Regardless of how far you are into your journey, one of the hardest things to know is how much to charge.

It's especially hard if you don't have a pricing strategy.

After coaching hundreds of creators, I've observed three distinct phases everyone goes through.

Phase 1: Competitive pricing

When you don't know what you're doing, asking your friends or industry peers how much they charge seems wise.

The problem is: how do you know that what they're charging is right?

What if they set their rates based on what someone else was charging (who was also winging it)?

Paul Jamison from the Green Industry Podcast told me that before we started working together, his formula for figuring out his rates was to take how much his friends were quoting and charge 5% of that (since his audience was 95% smaller).

Not ideal.

But let's discuss the pros and cons of competitive pricing.

Pros:

  1. You'll likely increase your chances of getting the deal. If you ask your friend how much they charged a particular brand and you quote the brand the same amount, as long as you have a similar reach or platform, you'll probably get the deal! You already know the brand is comfortable paying that amount.

Cons:

  1. There's now a power imbalance because you're a commodity. The brand looks at every partner similarly since they can interchange you with someone else without much consequence. You have no differentiation.

  2. You're going to leave money on the table. If you, your friend, and your friend's friend are all pricing yourselves in a vacuum, you'll never truly understand the value you're bringing to the brand. You might later discover the brand was willing to pay you 2x, 3x, or maybe even 10x!

  3. It will set a lousy price precedent. Good luck convincing the brand down the line they should pay you more than the "trial" rate you offered in the beginning.

Competitive pricing feels too basic now, agreed?

Phase 2: Cost-plus pricing

As you grow a bit, you get smarter.

Maybe your hustle is that you upcycle old furniture and share all your cool DIY tips on the Internet.

You've done several sponsorships with paint and sandpaper brands which went pretty well, but then you actually do the math.

You factor in all the time searching for the perfect thrifted specimen, buying all the supplies, hours and hours laboring over the project…

Turns out, you made $2.50 an hour. AWESOME!

So the next time a brand shows interest in a partnership, you think, "I want to recoup my material costs AND make at least $100 an hour."

So, you calculate your costs and add an arbitrary premium.

Seem better?

Well, let's talk about pros and cons of cost-plus pricing.

Pros:

  1. You'll cover your costs. You won't go broke anymore, but you won't get rich.

Cons:

  1. There's still a power imbalance. Now you're just a vendor. Same as a catering company.

  2. You're going to leave money on the table. How do you know whether that brand wasn't willing to compensate you 10x to help them get closer to achieving their objectives? Meanwhile, you're satisfied with getting reimbursed for a $5 paintbrush.

  3. You'll set a lousy price precedent. Good luck convincing the brand that you'll ever be anything other than an "expense."

Darn. Cost-plus pricing had us for a second there.

Phase 3: Dynamic pricing

Things are going a lot better now.

Your audience is growing faster. Your deal flow is accelerating.

You're feeling…too busy?

Seems like every brand wants to spend their ad dollars during the Q4 holiday season.

You get a genius idea: "I'll tell brands that my rates are 2X right now."

Supply and demand, baby!

Hold your horses.

Pros:

  1. Short-term revenue maximization. If a brand is desperate to partner during a critical period and the only way to make it happen is to pay you 3x what they did a few months ago, you'll come out ahead.

Cons:

  1. Your repeat business is going to decrease. Brands can no longer expect consistency from you. When a campaign goes well, the first thing they think is, "How can we keep working with this person?" They want to slot you into their future campaign plans. Imagine you do a Spring campaign through an agency. Your agency contact tells the brand they should hire you again for the Summer campaign because it went so well. Brand says, "Cool." Agency reaches out to you three months later, only to find you've jacked your rates up? Now they've got to return to the brand with egg on their face.

  2. It feels arbitrary to brands and leaves a bad taste. Do you think the brand will slot you into future campaigns? They don't have time to reach back out whenever they're trying to plan something and ask, "Are your rates still the same?" Unless you've grown substantially, don't arbitrarily change your rates every month.

"Justin, stop messing with me. What pricing strategy should I use?!"

The moment of truth has arrived, friend.

Phase 4: Merit-based pricing

Your singular focus when negotiating should be to quantify what it would be worth to the brand if you could help them accomplish their objectives.

You'll quickly realize that different brands value wildly different things.

Pros:

  1. Prioritizes the brand's goals. Brand A may be willing to pay you $10,000 for a single video while Brand B might be willing to pay you $20,000 for the same scope of work.

  2. Your rate is detached from your influence. It's no longer just about your audience size or vanity metrics because the brand knows you're invested in the campaign outcome.

  3. Working with you is not an "expense." The brand now views you as a "profit center."

  4. Increased repeat business. The brand wouldn't dream of canceling its contract with you because you blow their minds constantly with new ideas and insights.

Cons:

  1. You'll need to pass on partnerships you would've done before. There's nothing wrong with small deals. They can add up. But your goal should be to make mental space to prioritize higher-value relationships. It will be scary saying "no" the first few times. However, "no" will give you the confidence to say "yes" at the correct times.

It will be tempting to switch back to non-merit pricing styles to close a deal and get a quick payday. Do so at your peril.

Instead, stick with merit-based pricing so it's clear you and the brand are on the same team, trying to accomplish the same goals.

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Join 34,950+ creators for brand sponsorship opportunities and negotiation tips

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Brand sponsorship deals, tips, and insider info delivered to your inbox every Monday, Tuesday, Thursday, & Saturday.

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