# The underpricing audit

Five questions. Answer yes or no to each, out loud, in one sitting. Do not skip one because the answer feels obvious. Write the date next to your answers so you can compare this quarter to the last one.

## The five questions

1. **Have you only ever raised your rate during a cash crunch, never on a planned schedule?**
   If every increase you've ever made was a reaction to a bad month instead of a decision you made on purpose, your pricing is being set by your bank balance, not by the value of the work.

2. **Does every quote get an instant yes, with no pushback and no negotiation?**
   A painless yes on every single quote is one of the clearest underpricing signals there is. If nobody ever hesitates, winces, or asks for a discount, the number is probably too low. Some resistance on some quotes is a sign the price is closer to correct.

3. **Are you still billing by the hour for work you could price by the project or the outcome?**
   Hourly pricing caps your income at your hours times your rate, and it charges less the faster and better you get. Owners who move to project or value-based pricing for well-scoped work usually see their margin improve on the same work, because the price stops tracking time spent and starts tracking the result delivered. If you are still defaulting to hourly out of habit rather than a real decision, treat that as a signal worth acting on now.

4. **Would losing your single biggest client put the business at real risk this month?**
   If one client's invoice is what keeps the lights on, that concentration is doing more to keep your prices low than any lack of confidence. You will not quote a number that risks the relationship when that relationship is the whole business. This is a pipeline problem wearing a pricing costume. Phase 2 exists to fix it.

5. **Has your rate stayed flat for twelve months or more while your skill, speed, or results have visibly improved?**
   Getting better at the work and charging the same amount for it is a quiet form of giving yourself a pay cut every year, once you account for the fact that you now deliver more value in less time than you did a year ago.

## Scoring

- **Three or more yes answers:** Underpricing is very likely present. Proceed through every phase of this skill, in order, starting with Phase 2.
- **One or two yes answers:** At least one specific underpricing signal is active. Proceed, but put extra weight on the phase tied to the specific yes answer (question 4 points hardest at Phase 2, question 3 points hardest at Phase 3).
- **Zero yes answers:** Pricing is probably not the active problem right now. Say this to the owner directly instead of pushing them through the rest of the skill anyway. Ask whether the real issue is something else: not enough leads, the wrong kind of leads, or not enough capacity to take on more work at the current price.

## Re-running the audit

Run this audit again every quarter, using the same five questions, and compare the new answers to the last set. Log every quarter's answers and score in references/tracker-template.md (section 1); that running record, not this page, is what Phase 6 compares against next year. A yes that flips to a no is the audit doing its job. A no that flips to a yes, especially on question 4, is worth flagging before it becomes a crisis.

| Quarter | Q1 (crunch-only raises) | Q2 (instant yes) | Q3 (still hourly) | Q4 (one-client risk) | Q5 (flat 12mo+) | Yes count |
|---|---|---|---|---|---|---|
| | | | | | | |
| | | | | | | |

# The 13-week rolling pipeline forecast

This is the tool that removes the single-client dependency behind underpricing fear. It is adapted from the 13-week cash flow forecast that corporate treasury teams run, scaled down to a solo or small-team operation. Set it up once. Run the review every week from here forward, whether or not a rate increase is currently in progress.

## Why 13 weeks

Thirteen weeks is roughly one quarter: long enough to see a gap coming while there is still time to fill it, short enough that the numbers in it are real rather than wishful. A forecast that only looks two weeks out cannot warn you about anything. A forecast that looks a year out is mostly guessing.

