More pricing wisdom from The Office

I love how often The Office finds humor in real-life lessons.  I've blogged about it before: the classic whoever/whomever debate, and Michael Scott's lessons in the importance of pricing.

We're on season 7 now.  A few nights ago we watched "The Search," where Michael Scott is lost in the city without his wallet.  He gets hungry and tries to con a hot dog stand owner into giving him a free hot dog.  First he offers his watch as collateral, saying that he'll come back later and pay the guy in order to get his watch back.  The stand's owner basically says that he can't do anything with a watch, and that he needs money.

Of course, this makes me think of website owners who try to get freelancers to write content for their site for free, often promising "exposure" or that they'll pay them when the site starts making money.  Regarding "exposure," what has value for the client may not have value for the vendor, so how does it benefit you to get exposure on a site no one has ever heard of?

In other words, what do you need with a men's watch?

And, seriously, who comes back later to pay?  Michael claims his watch is worth $45, but maybe it's a $10 watch and he doesn't care if he goes back to settle the bill.  Promises of future payment are the same as being paid nothing at all.

When that doesn't work, Michael tries another tact.  He asks, "What do you do with the hot dogs you don't sell at the end of the day?" and of course, the vendor says, "I throw them away."  Michael suggests that he "throw one away now, in my mouth."

Ah, another approach used by websites trying to get free content: "You're new/blogging/a stay at home mom, so you'll be writing for free either way.  Instead of spending that time writing for free for yourself, why don't you write for free for me?"

What a winner of an argument.  Unbelievably, some "clients" seem to think the logic here is sound.  Sorry, but if I'm writing for free, why would I want to do it for any other reason than my own pleasure?  Besides, if I write for myself, I keep the rights to the work and could possibly benefit from it later on.

Of course, the vendor still refuses, so Michael says, "You've lost my business!" and storms off.  It's funny on the show, because obviously his "business" was of no value to the hot dog vendor, yet website owners make that kind of threat all the time: "If you don't write for us for free now, we won't pay you when the website becomes profitable," or, "you'll lose out on this GREAT opportunity to showcase your work."

Lesson learned: Beware of wallet-less Michael Scotts trying to con you out of free hot dogs.

Lessons from The Office

Michael and I just finished watching Season 5 of The Office. I've found wisdom for writers in past episodes, and this season held a particularly fine little gem: a lesson in why we shouldn't price ourselves too low.

Spoiler alert — if you haven't seen this yet and you don't want to know what happens in the season, click away!

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Basically, the boss, Michael Scott, quits his job and starts his own paper company. He scores quite a few Dunder Mifflin clients by offering low low prices, but it turns out the prices are too low. He and his employees, Ryan and Pam, have a conversation with an accountant that I think is all too applicable in the writing industry, too:

Accountant: Your prices are too low.

Michael: Lowest in town!

Accountant: Why do you think Staples and Dunder Mifflin can't match your prices?

Pam: Corporate greed?

Ryan: Our pricing model is fine... Over time, with enough volume, we become profitable.

Accountant: With a fixed cost pricing model that's correct. But you need to use a variable cost pricing model... As you sell more paper, and your company grows, so will your costs. For example, delivery man, health care, business expansion. At these prices, the more paper you sell, the less money you'll make.

Michael: Our prices are the only thing keeping us in business.

Accountant: They're actually putting you out of business.

It's the last two lines that I think are the most profound. Listen up, newbie writers! You might think you can learn to write faster, turn out more articles per hour, and become profitable "over time, with enough volume," and maybe that will work for a little while, but that's not how you stay in business. You need to think about your long-term goals — whether you still want to be freelancing five years from now, for instance.

Michael Scott goes back to the office and starts calling up clients to raise their prices, and of course they just go back to Dunder Mifflin, because the only reason they'd left in the first place was for the lower price. i.e., You can't quote a client a rock-bottom price and expect to be able to raise it to a more reasonable rate later on.

Naturally, the show has a happy ending: Dunder Mifflin (not realizing that Michael Scott is about to go out of business) buys out the fledgling company and gives Michael, Ryan, and Pam jobs again. But my idea of a happy ending is NOT going to back to work in an office. I like working for myself just fine, thanks! So I have to set my rates to enable me to continue doing that.

What's your happy ending?

Taking the freelance writing rates survey

Yesterday a commenter on Lori Widmer's blog mentioned a survey she is doing, on freelance writing rates. It's a quick, anonymous survey, on a frequently visited topic for my blog as well as others, so I thought I'd pass it on.

You get what you pay for...

Apparently, with the current economy freelance writers are not the only ones pointing out that you get what you pay for. NPR ran a story today on a new book called Cheap, in which the author, Ellen Ruppel Shell, talks about the hidden ways we pay for it when we buy things at discount prices. It's not about the dramatic reduction in quality — it's also about the risk of deflation.

