Pricing models for working with freelancers in technology.

We have covered about planning on pricing in some detail in our previous two articles:

and

These are detailed introductions about the objective ways of pricing.

In this article, wanted to explain the pricing models so that it puts you in a comfortable position to choose your the model which suits your way of work.

  1. Hourly Pricing (a time slot based pricing): This could also be modified as daily pricing or weekly pricing or monthly pricing.

Hourly pricing is mostly used and encouraged by most freelancing websites. Reasons being,

a. Hourly payments are easier to track and maintain especially by the freelancing marketplace.

b. The client knows that the billing is done according to some measured factor and the developer may not overcharge the client for the same work.

c. Also gives the developer a sense of worth of one’s time.

Where this process might not succeed:

a. Hourly pricing could measure the amount of physical labor one is doing but might fail to measure the intelligent work which goes behind the labor. Example: It may have taken quite a while to create an algorithm to solve the issue as required by the application, but writing that into code might take little time.

b. As a few research studies have shown that a human is productive for around 3 hours per 8 hours of work. There is a good chance that an average freelancer might be in this routine too. So, the client might not be paying only for the net effective hours.

c. Determination of the price of one hour(or a time frame) is subjective. A lot could vary between developers of various quality and backgrounds.

2. One-time pay: In this case, the client and freelancer agree to a one-time payment at the end of the project.

Pros:

a. No hourly tracking and no micromanagement on project progress.

b. Freedom on working schedules and freedom on trying out new tools/stuff. Learning happens the most when one puts knowledge to practice.

c. One time payment reduces the headache of keeping a track of the pay schedule(s).

Cons:

a. For a longer project, a freelancer may have to put effort for long without pay as payment will only be released at the completion.

b. As software development is understood, the initial requirements may change after a while. A change in feature or design change might be requested mid-project and that probably would be covered in the same pay.

3. Milestone Based Payment: Divide a large project into manageable chunks/milestones. On completion of each milestone, the payment can be done.

Pros:

a. Both freelancer and client are involved with the progress of the project.

b. Incremental work can be judged and feedback can be taken.

c. Changes in requirement can be implemented between milestones, hence more flexibility in work.

Cons:

a. Since both the client and freelancer would be actively involved in this work process, very few cons. A possible con is cheating, which can be mitigated on the case to case basis.

4. Value-Based Pricing: In this case, freelancers price their work by the value they provide to the client.

This book:

is probably the best resource for learning “Value-Based Pricing”. Please read this. It is a short read, maybe max 1 hour and has lots of value. Moreover, it's free.

I would only recommend (and as it suits) value-based pricing to the business process of experienced freelancers who have established themselves in the market, who can command the percentage in profits.


Other cases:

Taking advance payment: If you could show promise of work and want to freeze some deliverable as a promise of guaranteed work, you could convince the client for some money as advance. This safeguards guarantee of work from both sides.

Non paying clients: A very difficult situation, especially if terms of business were not clarified from the beginning. Try to deliver as promised as long as client cooperates. If not, avoid non paying clients.

Accepting a cut(discount) in payment: Offer a discount to customers as a goodwill but do not cut into your base minimum price.

Who will pay for the resources(hosting, tools, art, pictures ..): I usually recommend that the freelancer should not pay for any resources from their own pocket. If the client doe not want to buy, they you may buy it for them, but please mention the appropriate charges in the invoice. But each business deal could be a completely unique scenario. It is important to show what resources or materials are going in building of the project, so both parties have the clarity.

Charging for preparation of quotation: There are occasions when a client asks for a quotation of work to be done. A freelancer could be more than eager to prepare a beautiful and well researched quote to impress the client. Sometimes (very rarely though) the clients just take the quotation and do not return calls. The hours spend in preparing the quote might go wasted.

Maybe, you could charge for preparation of an elaborate quotation. Or maybe you could give a very rough ballpark estimate of what could be expected. So be wise and do not over commit before you get the work in a written format.


We host the Freelancers meetup in Bengaluru every alternate Saturday and in Hyderabad once a month, where freelancers get to discuss various aspects about their freelancing related experiences. If you are interested, please do come by.

For some reason, if you are unable to attend the meetup, please feel free to register at CrowdShakti, so that we can reach out to you with opportunities. Follow us on Facebook, Twitter and Instagram for meetup and related updates.

CrowdShakti

Work with experienced software professionals cost-effectively.

Balachandra Tejaswi Bitra

Written by

Marketer for freelancers | Top Quora Writer 2018 | Freelance web designer

CrowdShakti

Work with experienced software professionals cost-effectively.

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