The freelancer’s guide to pricing: 3 things every freelancer must know before making a deal
When it comes to the freelance market, nothing is more variable than pricing. For any freelancer, the topic can be overwhelming as we balance our desire to maximize profits with our necessity to agree upon a fair cost that fits within our client’s budget. There are numerous factors to take into consideration when it comes to pricing your time and work: experience level, market prices, project scopes, revision costs– the list goes on. In this post, I’m going to share some of the most valuable pricing tips that will help every freelancer conserve time and maximize their bottom line — tips I wish I had known prior to beginning my freelance enterprises.
Choosing your method: Hourly or Project-based
Forget “to be, or not to be.” If Shakespeare were a freelancer, he’d be asking himself the real golden question: “should I price by the hour, or should I price by the project?” The truth is that it totally depends on the job, and it is important that you gauge your client’s specific needs and personality prior to deciding whether to price by the hour or by the project. If you don’t, you could find yourself regretting your quote.
In my experiences, hourly pricing has always worked best in two types of situations.
First, I recommend using hourly pricing when the client is unclear about the exact deliverables they want and may even be treating the project as a “play it by ear,” experimental type of project. In these circumstances, timelines may be loose, and therefore it can be difficult to scope out the whole project from start to finish. Also, these types of projects are highly susceptible to “scope creep”– that is, when clients decide they want more than what they originally asked for, midway through the project. By billing hourly, you can be sure you are compensated for every ounce of time you spend and every bit of value you add.
Second, I’d recommend hourly-based pricing for jobs that you anticipate will require a high number of iterations. This can be dependent upon two things: the project type, as well as the client.
Regarding project-type, there are some jobs that can inherently warrant numerous rounds of revisions. For example, if you are designing a slide deck for a startup company, not only may they want you to tweak the layout of each draft you send them, but it is also possible that they may modify their copy, stats, and other content on short-notice, requiring you to return to the project many times. Likewise, if you are a consultant or strategist that physically meets with clients, whether in-person or digitally, it is wise to bill them hourly so that they are conscious of your time, which is where you are adding most value.
In terms of the client, it is quite simple. Some clients are very picky and even indecisive. If this is the case, you are likely to receive detail-oriented requests for changes or additions that you did not originally anticipate, so billing hourly allows you to account for this.
In summary, I recommend billing hourly in the following circumstances:
- Project warrants an unfixed number of iterations
- Loosely specified deadline/timeline/deliverables
- Picky or indecisive clients
- Anticipate “scope creep” during the project
- Projects that require meetings or calls with the client
From what I’ve experienced, the decision of whether or not to use project-based pricing depends on two things: familiarity and productivity.
The decision of whether or not to bill by project is almost entirely a matter of familiarity. Fixing your pricing is best for projects or jobs that you are very familiar and can therefore predict the typical range of hours requested to complete the work required. It is important that you can easily break down a project into your own streamlined process or scope of work with milestones, deadlines, and specific deliverables.
Productivity-wise, if you have reached a certain level of expertise in your trade, you may be able to get things done wicked-fast. As a result of you spending less time, your hourly rate would increase accordingly to reflect the value you are adding in each moment of work you provide. Nonetheless, some clients may be scared by a relatively higher hourly rate and may not understand your justification, therefore by packing the project within a single price, you avoid any speculation as to whether or not your time is really worth the hourly rate you are proposing. This gives you the freedom to complete more projects in a shorter amount of time, while generating even more revenue.
In summary, I recommend project/package-based billing when:
- You are familiar with the project and can easily break down the process
- You have an exact timeline of milestones, their corresponding deadlines, and deliverables for the job
- You are highly productive or even specialize in the specific kind of project being requested
Selecting the right price
After you know how you’re going to charge your client, your next step is actually choosing what you will be charging them for the work you will complete. Whether you choose to bill by the hour, or by the project, the tips below will help guide you to choosing the best price for the project.
Create a pricing menu
I am a huge proponent of transparent pricing, for a multitude of reasons. By creating a list of your service offerings in package-format (i.e. all deliverables laid out) along with their per-project or hourly cost, you will find yourself saving a tremendous amount of time when pitching to clients or creating proposals. Keep in mind that these prices and packages do not need to be 100% set– you can always modify the prices or specific offerings on a per-case basis, and it is wise to inform your prospective clients of this.
