One of the most difficult parts of becoming a freelancer/consultant or selling your services is figuring out how much to charge. As a freelancer or small business owner, putting a price tag on your services can be tricky and confusing. When I first started my consulting business I made the same mistake that many freelancers/consultants make. I charged an hourly rate not realizing that sometimes your expertise and knowledge results in you completing the job more quickly than someone who does not have the same level of expertise. What you know is more valuable than how long it takes you to complete the project. So if you base your compensation on the number of hours you spend working on a project you can potentially lose out on income. You should be getting paid for your knowledge and expertise, not the number of hours spent on completing the tasks. Clients don't pay for the number of hours you spend working. They don’t care if it takes you 30 minutes or 30 hours to complete the project. Clients care that the work is done and it is done well. They're paying for solutions, not hours. When you charge based on the project, you are tying the price of the project to the client’s end result. The end result is all that the client cares about.
When I took on my first client, I had no idea how to set my freelance rate. I believed if I asked for too much, potential clients would view me as being greedy and if I asked for too little I would be short changing myself and not get paid what I was worth. In the end, it resulted in me being underpaid and overworked. As my business started to grow I changed my pricing structure. Instead of hourly billing I changed to a project based pricing structure. Because I also provide speaking services along with consulting services my current pricing structure is a hybrid. For speaking engagements, hosting gigs, and facilitation services I charge hourly, but for freelance writing gigs or similar projects what I charge is based on the project and also the client's budget. This structure has worked best for me. Being able to integrate both has allowed me to set prices that are not only fair, but also reflect my knowledge, expertise, and experience. In short, your rate should reflect your value.
I've spent hundreds of hours (thousands even) educating myself, attending workshops, & learning about my craft so that I can bring top notch services to my clients. Remember your level of expertise, knowledge base, and experience all factor into the value you bring. Why shouldn't you be compensated for it? When I shifted the focus of my freelancing away from the time I worked and toward the value I delivered, it changed everything. It completely changed my income potential and how much I made.
Freelance web designer Jake Jorgovan says that one of the mistakes that many creatives make is basing their pricing off of what other people charge. They know that this person charges this much for a project, so they charge accordingly and match their rates to the market price. While it is good to know what the current market price for your services are neither of these methods of pricing do anything to help you make more money in the long run. Both methods of pricing keep you stuck in the same grind of low pay for a lot of work. So how do you decide how much to charge for each project? Jake says deciding what to charge is much simpler than we think. "Make up your pricing for every client. There is no formula, no rules, and no perfect way to do it. Instead, your pricing is made up based on a handful of criteria.While there are some criteria to consider, it is important that you understand that there is no formula and are no rules to pricing." Below are 4 things to consider when determining your price:
Know Your Client. When approached by a potential client, listen to what they want and begin the conversation by asking them why they came to you in the first place. Ask them to describe exactly what it is they’re looking for. Ask them about any past experiences with other freelancers, ask them specifically what made them wake up that morning and reach out to somebody like you. Was it a specific event that’s affecting the operations of their business? Was it a culmination of different events? At this point, you’ll uncover exactly why they’re firing an old process and implementing a new one—and why they chose to do so, through you!
Additionally, ask them about their expectations. Are they the hands on controlling type who will micromanage the project and have your number on speed dial calling you all day about the status of their project or are they willing to give you creative control and only add input when solicited by you? Understanding their personality is key to discovering how much creative control you'll have and/or how easy or difficult it will be to work with the client. These are all things you should be factoring into your price.
Identify the Risks. According to Brennan Dunn, consultant and founder of Double Your Freelancing—an educational hub for freelancers, when clients seek him out, at that point he's acting like a doctor in a way:
"If you don’t heal the wound, what will happen to your business? Their response is usually something more aspirational. For instance, they’re not going to grow as quickly as they wanted to or the lifestyle changes as a business owner. I also want to know what financial impact this will have if it goes unfixed. The only reason I’m asking this is I only want to work on a project if I know I’m an investment."
Brennan says, "that by identifying the financial impact the project will have on a client’s business, you’ll also be able to “anchor” your pricing model for later. For instance, if you decide to charge $10,000 a week for your services and the result of your project will yield three times more in investments for your client, the $10,000 figure will look much more feasible compared to a standalone number."
Identify the Problem The Client is Looking to Solve. Ask them if the problem they’re looking to solve could just magically go away, what would tomorrow look like and what would be different about their business, their life and everything else. All freelancers/consultants are in the business of solving problems. It's why we sell our services, to fill a need void in a client's business. Once you know what the client's problem is you can effectively leverage your own skillset to craft a solution based on what success looks like from the client's perspective.
Present Pricing Options. While many newbie freelancers offer one simple price for their services, seasoned freelancers offer different pricing packages (because there's levels to this ish). Offering different pricing options allows clients to choose the model that best fits their needs and budget while also not cornering them into one decision of hiring vs. not hiring. Industry experts say that if a client first sees a single quote, it’s placed in a vacuum all by itself often making the feel like it's their only option. However, when you offer options you're providing your clients with choices and increasing the likelihood they'll hire you instead of shopping around for someone who is cheaper. Just to put things into perspective, Brennan shares this analogy:
“Imagine that you’re out in the rain. You don’t want to be cold and wet anymore, but the problem is you’re cold and wet. Your solution is to not be cold and wet.” The offer or the “package”—can be a number of things: As a cheap solution, you could put a piece of cardboard over your head; it might stop you from being wet, but you’ll still be cold. You can get an umbrella; it’s a better solution than cardboard. As a high-end solution, you could walk inside a really swank hotel with a fireplace, where they give you a robe and a cup of tea."
In this example, we see 3 different options for solving the problem and when presenting solutions to clients you want to give them choices. You never want to offer a take it or leave it price. Brennan says that dedicating a little extra time towards each proposal will help to build your clientele. You’re providing clients with options—ones that’ll look more feasible once placed in a side-by-side comparison. What you’re also doing is reiterating the needs of the client, as said by them, so there are no surprises. So, start massaging the process from early consultation—you’ll not only be able to increase your project rate, but you’ll also be equipped to effectively justify it to your client.