## Setting it up

Build one row per week, thirteen weeks forward from today. For each week, fill in three kinds of money:

1. **Committed revenue.** Work that is contracted, invoiced, or otherwise certain to land in that week. Full amount, no discount applied.
2. **Probable revenue.** Open proposals and warm conversations that have not closed yet. For each one, record the estimated close date and a probability (25 percent for an early conversation, 50 percent for a sent proposal with no objection, 75 percent for a verbal yes waiting on paperwork). Multiply the deal value by the probability to get the weighted number that goes in the forecast.
3. **Fixed obligations.** Rent, contractor payments, software costs, loan payments, your own minimum draw. The number that has to be covered no matter what closes.

| Week starting | Committed revenue | Probable revenue (weighted) | Fixed obligations | Net position | Notes |
|---|---|---|---|---|---|
| | | | | | |
| | | | | | |
| | | | | | |

Repeat for all 13 weeks. Recurring revenue (retainers, subscriptions, ongoing contracts with a standing invoice) should be tagged separately in the committed column so you can calculate the next number.

## The recurring-revenue percentage

Add up recurring or retainer revenue across the 13 weeks. Divide by total revenue across the same period. That is your recurring percentage.

- **Below 30 percent:** This is the real volatility driver. Flag it to the owner directly: the fear of losing one client is a structural problem, because there is almost nothing underneath that client if they leave.
- **30 to 50 percent:** Getting there. Keep building recurring or retainer relationships alongside everything else in this skill.
- **Above 50 percent:** The pipeline can absorb a single client saying no. Treat 30-50 percent as a target range to build toward over time; every other phase in this skill still runs well before that range is reached.

## The weekly 30-minute review checklist

Run this every week, same day and time, on a standing calendar hold. It does not get skipped because nothing seems to have changed; a quiet week is exactly when a gap first becomes visible.

1. Roll the forecast forward one week: drop the week that just ended, add a new week 13 at the far end.
2. Move any deal that closed from "probable" into "committed" at its real value.
3. Update the probability on every open deal that had a conversation this week, up or down.
4. Look at weeks 6 through 13. Is there a gap where committed plus weighted-probable revenue falls below fixed obligations? If yes, that is this week's actual priority, not whatever else is on the to-do list.
5. Ask the question out loud: "if my biggest client said no to a rate increase today, does the 60-to-90-day forecast still hold?" If the honest answer is no, work on filling the gap this week, before touching the pricing conversation with that client.
6. Note the recurring-revenue percentage for the trailing 13 weeks. Track whether it is moving up or down over time.

This review has no end date tied to a specific rate increase. It is the system that keeps this exact fear from coming back with the next client.

# Cost-plus versus value-based: the decision test

Use this before quoting a new engagement, or before re-pricing an existing one. Do not let the pricing model default to "whatever I used last time" without running the test below.

## The two models

**Cost-plus pricing** starts from your time or your costs and adds a margin on top: hours worked times an hourly rate, or materials plus a markup. It answers the question "what did this cost me to deliver." It is easy to defend and easy to compute, and it caps your income at your hours, because the only way to earn more is to work more or raise the hourly number.

**Value-based pricing** starts from what the outcome is worth to the client and prices against that, independent of how many hours it took to deliver. It answers the question "what is this worth to them," not "what did this cost me." It rewards getting faster and better at the work instead of penalizing it.

## When each one fits

- Use **cost-plus** when the work is genuinely open-ended, hard to scope in advance, or billed as ongoing support with no clear outcome to price against (an hourly retainer for ad hoc requests, for example).
- Use **value-based** when the engagement has a definable outcome: a launch, a specific number moved, a problem solved, a deliverable handed over. Most well-scoped project work belongs here, even work that has historically been billed hourly out of habit.

## The practical test

For the engagement in front of you, ask two questions in order:

1. **What would it cost this client if the outcome went unsolved?** Put a real number on it: lost revenue, wasted spend, a missed deadline's downstream cost, a problem that keeps recurring. This number is usually far larger than the hours-times-rate number.
2. **Would the project still be worth taking at half the quoted rate?** Answer honestly, using the actual number you would quote today.

If the honest answer to question 2 is yes, the price is too low for what the work is worth, regardless of how many hours it takes. Say this to the owner directly, before moving to a quote, a script, or a notice. This is the moment to decide the model and the number, not after the conversation with the client has already started.