This reminded me so much of the ongoing talk of writers rates' and that clients get what they pay for. The other issue is, of course, that writers' rates trending downward also downgrades the industry, and makes it more difficult to earn a living as a writer. If we aren't careful, and writers' rates fall too much, will writers from India, who speak English as a second language, be the only way to find a writer — kind of like how discount superstores like Wal-Mart and Target dominate the shopping scene now?

Happy belated Writers Worth Day

Well, Writers Worth Day was Friday, and I forgot to blog. Instead I spent the day with my husband, who had taken the day off, and made up a few hours of work in the evening.

Being able to take days off like this is, I think, one of the strongest arguments for upholding your worth as the writer. If you take low-paying jobs, you'll have to work almost constantly just to keep up with your bills. If you only take jobs that pay professional wages, on the other hand, you can afford to have a personal life as well as a great career.

Low-paying writing work is demoralizing, not only because it forces you to work for a pittance, but also because it usually leaves you with no free time. Being able to balance my need for income with my desire to spend time on my hobbies is my biggest reason for setting my rates where I do. What's yours?

Busy as a Beaver

I have been SO busy lately. Not long after I told Lori Widmer that I was comfortably busy, not slammed, I ended up... slammed. I think I jinxed myself, though I haven't quite been able to bring myself to regret it!

April was a big month for me, bill-wise, and May is no less momentous. Just the other day I had my horse's spring vet visit, and I have a few other unusual expenses this month. So believe me, the extra work is definitely not a bad thing!

But then you add to that the extra time I've been spending with my horse in celebration of the nice weather, plus the time I've spent on some writing projects related to my doll collecting hobby, and you're looking at the beginnings of a very busy summer.

In other words, I don't have the time to spend on projects that don't pay me well. I have a certain amount of income I need to make, and a limited amount of time I've set aside to make it in. And that, I think, is probably one of the biggest arguments ever for writers setting professional rates.

Which brings me to my next point: Tomorrow is Writers Worth Day. You've no doubt seen the shiny new widget in my sidebar. You can find out more about it on Lori Widmer's blog. Honestly, I won't be surprised if she sets fireworks off from her blog tomorrow. If any one person can make a holiday official, it's Lori. The woman is tireless!

As for me... My husband has tomorrow off, so I'll be splitting the day between him, my horse, and work. What better way to celebrate Writers Worth Day than by reminding myself why my time is worth so much?

Examine this!

There has been a lot of talk lately about Examiner.com, a website that pays writers per pageview. They've been posting ads all over the place and growing pretty rapidly, and as a result they've come to the attention of WritersWeekly.com.

Last week, Angela Hoy ran sort of an introductory column about Examiner.com, asking for responses from writers who work for them. This week she printed the responses she got about how much Examiner.com writers are making. The average, per the responses she got, was $1.46 per article. Atrocious!

But what really appalled me were the writers who were happy with their pay. For instance, one writer said,

The only problem I see is when writers expect to make money quickly or easily. This could be a way for new writers to get accustomed to turning out regular content. I understood the game in the beginning. The problem with newbies is they don't read before they jump in and they expect something for nothing.

So let's get this straight: expecting to earn a living wage is a problem? Even newbies can and should be able to start earning professional wages right away as a writer. What do you think would happen if doctors were told they had to work for free for several years after earning their degree, and anything else was expecting "to make money quickly or easily"? You'd better believe we'd have a whole lot fewer doctors in this world.

But it's the last sentence that really gets me. "The problem with newbies is they expect something for nothing." Uh, hello, we're not asking for handouts here! Writing articles for someone is NOT nothing!

It infuriates me that a fellow writer, one of our own, should suggest that writing is worth nothing. In fact, I find this writer's attitude just as offensive, if not more so, than the rates Examiner.com pays. By saying things like that she is contributing to the low opinion of writers that lead many clients to underrate our services.

No self-respecting writer...

Here's another gem from this week's WritersWeekly.com — and just in time for Writers Worth Day, too!

In the Whispers and Warnings section of this week's issue, there's a complaint about Cantara Christopher and cantarabooks.com. Apparently a writer submitted a poem to them, and when they offered to publish it without remuneration, said he'd have to think about it. They then withdrew his work from consideration, and sent him a rather rude email containing this statement:

No self-respecting writer who is serious about a career at your stage would consider payment to be more important than inclusion in a prestige publication like ours.

The letter goes on to talk about how widely read and respected their two-year-old publication is, but it's this sentence that stopped me up short. I mean, really — what they're implying here is that to expect compensation is disrespectful to yourself. What??

Where I come from, it's the opposite — giving your work away is disrespectful to yourself, no matter what stage of your career you are in. How do you expect to have a career at all, if right off the bat you establish a reputation for undervaluing your own work?

