Have you ever had problems figuring out your freelance pricing?
Even if you’ve been freelancing for a long time, pricing might still be a challenging task for you.
The reason is that money is usually the most critical factor for both sides, and unfortunately, there is no concrete rule for pricing. Many freelancers doubt how much they should charge for their work. Of course, the more experience you get, the fewer problems you’ll face in this regard.
If you’re one of these who doubt their freelance pricing, you’d better read this article to know different ways to price your services with minimum problems.
4 Types of freelance pricing structures
If you’re a beginner, you need to know the 4 different pricing structures freelancers usually use to set their rates. This can help you to offer a fair price according to your condition.
Hourly: set a price for your time
Although you’re not a full-time employee, you have to earn everything a full-time employee with similar skills has.
As you know, full-time employees have:
- Health insurance
- Retirement benefits
- Consistent work and payment
- Necessary software
And some other perks.
When you’re using hourly for your freelance pricing, you need to consider all of these, such that you can buy them yourself.
You can divide the monthly salary of a similar employee, add these prices to it and then divide it by the hours you work for the company.
Apart from these factors, you need to consider standard rates in the market to offer a competitive price. For example, you can search for a social media manager’s salary to know how much you should offer as a remote manager to a company.
Here are several advantages of hourly freelance pricing:
- It’s easy for beginners
- It causes less misunderstanding
- The client knows your rate for the future projects
- If you underestimate the time, you’ll still get paid for your time spent
This type of freelance pricing also has some drawbacks such as:
- You’ll be paid less if you do the job efficiently
- The client will frequently ask the remaining time because they pay hourly
- You can’t be free when doing a project, and you need to track the time
- You need to be worried about other freelancers who offer lower prices
Project-based: set a price according to the project
When you offer a price for a particular project, the clients know how much exactly they have to pay, which is excellent for them and easy to predict.
You should price your projects according to the time you think it will take to be done. Try to talk with the client in detail to understand the scope of work for the project. This can help you precisely estimate how long the project will take and offer a fair price accordingly.
Here are several advantages of project-based freelance pricing:
- Clients are usually satisfied because they know exactly how much they’re going to pay
- Clients can understand the result and the efficiency better
- If you finish a project in less time, your hourly earnings will rise
Of course, this method also has several disadvantages like:
- The client wants the project to be done as quickly as possible, and this might put the quality at risk
- Estimating the time of the project might be difficult, especially for beginners
- You need to have a new contract for each project
- You run the chance of over-charging and losing a job
Value-based: set the value price
Value-based pricing is another kind of freelance pricing. It’s based on the customer’s perception of the benefits your project can bring to them. It is also known as customer-based freelance pricing, value pricing, or even value-optimized pricing.
In value pricing, you need to estimate how much your project is worth to your customer no matter how much time you need to spend on that project.
Obviously, setting a value-based freelance price is much more difficult than hourly pricing. Estimating the value of every single project requires a lot of experience and understanding.
For example, if you design a logo for a Fortune 500 company you’d charge a lot more than you would for a small mom-and-pop shop in a small town.
Here are several advantages of value-based freelance pricing:
- It’s not related to your time
- It’s of interest to your clients
- You can potentially make a lot of money per hour
- The higher quality, the more money
This method also has several disadvantages. Here are some:
- Estimating the value is difficult, especially for beginners
- You need to have experience in every single project
- You need a new contract for every project
Retainer: flat fee for a set scope of work
As you can see, in all the above methods of freelance pricing, the freelancers’ income is unstable. The solution to this problem is to go for retainer clients.
Retainer clients pay you a predetermined amount per month, and they provide you with a steady earning. For a freelancer, retainer clients are the best options to have a life similar to full-time employees.
This is a great option for those freelancers who are looking to have a consistent and reliable recurring income.
Although this is a reliable source of income, you need to be careful and have a solid contract. Many of the influencers who are working with retainer clients are under-paid.
Generally, working with them have several advantages such as:
- Providing a set, reliable income
- Not needing to spend as much time in finding new clients and projects
- Reducing communication tasks
And some disadvantages like:
- You’re not so flexible because they’ve bought your time
- Clients feel free to ask for other tasks in the project
- Scope creep
Best freelance pricing for a beginner
Initially, it’s best to start billing hourly because it’s great for beginners who don’t have a lot of experience. This method is quick and easy to learn.
Keep your eyes on the market to estimate the hourly rate accurately. Remember that if you offer a price much higher or less than the average rates, the client will see you as a non-professional person.
When you’re doing projects based on hourly pricing, try to think about the value of each project to be prepared for value-based pricing in the future.
After a while, you’ll be able to estimate the value of each project based on the time you need the spend on it, and the money clients will pay for it.
Get feedback from clients to collect enough data to help you when you want to start aiming for value-based pricing. Postpone transitioning to value-based pricing until you have enough data for quantifying the value of different projects.
Always look for new opportunities to raise your hourly rates, but avoid doing it so often you lose clients. If you have an opportunity in a specific project to finish it quickly, you can take your chance with project-based pricing to earn more money. Also, it’s a good idea to use freelance invoicing apps to get paid faster and save you time.
