One of the scariest aspects of freelancing is pricing your services. You know you are talented and should be properly compensated for your work, but you don’t want to overcharge and be beat out by the competition. Or you undervalue your services because you’re so good at what you do that it seems like highway robbery to charge a decent price.
Let’s face it: there are always going to be freelancers who charge more than you do and others who charge less. You have to create a pricing policy that works for you and accept that sometimes you won’t get the job.
Based on your experience and expertise, decide whether you will charge on the higher or lower end. Figure out what hourly rate is worth your time and effort, and below what price you prefer to refuse the project. Then come up with a pricing method which is based (possibly loosely) on this hourly rate.
Some freelancers charge the client by the hour, but this system has a number of disadvantages. It causes you to work mechanically rather than produce value. Working faster means you get paid less, so there’s no incentive to produce quickly. And you give clients an opening for complaints and demands to account for every moment of your time. However, there are certain types of work, like social media marketing, where an hourly rate puts an end to expectations that you will be working day and night.
A daily or weekly rate takes the emphasis off accounting for each minute of work and focuses instead of what results you get at the end of that time. If you use this method, make it clear that even if the work week is shorter (because of a national holiday, for instance) you intend to accomplish as much as in a regular week. To make this system work best, do all business administration tasks on the weekend, leaving the weekdays free for dedicating to your client.
Flat rate pricing is a popular method, which can go really well or really badly. If you overestimated how long the project would take, you will make lots of extra money, but if you underestimate you are stuck with the unfair pricing. And if you or your client change the scope of the project after you start it, you’ll end up wasting time calculating a new flat rate. If you charge a flat fee, don’t forget to include meetings, task management and last-minute requests for changes into your time estimate, and “overcharge” a bit so you have a some wiggle room.
As opposed to a flat rate, where you charge the same fee to each client for similar work, a value based fee takes into account how much money the client will save as a result of your work. The company hiring you is investing in its future and will likely be happy to pay a certain percentage of what it hopes to gain in revenue in the long-term.
In the real estate and e-commerce market, conversion based pricing is widespread. In this system, you only get paid if there are conversions (i.e. sales). This is of course a risky proposition since if you aren’t successful, you lose out big time. But if you have a proven track record and are confident enough in your skills, this type of pricing might work for you.
Another payment option is the retainer model. You calculate how much time you expect to spend on a project and charge a set monthly fee. This works well for long-term projects, and makes it easy for you to set aside time in advance to dedicate to a specific task. It also helps you predict what your salary will be for that month.
Experiment with different pricing options until you find the one that works best for you and your clients. You may also want to use more than one system, factoring in the project and the specific client to determine how to charge each time.