The most you can charge is the perceived differential value you provide. So, if the client perceives that you will make them an extra $1M compared to the alternatives, you can charge, say $300K. If you have to do 100 hours of work to do that, don't say that your rate is $3,000/hr. Just say that the $1M costs $300K.
You don't always get a clearcut case like that, but the key, as @bdunn mentioned, is that you need to help the customer in a way that other commodity providers can't. Writing Ruby code or working with Photoshop is a commodity. The market sets the rate for those services. But if you can use those skills to reduce costs, increase web conversions, etc, you can provide increased differential value.
I've helped a lot of small business owners work through these scenarios, and then come up with numbers that "don't feel right." They don't want to charge what they're worth. Then we have a conversation like this:
"I agree with you that it's worth it, but I just don't feel like I can charge that much."
"Why not?"
"It just doesn't feel right?"
"You believe in helping your clients, right?"
"Of course."
"Would charging the higher rate help you provide more resources and increase the customer's return?"
"Probably."
"So why are you so hung up on your own feelings that you're hurting your clients by not charging them properly?"
OK, it's a bit silly, but it's a real conversation I've had many times. When they are convinced in their head but not in their gut, I ask them to literally practice talking about price in front of a mirror. Do it so that it sound confident, comfortable, and unapologetic. Your customer is getting a great deal! Of course they should want to do this. Steve Jobs never apologized for the fact that a Mac had a higher price than many PCs-- it was just a great deal if you wanted to do certain things.
Feedback is that practicing in front of a mirror really helps. ;-)
This is true in some cases, especially if they don't perceive the value, or they are so cash-strapped that they can't execute on the plans that would really help them.
However, this is often an excuse to avoid having the pricing conversation. I've worked with people who have raised rates on existing clients by 30% without losing any of them.
Usually, though, you'll lose some clients who don't perceive the value and are a giant pain, anyway. You'll get to do better, more interesting work for most of your clients, who will magically start treating you better, and you'll get to do work for a new set of clients who treat you better than the ones you lost.
(Of course, value is not something you assign to a project. It's what the buyer perceives. You can help frame the perception, but it's got to be credible.)
You don't always get a clearcut case like that, but the key, as @bdunn mentioned, is that you need to help the customer in a way that other commodity providers can't. Writing Ruby code or working with Photoshop is a commodity. The market sets the rate for those services. But if you can use those skills to reduce costs, increase web conversions, etc, you can provide increased differential value.
I've helped a lot of small business owners work through these scenarios, and then come up with numbers that "don't feel right." They don't want to charge what they're worth. Then we have a conversation like this:
"I agree with you that it's worth it, but I just don't feel like I can charge that much."
"Why not?"
"It just doesn't feel right?"
"You believe in helping your clients, right?"
"Of course."
"Would charging the higher rate help you provide more resources and increase the customer's return?"
"Probably."
"So why are you so hung up on your own feelings that you're hurting your clients by not charging them properly?"
OK, it's a bit silly, but it's a real conversation I've had many times. When they are convinced in their head but not in their gut, I ask them to literally practice talking about price in front of a mirror. Do it so that it sound confident, comfortable, and unapologetic. Your customer is getting a great deal! Of course they should want to do this. Steve Jobs never apologized for the fact that a Mac had a higher price than many PCs-- it was just a great deal if you wanted to do certain things.
Feedback is that practicing in front of a mirror really helps. ;-)