If you have done your research properly you will already know how often other companies get called for consultations and continued support with questions. This means that you would of found that other companies don't really get these types of continued support questions and consultations. So you can predict, with more certainty, if you offer this, people will perceive you as someone they want to work with because they will be able to still reach out and get some support, knowing for yourself, the chances of everyone taking you up on it will be slim. Essentially, you are adding value, but know the majority of people won't use this part of your service that much.
Conversely, maybe everyone of your new clients starts using this part of the service, so much so, you can't keep up with demand. Your always on the phone answering questions and it's starting to be too much extra work for you. You find yourself doing more of these consultations then actually recording music. But is this a bad thing?
No, it is not a bad thing in the slightest. Sure, it is more work all of a sudden and you may not have charged enough initially to make up for all the extra work, but it does mean that you have found a niche. A niche like this is what is going to bring in more money, and you have just found a demand for this service you never knew existed. All you have to do now is tweak the pricing structure to make it more worth your while. It may even mean you start a whole new company because demand is so high.
We can all learn something from everyone else. The most important thing you can do for yourself is to be open to learning. By doing this, you allow yourself to adjust and tweak things to better your clients. This is the fundamental reason why research is so important. You have to understand your market and cliental in order to be successful.
In the beginning of your career you may have to do things for free. In fact, I would argue this is a must. You need to build up your portfolio, and as we have already said, if you don't have any work to show potential clients, they are not going to want to pay you. Of course, this is double sided.
If you moved into a brick and mortar building and now have a lease you have to pay for, on top of rent for where you live and all your other bills, you can't really just work for free. Likewise, if you are trying to get clients into a studio you want to work in, this studio is going to charge you a day rate, so you can't really pay the day rate out of your own pocket just to record this band.
However, in our examples, you can't go overboard on fees. If it's the studio situation, you will have to still charge the band the day rate, but you would waiveyour engineer fee. So basically you don't get paid, but you are not coming out of pocket either. If it's a brick and mortar building you obtained for your business you will certainly have to charge clients but, you would be wise to offer some sort of introductory rate or grand opening rate. Like a first time fee, and then after that it goes up to normal rates.
Doing things for free when you are getting started has advantages. For instance, it lets you get more potential new clients because you are selling them on how great of a job your going to do for them and, since you are just getting started out, you need to build your portfolio. It lets you maintain your quality and reputation, and allows you to prove to them how good you really are. In this way the client has nothing to loose except some time. If you record them for free and it's the best recoding they have ever gotten from someone, guaranteed they will want to work with you again, and if your rates after this initial free period are competitive, they will have no problem paying you for the next one. The flip side, if it's the worst recording they have ever gotten at least they didn't have to pay for it, and it shows you what you need to work on or what you would have done differently. It allows you to get better and learn from your mistakes. If you just try and charge without going through these learning curves first, and you mess up, those clients will bad mouth you forever and your reputation may never bounce back.
We all make mistakes. The successful people learn from them, the failures blame everyone else for the problems. It is way better to get real world experience, without charging, because the clients go into it knowing it may not be that good. It sets their expectations low, and gives you the opportunity to knock their socks off.
The initial free phase also gives you some knowledge on just how much you should be charging. Maybe you thought x amount would be a great fee but, after doing it a couple of times, you realize it's just not worth it at that amount, you should charge more. It is a whole lot easier to change from free to x amount, especially in the clients view point, than to charge x amount and the next time they come back your rates are way higher all of a sudden. You will have to defend your new rates and try and convince them why you are now charging more. And if you are now charging more all of a sudden, with no extra added value, chances are they will not want to pay the extra fee.
You need a little bit of a respectable buffer between free to pay in order to fine tune your pricing structure. If you want to charge x amount in the future, while you are doing it for free now, would the amount you want to charge be worth it? Would $50 a mix, considering how long it takes you, and now that you know what is really involved, be worth it? Or, should you charge $75 like everyone else?
Once you start doing your creativity with the point of charging, we learn new things we hadn't anticipated of clients. Maybe you thought doing a mix would just be simple, so to speak. You get the stems and mix away to your liking. But until you did this for a client, you never realized that you'd have to talk with them, do multiple mixes to get it right, what kinds of questions you should ask to avoid mistakes, how involved they really want to be, etc. At the free level, we simply adjust our future rates to reflect all these scenarios. At the paid level, you have to have a really good explanation why you are charging more than you use to.
Charging free initially is best described as market research. You are researching what the best pricing structures will work for you. It allows you to tweak your pricing structure without having to justify it. At the end of the day, you have to be happy with what you are earning from your creativity. You don't want to get mad at the clients because you are not charging enough, it is not their fault you undercut your competition so much that you feel angry your doing all this work for next to nothing. Nor do you want to loose clients because you keep changing your pricing structure every week.
You will know when the right time to switch from free to charging makes sense. Once your calendar starts really feeling up, and you have a hefty work load, is the perfect time to switch into charging. The key is to not wait to long but, build up enough of a portfolio with really solid work to show. You don't want to wait until your booked everyday to start charging because you will still have to finish out all those free clients. A good rule of thumb is to have 5 solid projects that you are proud of in your portfolio, once this happens it's time to start thinking about charging. However, don't jump the gun. If you have lots of people starting to come to you then thats the right time. If you have 5 solid projects but still no one is coming to you, it may be wise to wait some more. In other words, you want to make sure there is a demand for you, then start charging. If you start charging to early and don't have enough solid projects under your belt, you will turn people off.
There is no set in stone rule about the right time to transition into charging. Really it's all about understanding your clients and frequency of work you are getting. You might even have to give some clients free work, while others you charge. This can also be part of your added value or competitive advantage. Something like: when you book 4 songs you get the 5th for free. Free can be used to entice paid services in this way. The only real rule, in other words, is to always be assessing what is going on in your business and use this to gauge the correct time to charge.
It is all about finding that happy medium where you will be happy, your clients will be happy, and you get repeated business. Taking the extra time to properly research the competition, crafting your competitive advantage, bringing added value, and staying within industry rates, will guarantee your success.
However, these tips in of themselves, will not guarantee your overall success. These tips will only guarantee your success in getting new clients and repeat business. To be truly successful on all fronts, I will be writing more about this on future and past blog posts.