Setting Rates As A Freelancer -Oh, money how we love you when you’re flowing and loathe you when you don’t appear.
Hands-down, this is the side of freelancing that causes the most extreme reactions. Heck, this is the part of LIFE that drives people to lunacy.
When we have money and are making it, we tend to stress less, stay well longer, and smile a heap more.
But if that rockstar client doesn’t call for a week, the twitching begins as the middle finger flies free at anyone who deigns to drive in our general vicinity. …or is that just me?
In this line of work, quoting rates to relative strangers and committing to a self-assessed value is all in a day’s work for a freelancer.
The money part can be intimidating. From pricing strategies and determining how much to charge to getting paid, consider Setting Rates As A Freelancer a user-friendly walkthrough to pricing your services.
You’ve built the foundation for life as a freelancer by starting a legal business, setting-up a portfolio, crafting a solid profile, and passing Freelancing 101 with flying colors…right?!
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Setting Rates As A Freelancer
Quoting and setting your freelance rates is a delicate, balancing act. Before every quote sent, I still do the freak out dance, pacing around the screen, questioning my sanity until I finally push the ‘Send’ trigger just to end the madness. I’ve always imagined my neighbors watching with a large bowl of popcorn.
Even when you’ve been at this for a hot minute, it takes a certain amount of moxie to not only know your worth, but quote it to someone on the other side of a screen.
The goal is to find the sweet spot. My mentor and fellow badass, Aileen Bennett of Creating Clever said it best.
The Right Number
The right number is the bittersweet median where you and the client coexist in relative peace. Quoting too high could cost you the project. Quoting too low will leave you feeling angsty and undervalued. Resentful people don’t deliver extraordinary work.
In the early days of quoting clients, you may experience something I’ve lovingly dubbed as Freelancer Bipolarism. A condition where the quoter dwells in a mental purgatory of sorts. Affected by drastic, emotional mood swings, you may find yourself on the edge of your seat refreshing sent quotes every few seconds. The lows come in the form of laptops being thrown and at times total disconnection from all digital devices.
…I heard about it from a friend.
Ask any established freelancer how they evaluate their work and prepare for an infinite flurry of answers. Going into this mosh pit, you need to know that there’s no one way to rule them all.
The good news is that you can avoid most of the quoting cray by taking a logical approach. Step one in figuring out how much to charge for your services is to select the pricing strategy that works for you.
The Four Pricing Strategies
You may believe that your skills are the Taj Mahal of the marketplace, but if freelancers of the same caliber are bidding on the same job -and your quote is astronomically larger, you’d better have the gumption to stand up real tall to defend your quote.
Anything’s possible, but always browse at what freelancers of your skill and expertise are charging for similar projects. That’s what we call Competition Based Strategy or Market-Based Pricing.
The internet is one of your greatest assets in comparing rates by trade, location, and experience. There are a plethora of profession-based associations and groups that you can use as a resource for everything from networking to industry standard prices.
Some freelancers charge more or less depending on seasonality and demand. Nothing explains this approach better than the national toilet paper famine of 2020.
Before COVID, toilet paper was a mundane expense of existing. During the pandemic, TP became a commodity people Ebayed at 5 times the typical price …and we, the people, bought it, made memes about it, and rationed pieces of it.
Yep. That Happened.
Cost Plus Pricing
This concept is one we’re all familiar with :
make something, sell that something
for more than you spent making it, because #bills. Cost-Plus Pricing asks you to calculate the costs associated with your product or service, adding a stress tax (profit margin) of 10-30% to the final price tag.
Personally, I struggle with this model for freelancers who have an intangible skill. How exactly does one quantify the cost of a mission statement?
I mean, it is the foundation of a brand’s entire operations…but would anyone pay the majillion dollars I think it’s worth? …Meh.
For those creative freelancers with a physical end product, like an artisan crafts, this approach makes more sense.
My personal favorite way to appraise the value of my labor and the fruits of my overeducated brain, Value-Based Pricing. In this model, there’s no such thing as an ‘all you can eat, scope-creep buffet’ at a single cost nor are there ‘one-size-fits-all’ project quotes. Can I get an amen?
Pricing by value allows freelancers to gauge the client, their expectations, and willingness to pay, giving you the freedom to custom quote every project and business individually.