The funny thing is, I've never even heard of this publisher, so all their high-and-mighty talk is laughable — not to mention sounds just like every publisher who offers "exposure" in lieu of compensation. If they were so great, don't you think could afford to pay writers?

Newbie writers, pay attention: Never write for publishers who don't pay, but promise great things from the "exposure" you'll get with them. It's nothing but a fairy tale concocted by greedy publishers!

Should flexibility equal a pay cut?

Today Lori over at Words on the Page blogged about a Morning Show segment featuring a woman who made $1,100 a month sitting by the pool and writing articles for $1 to $20 each. It's upsetting for many of us who are serious about our writing careers (as opposed to a career working by the pool), because it undermines decent wages when clients hear that articles can be had for $1 apiece.

Of course, I think the point of the segment was actually that she was making a living while sitting by the pool, and that she was earning any money at all by doing it. In my experience, this is a pretty common attitude: that we should expect a pay cut for the convenience and flexibility of working from home.

I have mixed feelings about this. I've accepted a pay cut in order to work from home — but in my total monthly income, not in what I get paid per hour. My hourly is actually considerably more than what I got as a full-time technical writer, but at the same time I've chosen to work fewer hours in order to have enough time to work with the horse I rescued a few years ago. The lower income is worth it to me, and I'm lucky enough that my husband's income allows me to make choices like this.

However, the number of hours I work is none of my clients' business. Sure, I may pay for having a flexible work schedule, but I pay for it out of the hours I choose not to work, NOT out of my hourly wage. Don't let clients tell you that the convenience of working from home comes at a price, because technically they are getting a convenience too: the ability to hire someone just for one job, without having to pay benefits or an annual salary.

But the big companies are doing it...

I was somewhat horrified to read an article in the Wall Street Journal on Thursday about how firms are rethinking their rate structures in order to retain clients.

Unfortunately, the article is for subscribers only, but here is the link in case you are one:

Firms Try Alternative to Hourly Fees

In short, the article talks about how some companies are switching to performance-based fees to keep business flowing in the current economy. They offered two companies as examples: an advertising agency, and an online marketing firm. The reductions in rates were pretty steep, too: The advertising agency reported switching from a $15,000 monthly retainer, to a $10,000 fee for obtaining a specific booking, and the marketing firm reported dropping rates from around $135 per hour to $80 per hour with additional fees charged only if the client's goals were met.*

Lori Widmer has been blogging a lot lately about why we shouldn't lower our rates during tough times, one of the reasons being that it makes it more difficult to go back to our original rates as the economy improves. And sure enough, this article didn't address the future of these companies at all. I can't help but wonder whether they are planning on adopting the performance-based pay permanently, and if not, how they will convince clients down the road to pay a higher price whether they see results or not.

While most of us aren't charging $135 an hour or a $15,000 monthly retainer (or at least if you are, you probably aren't reading my blog), whether to lower prices is still an issue that's on our radar, whether or not we agree with it. I personally am not lowering my rates, but I'm not raising them either, which I usually do in the spring or summer.

I am curious to hear from my fellow freelancers. Are you lowering your rates, keeping them the same, or raising them despite the current economy? And does hearing that the big firms are lowering their rates change anything for you?

* Note: All of these numbers are drawn from memory, since I no longer have the print version, and don't have access to the online article. If you have either and find that I've reported the numbers wrong, please let me know.

A lesson on rates from my farrier

My farrier came out to trim my horse's hooves yesterday, and afterward — as per his usual — he proceeded to talk my ear off.

Interestingly, one thing he talked about was rates. Since that has been a commonly discussed topic on Lori Widmer's blog lately, I decided his point of view had relevance for writers, too.

I've been using my farrier for over a year, and in that time he has not raised his rates once. Now at $40 a trim (which takes about 15 minutes on my horse) his prices are in no way bargain basement, but they were average when I started using him. The thing is, many other farriers raised their prices as the cost of gas went up — so while he wasn't necessarily cheap, his customers sure appreciated being able to count on his prices staying the same.

Now he's reaping the rewards of not raising his prices when everyone else did. Not only has he kept most of his customers, but he's also getting calls from new customers who want to switch farriers. Meanwhile, the other farriers aren't getting calls almost at all.

Now, I'm not advocating lowering your prices to lure clients away from other writers — my feeling is that in the end, you'll get only enough extra work to make the same amount of money you were before, with less work. However, I think this example shows how important client perception is. While my farrier's rates were not and are not cheap, his clients feel they are getting a bargain when he doesn't raise his rates.

So how does this translate into writing rates? Well, for one thing I'm thinking of holding off on raising my rates this spring. I can handle where they are at right now, so perhaps a raise isn't as valuable as being known as the writer who was willing to work with her clients during tough times.