A Smarter Way to Price Your Freelance ProjectsBy Carrie Cousins March 21st, 2018
The hourly rate. It’s the go-to billing plan for many freelancers, and it needs to stop. Hourly billing doesn’t incentivize you to work efficiently or charge clients what a project is truly worth. This is especially true as you gain more experience and become an expert in your field.
As you mature in your career and take on increasingly complex projects, consider moving to value-based pricing. In this model, your rate is anchored by what you provide—not how long it takes you to provide it. If your work consistently meets and exceeds the client’s need, it carries the same value regardless of whether it takes 20 hours or 20 minutes. The higher you value the work you, the higher they’ll value it. That opens to the door to more lucrative opportunities.
So how should you price projects to demonstrate value without overshooting client budgets? There are several variables to consider, some within your control and others that you’ll have to adapt to depending on the situation.
How long will this project take? Think about the time you will spend doing actual work, plus meetings, phone calls, and other admin tasks. Add up those hours, tack on 10 percent for incidentals, and multiply that by how much you normally charge per hour. This is the starting price for the project (and the absolute pricing floor in negotiations).
Will this project tap out your availability? Or can you take on other projects concurrently? Exclusive projects should get quoted at a higher rate because everything else goes on hold.
It’s tempting to compete with the freelancers you see every day at your local cafe, but when pricing your projects, align your rate with the client, not your friends. The rate for an article in a New York publication will be higher than that same article in an Omaha publication.
Need help finding rates in different markets? Try a cost-of-living calculator. Compare locations and then increase or decrease your rate based on the percentage difference in overall costs.
This is where things get more subjective. How much do you like working with this client? Do they offer interesting projects? Do you get a lot of business from them? If the answer is yes, then you should prioritize the relationship over a per-project price.
Consider discounts for long-term, or potentially long-term, clients. And don’t be shy about noting the discount on the invoice. By showing how much you value working with them, you’ll set yourself up for continued work.
Conversely, what if you don’t particularly like this client? Maybe they’re difficult to work with or miss deadlines. In that case, up your bid to make sure the project is worth the trouble. How much is up to you, but 20 percent isn’t unreasonable.
This is the quickest and easiest way to price, but it allows for the least flexibility. If your client sent out a request for proposal (RFP), chances are they already established a budget and noted it in the request. Quote within the budget and scale services down (or up) to make it worth your time.
We’ve talked a lot about your needs as a freelancer, but pricing must also reflect the client’s requirements. They’re investing in you, and they need to see a return on that investment. Fortunately, you can actually use ROI to set and justify your prices in terms the client will likely understand.
Think of it like this: If you are writing a press release or article for a company that sells widgets at $1 each, and you charge $250 for your work, the company will have to sell 250 widgets to break even. On the other hand, if the client is not selling widgets but renting hotel rooms for $250 per night, they’d only have to rent one unit to break even. The ROI in your work will be higher for the second client, so you can charge a higher rate.
Do your homework to get an idea of what a reasonable ROI looks like. Charge appropriately, and don’t be afraid to turn down projects that just don’t make sense. There’s no easy formula for pricing projects, and developing a strategy might take a little time to get exactly right. But you’ll eventually find that sweet spot and learn when to increase your rates to reflect your increasing value.Image by iStock