## Recording the decision

Log every decision in references/tracker-template.md (section 2) so the pattern across the whole book of business is visible instead of re-deciding from scratch every time. The table below shows the fields to capture.

| Client / engagement | Model chosen (cost-plus / value-based) | Why | Would it hold at half the rate? | Date decided |
|---|---|---|---|---|
| | | | | |
| | | | | |
| | | | | |

Review references/tracker-template.md (section 2) at the start of Phase 4 for a new lead, and again at the start of Phase 5 before drafting a notice for an existing client.

# The rate-increase playbook

Tactics for raising rates on existing clients without guessing your way through it. Read this before drafting anything for an existing client. Every draft this playbook produces stops at the owner for approval before it goes anywhere; nothing here authorizes sending a message on its own.

## 1. A fixed effective date with real advance notice

Give existing clients 60 to 90 days of notice before a new rate takes effect. A short notice window ("effective in two weeks") reads as an ultimatum. A long, fixed window reads as a business decision made in advance, which it is. Pick one specific date, not a vague "starting next quarter."

## 2. Frame around outcomes and value delivered, not your rising costs

The reason for the increase is never "my costs went up" or "I need to make more money," even when both are true. The client does not owe you a raise for your own cost pressures. The reason that holds up is what the engagement has actually delivered: specific outcomes, specific numbers, specific work completed. Anchor the new number to what the relationship is worth now, not to what it cost you before.

## 3. Grandfather current clients at a smaller increase; new clients start at the full rate

Existing clients who have been paying on time and working well with you get a smaller increase than the number you quote fresh leads. This recognizes an existing, working relationship rather than functioning as a discount, and it makes the increase easier to accept because it is visibly smaller than the full jump a stranger would pay. New leads, from Phase 4, start at the full new rate from day one. Over time this converges the whole book toward the same number without a single painful jump for anyone.

## 4. What to actually change in the notice

- Lead with the outcome or result, specific to that client, not a general statement about your business.
- State the current rate, the new rate, and the effective date plainly. Do not bury the number.
- Offer to talk it through if they have questions, rather than presenting the increase as a take-it-or-leave-it notice with no room for a conversation.
- Never apologize for raising your rate. An apology undercuts the outcome-based framing and signals the number itself is up for negotiation before the conversation has even started.

## 5. What never goes in the notice

- No invented result, deliverable, or outcome that was not actually delivered to that specific client. If the real outcomes are thin, that is information about the engagement, not a reason to pad the notice.
- No comparison to what other clients pay.
- No mention of personal financial pressure as the reason for the increase.

## 6. Sequencing with the rest of the clients

Do not send every existing client the same notice on the same day unless the business genuinely runs that way. Stagger notices by contract anniversary or by engagement type so a single bad week of pushback does not land all at once, and so each notice can carry that specific client's real outcomes rather than a form letter.

## 7. Budget for some attrition, on purpose

Expect that a small share of existing clients will decline the increase and leave; budget for it as a planned cost of correcting the price. Before sending any notices, look at the 13-week forecast (Phase 2) and confirm the forecast still holds even if the client receiving this specific notice leaves. If it does not hold, that is a pipeline gap to close first, not a reason to keep the old rate indefinitely.

# The underpricing tracker

One file, five sections. This is the durable record this skill reads from and writes to every time it runs, this quarter and every quarter after. Set the owner up with their own copy of this template (in whatever tool they already use for notes or records: a doc, a spreadsheet, a plain text file) the first time Phase 1 runs, and keep updating that same copy going forward. Never recreate it from scratch; that loses the history the recurring loop depends on.