How to determine your freelance pricing
Apart from what we said above about pricing, you need to consider several important factors to determine freelance pricing.
Here are five important factors:
Skills and experience you’re bringing to the table
When you’re offering freelance pricing, you need to consider the difficulty of doing the project. Always ask yourself, “what skills does someone need to do this project?”
The more specialty skills a project requires, the higher price you can charge.
Ability to work with different tools and platforms, communication skills, managing skills, programming skills, and team-working skills play a crucial role in the price, too.
The region your client is based in
As you know, pricing levels vary by country because the value of each country’s currency and the level of people’s income are really different.
So if you have clients from different regions, you might consider offering different rates. Of course, if you have enough clients from wealthy countries and cities, you don’t need to be worried about it.
The size of the client’s company
Remember that not all clients can afford expensive pricing. If you don’t have bigger companies as your clients, try to offer lower prices to be able to get projects from small businesses and startups.
Don’t worry if you’re earning less than what you expected when you first start. Many times, these small businesses grow, and they will offer you more lucrative projects. Also, as you get more experience working with small clients, you can go for big companies and offer higher freelance prices.
However, don’t take on jobs that are undervaluing your work if you can afford to pass on them.
The number of projects the client orders
Remember to take special care of your loyal clients. When a client drops bulk orders or gets back to you on every occasion, you could consider giving them a better pricing structure than other, more difficult clients.
This makes the client believe that you understand and respect their loyalty.
The application of the project in your future works
Another matter that can affect your freelance pricing is if the work might benefit your future projects. For example, if you write a program that might be helpful when collaborating with other clients, you might take a bit of a price cut with that in mind.
But if a project is specifically useful for that specific client, you can offer higher prices. The more customized a project is, the higher the price should technically be.
Freelance pricing mistakes to avoid
Although there is not a certain rule for freelance pricing, there are several mistakes that you should not make.
Here are six freelance pricing mistakes to avoid:
Insisting on the lowest rates
As a beginner, you might feel the need to lower your prices to be able to compete and stay in the market. Remember that insisting on this approach can diminish your reputation in the long term.
The reason is clear. If you hear the prices of two models of a device or project, you’ll spontaneously think that the more expensive, the higher the quality. As you know, many customers don’t know much about the details of products/services and might judge books by their covers.
Offering the lowest price for your project might make your clients think that you’re not as valuable. So try to find a price that isn’t rock bottom, but something you’re still comfortable charging. You also need to be careful not to lose loyal customers.
Lack of a concrete MAR
This one might be a bit related to the previous mistake. A Minimum Acceptable Rate (MAR) is something many freelancers forget to define.
A minimum rate is usually defined based on your cost of living. If you don’t estimate this rate correctly, you’ll find yourself having to face many problems.
Apart from the difficulty in talking customers into accepting your future offers, your personal budget will not be enough for your expenses.
You might even be forced to reject some project to meet your MAR. This will help you establish yourself as an expert with discipline and redlines.
Comparing your prices with other freelance pricing
Another serious mistake many freelancers make is comparing their prices with others. They usually think that this helps them convince customers to accept their prices.
But this is not completely true. The first reason is that this is against professionalism. In fact, each professional has its own rates, that is, of course, determined by their own experience.
Asking your client to compare your prices is not a good way of proving unrealistic pricing anyway. In sum, you have to know your work’s value and insist on it.
Not considering the impact of important factors like COVID-19
Depending on your industry and the type and level of your work, your job might be impacted by different situations. For example, the COVID-19 pandemic has hit many businesses and put a heavy burden on their resources.
If you don’t consider these effects, you might lose your loyal clients. Try to put yourself in their shoes and estimate the value of the project based on the new normal. You can offer them special discounts for a specific time period.
This is what many social media influencers who work as freelance affiliate marketers have done during the crisis. Many of them cut their rates to stay connected with their clients and encourage others to work with them. Remember that they might be making less money for social media posts, but they’re strengthening their partnership with their clients.
Not offering different options
Offering different options to clients makes them believe that you’re a professional and gives them the flexibility to choose.
For example, you can offer options based on the number of projects. Here is a good example:
- One project: 4*x USD / project
- Two projects: 2*x USD / project
- Four projects: x USD / project
This will encourage clients to offer more projects to pay less money for each one.
Not searching for the available range of prices
One of the easiest ways to accurately understand how much you need to charge is by joining freelance communities.
Try to make freelance friends in your industry and keep in touch with them to know the acceptable range for projects. In particular, you can make partnerships with niche influencers to keep up with the latest trends.
If you don’t search enough, you could be underpaid or not be able to increase your rates. One benefit of keeping in touch with your community members is that you’ll be up-to-date with the newest prices and trends.
You can even use social media polls to get feedback from other freelancers about the value of different kinds of projects. You don’t need to be so specific if you’re not comfortable. You can only mention the type and level of the project.
Ready to set your rates?
Pricing is a critical factor in your success as a freelancer. Using the tips above, you can successfully set your rates and work your way up as you gain experience. Remember that practice makes perfect, so keep these tips in mind and keep testing your freelance pricing until you’ve found the right balance.
Keep the conversation going...
Nearly 10,000 of us are having daily conversations over in our free Facebook group and we'd love to see you there. Join us!