That said, most freelancers can relate to the following scenario: we have a lead or a prospective client who is interested in our services. We meet them for coffee or have a phone call, where we explain to them all of the tremendous services we can provide for them to help them grow their businesses. The client is excited and asks for a quote/proposal. We spend hours putting one together just to be left in the dust or to find out that we are out of their budget range. Creating a pricing menu eliminates this issue from the start by acting as an “interest threshold” for the prospect. When they express interest, rather than spending time in a meeting or a call, you can preface any formal conversation by sending them the pricing menu, giving them the opportunity to see the service you offer and their corresponding costs. This way, if they are genuinely interested and can afford to play in your price range, they will follow up with you and seek further action. Otherwise, if they are not interested, you have saved yourself a tremendous amount of time and proposal-writing.
Aside from this, clients love seeing exactly what they are going to receive and how much it will cost, all in one place. When I started doing this for my own consulting firm, my sales skyrocketed and so did my productivity; this is one of the reasons why our platform Meelance uses project-based pricing. Having most of my offerings and prices laid out ahead of time limited the amount of cost-negotiation with my clients and it made it easier for me to provide ballpark estimates to people interested in our services.
Know your prices, and know the market’s prices.
Even if you don’t charge clients by the hour, it’s important for you to have an hourly rate– that is, knowing what each hour of your time is worth. And it’s equally important to do your research and see what freelancers, independent contractors, firms, and agencies in your industry are charging for the services you are offering. You can then use your experience and productivity levels to determine where you fall on this spectrum. And knowing where you compare to the rest of the market will be helpful in justifying your prices to potential clients.
I also recommend establishing a personal price “buffer zone.” It is inevitable that some clients may try to drive you down on prices, so it is important to know just how low you are willing to go. When I started freelancing, I charged $70 / hour for graphic design work, but I knew that if a project was really worth it to me (e.g. large number of hours, promise of ongoing future work, general creative appeal to me, work benefiting a non-profit, etc.) I’d be willing to negotiate my rate as low as $50 / hour, but no lower than that. This helped me make sure that clients did not undervalue my work and that I never got tempted to do the same.
Avoid the dead giveaway: “It depends… What is your budget?”
When a prospective client asks how much something will cost, it is imperative that you avoid the tempting deathtrap of an answer: “It depends on your budget.” Most clients can see right through this answer: you want to know how much they are able to spend and therefore how far you can stretch their wallets– to a potential client, this is a turnoff. And more likely than not, for a client that’s never hired, say, a web design or graphic designer before, they may throw out an outrageous budget that is impossible to work within, simply because they are clueless. Then from that point forward, you are convincing them to “overspend” in their minds. Instead, you should use market prices and your hourly rate to provide multiple options for them to choose from. For example, a web designer could lay out a “Basic,” “Standard,” and “Elite” offering, each with its own price and set of deliverables, getting progressively more complex as the price increases. Then, he or she can subtly ask, “Let me know how these packages fit into your budget.”
Pricing can evolve.
It’s simple. As you grow in ability, experience, and efficiency, your prices should likewise increase to reflect the added value you are providing to your clients. No matter how much awful platforms like Fiverr will contradict this, your work is not a commodity, and you deserve to be fairly compensated. When it comes to price evolution, I recommend using projects and portfolio pieces as milestones at which you increase prices. Early on, when you have a smaller portfolio, you may charge a bit less. But each time you complete a new project that you are proud to showcase, it is a great time to increase your prices, for you then have evidence that your skill set has improved and your experience has increased.
Make sure you’re actually getting paid
Whether you are freelancing on or off of a web-based platform, let’s face it: it is easy to be blown off by a client, either because they bail on the project, or because you bill them but never follow up about unpaid invoices. There are a couple key ways to eliminate this threat.
Require a deposit.
This is crucial. If your client cannot pay you up front, chances are they will not be able to pay you by the time you have completed their project. Depending on the project, I recommend requiring between 20% and 50% of the total estimate up front; for any project about $500 in value, I always require 50% of the balance paid up front before the project begins. It is wise to have all of this in a written agreement before starting the process. For longer, more complex projects, I’d also recommend splitting the project into milestones that must be pre-funded by the client prior to proceeding; this is how Meelance insures that its freelancers are always getting paid for their work.
Maintain control of your intellectual property.
Until you have been paid in full, it is crucial that you maintain control over your intellectual property. You never want to hand over website domain control, vector files of logos, photos without watermarks, etc. until you have been paid for your work and the respective ownership, licensure, or whatever else is agreed upon. This way, if your client is late on payment, or even refuses to pay, you can, for example, take their website off line or withhold any files you created from them, ensuring that you do not get taken advantage of.