## 1. Quarterly audit log

Updated every time Phase 1 runs (roughly once a quarter). Phase 6's annual ceiling recheck and next year's Phase 1 audit both compare against this history.

| Quarter | Date | Q1 (crunch-only raises) | Q2 (instant yes) | Q3 (still hourly) | Q4 (one-client risk) | Q5 (flat 12mo+) | Yes count | Verdict |
|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |

## 2. Per-engagement pricing-model decisions

Updated every time Phase 3 runs, for a new engagement or a re-priced one.

| Client / engagement | Model chosen (cost-plus / value-based) | Why | Would it hold at half the rate? | Date decided |
|---|---|---|---|---|
| | | | | |

## 3. New-lead quote log

Updated every time Phase 4 logs a quote outcome. Keep a running count of accepted-at-new-rate quotes here; Phase 4 uses three accepted quotes as the trigger to move to Phase 5.

| Date | Prospect | Rate quoted | Accepted (yes/no) | Reason if declined |
|---|---|---|---|---|
| | | | | |

Accepted-at-new-rate running count: ____ (Phase 4 moves to Phase 5 at three)

## 4. Rate-change log (existing clients)

Updated by Phase 5, the moment an existing-client notice is approved and sent.

| Client | Old rate | New rate | Effective date | Notice sent date | Outcome (accepted / renegotiated / left) |
|---|---|---|---|---|---|
| | | | | | |

## 5. Attrition tally

Updated by Phase 6 as clients respond to notices logged in section 4.

- Clients notified this cycle: ____
- Clients lost this cycle: ____
- Attrition percentage this cycle: ____%
- Budget ceiling: 10-15%
- Over or under budget: ____

## How to use this file

- Create the owner's own copy the first time Phase 1 runs, if one does not already exist; otherwise open the existing copy.
- Update section 1 every quarter, in Phase 1.
- Update section 2 whenever Phase 3 runs on a new or re-priced engagement.
- Update section 3 whenever Phase 4 logs a new-lead quote outcome, accepted or declined.
- Update section 4 the moment an existing-client notice is approved and sent, in Phase 5.
- Update section 5 as responses to Phase 5 notices come in, and check it against the 10-15% budget in Phase 6.
- Phase 6's annual ceiling recheck and Phase 1's next quarterly audit both read section 1's history to compare against.

# Worked example: quoting the new rate to a fresh prospect

This is a starting draft, not a finished script. Adapt every bracketed section to the specific engagement before using it, and present the adapted version to the owner for a yes before it is said or sent to anyone.

## Why this works on a new lead first

A new prospect has no history with your old rate. There is nothing to defend and nothing that feels like a loss to them. This is the cheapest place in the business to test a higher number, which is why Phase 4 tests it here before touching a single existing client.

## The worked example

**Situation:** A freelance web developer has been billing $75 per hour for small-business site rebuilds. The pricing-model decision (references/pricing-model-decision.md) showed this work is well-scoped enough to price by the project, and the honest answer to "would this be worth it at half the rate" was yes, meaning the old number was too low. The new target is a flat project rate reflecting the outcome, not the hours.

**Old approach (hourly, cost-plus):**
> "I bill $75 an hour, and a rebuild like this usually runs somewhere between 30 and 50 hours, so you're looking at $2,250 to $3,750 depending on how it goes."

This framing puts all the risk on the client (they do not know the final number until it is done) and prices the work by your time instead of by what a working, converting site is worth to their business.

**New approach (project, value-based):**
> "For a full site rebuild like this, one that's built to actually convert visitors into calls or bookings, I work on a flat project rate of $4,500. That covers the full rebuild, two rounds of revisions, and a working launch. I don't bill by the hour for this kind of work anymore, because the goal is the finished site that gets you more business, not the number of hours it takes me to get there."

What changed: the number is fixed and known up front, the reason for the number is the outcome ("more business"), and there is a plain, one-sentence explanation for why the pricing model changed, without apologizing for it or explaining your costs.

## The adaptable template

> "For [the specific deliverable], I work on a flat rate of [new rate]. That covers [what is included, concretely: revisions, launch, a specific scope boundary]. I price this by the project because [the one honest outcome-based reason specific to this kind of work], not by the hour."

