When starting out in any self-employed venture, your pricing is one of the hardest things to determine. Whether you’re a freelancer or an artist or photographer, your pricing is going to be the thing that determines whether you get those initial gigs and how you market yourself going forward.
Select a Freelance Niche Before Determining Pricing
Before you even begin thinking about pricing as a freelancer, you’re going to want to decide on a niche, this will help you to establish a market to sell your product to – making it easier to determine your pricing.
Locating a viable market for yourself and your niche will require plenty of homework and self-reflection. Are you a graphic designer with an Instagram page and a basic website? Perhaps you’re hoping to take your talents to the next level. Start by reaching out to local companies that you think may be interested in doing a free project – just to get your foot in the door.
Once you’ve established yourself with a couple of smaller, free projects, you can consider charging clients for your services, as you’ve established a body of work to showcase to prospective clientele.
Pricing Models Are Business-Specific
There are typically two pricing models in the freelancing world: by the hour or by the project. These two pricing models are fairly standard, although a blend of the two, or one or the other may be the best fit for your business – they also don’t account for overheads, which should be a separate part of your pricing calculations.
Hourly rates are what most freelancers do when breaking into the field. Many have held hourly wage jobs before and so it’s familiar and simple to make calculations. One hour of work at $X/hour makes your final pricing easy to understand – for you and your clientele.
Sometimes, certain freelancing businesses work better on a project basis. That is, the project is paid in-full at the end of the project, once the deliverables are completed and delivered to the client
Depending on the scale of the project, a blend of an hourly rate and fixed-price model may be necessary – although this is unusual and should generally be avoided as they tend to complicate client-freelancer negotiations unnecessarily.
A Guide to Charging By The Hour
If a client comes to you and asks for an hourly estimate, you have two options: you can either guess how many hours a project will take you – a fine choice for those with an established business record and historical project data to back up the estimate. Or, you can utilize a time-tracking software like that provided by Upwork. Upwork’s time tracker works exclusively within the Upwork software as it is tethered to your Upwork projects.
When first beginning in the freelancing world (with those free projects), it’s a good idea to take stock of how much time they’ve taken you. As you’re likely to be looking for familiar projects when you first start selling yourself a freelancer, those projects will serve as a useful template to provide for new clients who are looking for estimates.
Freelancers frequently sell themselves short on their hourly rates. It’s a natural part of business ownership, self-worth assessment and confidence. If you think you’re selling yourself short, try asking friends or other business owners what they would charge or what they would pay you based on an honest assessment of your work. Bear in mind that you have a particular and unique skill set that is in high demand in the global marketplace and thus commands a higher price tag than your average minimum wage worker.
Charging By the Project
A progression that most freelancers will make throughout their career – regardless of their chosen field – is to begin charging by the project instead of by the hour. Eventually, it will make more sense to charge by the project, as you may become too busy to charge by the hour, or your responsibility may change as the project continues, adding to your hourly workload.
Part of the allure of freelancing for most people is that it offers an opportunity for greater work/life balance. You don’t want to compromise on work/life balance by overworking for a lower hourly wage. Soon, you’ll realize that clients care more about the finished project and the quality of the work, rather than how long it took you to complete.
Exactly when you should start charging by the project is largely a matter of personal choice, but if you’re finding that you’re inundated with work and unable to keep easy track of the number of hours you’re spending on a project, or if you’re finding that you’re actually being underpaid and overworking – then it may be time to start charging by the project and making more money, but working less.
Value & Quality Over Time
One of the truisms that you’ll notice as you start to grow within the freelancing community is that the higher paying clients (read our guide to obtaining more of those here) will pay far more for quality work, rather than caring how much time you’d spent on it.
You could spend an hour creating an incredible logo for a business, or spend two hours creating an amazing website that ticks all the boxes of good web design, but if you’re charging by the hour, you may find that you’ve criminally undervalued your own work!
Part of the problem will then become justifying raising the price tag to something more acceptable to another client, if you’ve already established yourself as a cheaper option for new clients versus others with worse-quality work, but higher prices. At the end of the day, your clients may go to the lesser-quality freelancer and pay them the same price that you should be earning, for better-quality work.
What Are Other People Charging?
This question is something that freelancers often ask themselves – and then use that figure as a basis for their own work. While we understand that it is natural to compare yourself to others, charging for your work based on what others charge is a huge mistake!
Unfortunately, charging what person X charges for the same work will only keep your market value at the same as that other person – and who’s to say that their work is as good as yours?
Even if it’s better than yours, objectively, charging what they’re charging will never allow you to increase your market value and increase your rates, despite the fact that you make work more.
Comparing yourself to other people in the freelancing space is a natural byproduct of working for yourself and looking at the competitive field around you – but these other people aren’t you. Your product, skillsets, education, experiences, productivity levels, technology access and a whole lot more are completely different. So, charging what they’re charging just because they’re charging it is a mistake.
So, What Should I Charge My Clients?
Charging your clients isn’t a magic number, nor a magic equation. You can charge your clients whatever you want. Make a number up! While this may seem like a silly thing to say – it’s true!
You can do all the number-crunching you want, but ultimately, you’ll need to come up with a figure that is fair and affordable for the client, while also being respectful of yourself and the amount of work you’re going to be doing and the quality of work you know you can produce.
Assessing the value to your clients is one of the best ways to come up with a figure, while taking into account the other things we’ve mentioned. A good rule of thumb is to ask you client two questions:
Do you have a budget in mind for the project?
Asking this question will help you to dismiss lower-budget clientele (who doubtlessly will be able to find freelancers within their price range, so don’t worry about them!), and offer you an insight into whether or not this particular client can afford your services.
Give a ballpark figure
There’s a way to word this question that will provide context to your client. “This project will likely cost between $X and $Y to complete, depending on the scope of the project.” By providing your own ballpark, this will put the ball in your client’s court. Can they afford to spend between X figure and Y figure on this?
Something to Bear in Mind
Pricing negotiations happen once the client has reviewed your work! This isn’t the first conversation you’ll have with them. The contract negotiation and pricing negotiations will happen after the client has reviewed your portfolio and decided that they might like to hire you for the project. Therefore, there’s a reasonable assumption that they’re not going to run away and not come back, unless you price the work outrageously.
If they like you and your work, they may be more willing than you think to pay your asking price.
Always Have a Contract
We cannot stress enough the importance of having a basic contract template for every job you do, once you break into the freelancer world. Having a contract – outside of contracts offered by Upwork and other freelancer portals – is a protection method for you and your client! It prevents any misunderstanding or miscommunication and should be written in a clear manner.
Having a contract should lay out deliverables, timeframes, pricing and the commitments of each party. They should always be signed and dated by both parties. Remember, you’re not being rude by insisting on a contractual obligation by your new client. In fact, they may think it more professional – and even if they don’t – you’re protecting yourself by having one.
Setting prices as a new freelancer can be a daunting task, but it isn’t as complicated and scary as it might seem and can be simplified by really considering all of the aspects of your work and understanding the concepts of value and quality over the amount of time spent on a project.
Everyone has to start their business somewhere and setting competitive pricing that carefully considers your value is all part of self-employment. Happy freelancing! May it enrich your bank account and your quality of life at the same time.