Freelancer’s Guide to Pricing

As a freelancer you are often faced with that complicated issue of how do you price your services. If you have been in business for several years you slowly get a hang of it but as you first start off you seem clueless. Your first instinct may be to google how to set rates and compare your hourly rate to what a “professional” may earn. There is no set method for figuring out pricing but there are a few principles that you can follow in order to more effectively and profitably set rates that work for you.

Hourly Vs Project Rates

Some designers prefer to set an hourly rate for their work and bill the client for their hours later. However, nearly every time you give the client an hourly rate they will ask you for your estimate of how many hours it will take. The conversation usually goes as follows:

You: I charge $X per hour.

Client: How long will this project take then?

You: The project will take somewhere between A to B hours.

Client: Can we try to keep it closer to A hours?

When you quote a client on an hourly rate the both of you will nearly always have this conversation and create a range for how much the project will cost. I prefer to skip this step entirely and give the client a total project amount. I do this for three reasons.

1. Avoid the awkward conversation above where you have your client essentially asking you for a discount.

2. When you set a total rate it gives the client a sense of security. They know what to expect from you.

3. When you set an hourly rate it creates a competition between you and the client. The client is aiming for the lowest amount of hours possible while you are aiming at creating the highest quality product possible.

After you set a total project rate then either one of the following two things will happen. Your spend less time than expected so the project becomes profitable (in that case congratulations). Or you spend too much time on the project so it becomes unprofitable or worth much less than you desired. If you are scared of the latter happening to you then that leads me to the next point.

Margin of Safety

The concept of margin of safety is a finance/investing term that applies to this case. The margin of safety is based on this simple concept: If you want to earn $20 per hour then you should charge your client $30 or even more per hour.

Any professional designer can tell you that the longer you work the more likely bad shit will happen. Clients will demand revisions, poorly communicate ideas, or negotiate a price with you once the project is finished.

As a freelancer you understand that you are in a risky business so it’s important that you manage that risk. A margin of safety is simply a tool for managing that risk. If you create a large enough margin of safety then you can rest at ease knowing that you may spend a couple extra hours than you intended. Best case scenario you work exactly as long as you expected and you earn more than your hourly rate. Once you know what your hourly rate is and how much extra you want to charge the client then you must finally decide how much time the total project will take. This is largely based on the client.

Estimating Hours

Client work is somewhat counterintuitive in pricing. There are a few factors that you need to pay attention to when estimating the total amount of time it will take for the project to be complete. Some of which are:

Client’s availability

The fastest projects I’ve had are the ones where the client made themselves the most available. The more available a client is the faster the project will be. This is because it allows you to get feedback on your work and including the client in the project leads to more desirable results which also lead to less revisions. The busier your client is then expect your project to drag on for a longer period of time which can effect your hourly rate.

Client’s expectations

It’s incredibly important that you gauge a client’s expectations before you start estimating a rate. There is a strong possibility that your client will ask you for something fairly complicated but request a quote that is much lower than appropriate. This is where it is up to you as the skilled freelancer to educate the client on the process and tell them why the work will take much longer than they expect. If you want to find out what a client’s final expectations are then ask them to show you work that resembles what they have in mind. This helps give you a clearer sense of direction and it helps you to discover what you are in for.

Client’s budget

There will be instances where the client has a budget that is smaller than what the project demands but it is a project that you want to take on regardless. Maybe you are friends with the client, the project is intellectually stimulating, or you need to build up your portfolio. Those are all legitimate reasons but it is important that you understand you will likely take a loss on this project in exchange for that intangible future reward.

Conversely, you may be lucky enough to have a client that has a budget that is well above what you expect for a project. If you are lucky enough to be in this position then use that larger budget to your benefit. You may feel that you are taking advantage of your client but can avoid that feeling. Spend more time refining your work and invest more of your energy in the design process (research, sketching, etc…). By spending more time and working harder to deliver a quality product you can create a win win scenario. You advance to the next level by adding a strong piece of work to your portfolio and you deliver well above your client’s expectations.

After reading this you may well conclude that there is no magic formula to calculating a price for your work. However, if you take all of these factors into mind and are self aware about your own expectations then you can confidently navigate the ambiguous financial part of being a freelancer.