Fill in every bracket with the real specifics of the engagement in front of you. Do not reuse the worked example's numbers or wording for a different kind of work; they belong to this one example only.

## Handling the two likely responses

**If they accept:** Confirm the scope and the rate in writing before starting, and log the accepted quote in references/tracker-template.md (section 3) per Phase 4, step 17, so the running count of accepted quotes at the new rate stays accurate.

**If they push back on the number:** Do not immediately drop the rate. Ask what specifically feels off, the scope or the number itself, and address that directly. If they decline outright, log the decline and the reason if one was given, in references/tracker-template.md (section 3) per Phase 4, step 18. A single decline doesn't settle whether the number is wrong; wait for a pattern across several new leads before drawing that conclusion.

# Rate-increase notice template (existing client)

This is a draft template only. Every field in brackets must be filled with that specific client's real details before this is shown to the owner, and it is never sent, scheduled, or queued without an explicit yes from the owner on the exact drafted text. Silence is not approval; a request for edits means revise and re-present, not send.

## Template

> Subject: An update on our rate, effective [effective date]
>
> Hi [client first name],
>
> I wanted to give you plenty of notice on a change to my rate. Starting [effective date, 60-90 days out], the rate for [the specific service] will move from [current rate] to [new rate].
>
> Over the past [time period], we've [one or two specific, real outcomes actually delivered to this client: a result, a number, a deliverable, a problem solved]. This new rate reflects where the work is now, not where it started.
>
> As a client we've been working with for a while, you're moving to [new rate], which is below what a new client starts at. Nothing about how we work together changes, this is just an update to the number.
>
> Happy to talk through any of this if you'd like. Otherwise, the new rate takes effect on [effective date] and everything else stays the same.
>
> [Owner's name]

## Worked example (filled in)

> Subject: An update on our rate, effective March 1
>
> Hi Dana,
>
> I wanted to give you plenty of notice on a change to my rate. Starting March 1, the rate for the monthly content and email work will move from $1,800 to $2,400 a month.
>
> Over the past year, we've grown your email list from about 900 to just over 3,100 subscribers, and the last two launches both cleared your revenue targets. This new rate reflects where the work is now, not where it started.
>
> As a client we've been working with for a while, you're moving to $2,400, which is below what a new client starts at for the same scope. Nothing about how we work together changes, this is just an update to the number.
>
> Happy to talk through any of this if you'd like. Otherwise, the new rate takes effect on March 1 and everything else stays the same.
>
> Sam

Note the two real, specific outcomes in the example (the subscriber growth number, the launches clearing targets). If the real outcomes for a given client are thinner than this, use whatever is actually true and specific rather than padding the notice with something that did not happen. A shorter, honest notice holds up better than an inflated one.

## Before this goes anywhere

1. Confirm the current rate, new rate, and effective date are correct for this specific client.
2. Confirm both outcome sentences describe things that actually happened for that client, not a generic result copied from another account.
3. Show the complete filled-in notice to the owner and stop. Wait for an explicit yes on this exact text in this turn.
4. Only after that yes does the notice go out, and only through the channel and method the owner specifies.

Run the five-question audit in this skill once. Three or more yes answers means underpricing is very likely present; zero means pricing probably is not your real problem.

Underpricing fear is rarely about nerve. If one client's payment is what keeps the business solvent, a no to a rate increase feels like a no to the whole month; building a pipeline forecast that doesn't depend on that one client removes the fear at its source.

Start with new leads. Quote the new rate to fresh prospects first, and once a handful accept it, you have market proof to bring to existing accounts.

Give real notice, commonly 90 days, and do not apologize for the increase in the notice itself.

Set an attrition budget before you start: decide in advance how many clients you are willing to lose, so a decline is a planned, budgeted outcome.

Run the cost-plus versus value-based test on the specific engagement in front of you. If the project would still be worth taking at half your hourly rate, the price is too low no matter how you bill it.