Think of it this way, two perspective clients call, both wanting a price on product branding for the same product to the same audience. How much should I charge?
What if during the consultation call, client #1 drops their brand name… and it’s Apple calling, because they heard about my EPIC skills.
Client #2 is a brilliant duo who have engineered a product for the past five years and are getting ready to go to market.
Two clients are better than one, so obviously, I’m going to partner with both of them, but am I going to charge them the same?
With Value-Based Pricing, you can provide your superior service to both companies in a way that both you and the client wins.
By The Hour or By The Project
The great freelancer debate where many a smackdown has been had. People have strong emotions tied with their choice of ‘By The Project’ or ‘By The Hour.’ I say, go with the option that’s practical for you and yours.
And guess what. If you try one and it falls flat, you can always change your mind. Freelancers have the liberty and flexibility to choose a path… as many times as you’d like.
p.s. clients prefer consistency, so maybe not change your mind weekly.
By The Hour
Hourly rates ensure that every second of your time is billable.
Phone call -bill it.
Editing, bill that too!
If you’re working on a client’s project in any capacity, you can charge for it.
This is a stellar option for freelancers hired to fill a position with a never-ending list of to-dos, rather than a single, large project.
i.e. virtual assistants, social media managers, content strategists, etc.
It’s pretty difficult to be screwed over by things like scope creep, underquoting, and extra work when you’re paid by the hour. Keep in mind, this approach takes self-discipline and time-management skills. If you’re charging for it, you need to account for it.
By The Project
Project pricing is kind of a win-win situation for both client and creative when it comes to the large one-off projects like branding, website development, and design collaterals.
For clients, it means paying a single cost for a single project removing any budgetary ambiguity and restricted time allotments. Oh -and edits are included in the fixed cost.
For freelancers, it means badasses getting paid for badass work not to mention it’s one heck of an incentive to bust but, wrapping up the project in record time. Less time for the same amount of pay. #winning
All-around, this option let’s everyone take a big sigh of relief, allowing for the primary focus of the working relationship to be on what is being created rather than the micromanagement of details.
Of course, it’s not a flawless system. Most issues can be avoided altogether with a solid contract, and being up-front with your clients from day one about your policies.
Bonus Hourly Pricing Tip+
DIY pricing is the most personalized way to price your services. This logic-driven, freelancer-facing structure is based on how much revenue you need in order to be a freelancer and stay one.
So, what’s your magic number? The one that will keep you happily housed, clothed, illuminated, and fed within reason.
Let’s call it $3000.
Take that number and multiply it by 3. This gives you wiggle room for profit, taxes, and mid-month client disappearing acts.
$3000 x 3 = $9000
Divide that number by 4 for the four weeks in each month. That final number will be your hourly rate. Tah-Dah. Like magic.
$3000 ÷ 4 = $2,250 / week
Getting Paid For Freelance Work
How does the money go from their account to yours?
Money can be a seriously uncomfortable topic, especially when you haven’t discussed the when, where, and how with your client before pay day.
Even freelancing titans have moments when money makes them quake. But guys, money is what makes life as a freelancer possible. Billing, invoicing, getting paid, it’s a part of your business.
Comfortable or not, you have to handle it.
Getting Paid On Freelancing Platforms
The good news is that if you’re working on platforms like UpWork most of the details are worked into the initial contract signed between you and the client.
As the mediator, freelancing havens often provide support for both parties in cases of a dispute or monetary disagreements.
Many of the top-rated talent pool and networking sites are built with automated features that automatically ping clients failed payment reminders and invoices. This gives you more time to focus on the thing you do best.
The not so great news is that you have to think about them like birth control. They’re good for 99% of potential faux-pas, but it only takes once to fall into that 1% category. I’ve seen freelancers and clients alike lose thousands of dollars on these sites, believing the system to be the ultimate form of protection.
Bad shit happens to everyone at some point.
Nothing in life is fail proof, apply a touch of skepticism to your freelancing business and you may be able to avoid the random freelancer fall-outs.
Many platforms, if not all, charge the freelancer and / or the client a pretty penny for their services. The percentage and frequency depends on which company you’ve decided to call home.
Just because the fee is required, doesn’t mean that you necessarily need to be the one doing the paying. Personally, if the project is on the lean side and I’ll only lose a few dollars, I pay.
Showing generosity where you can may earn you a returning client.
On the other hand, if it’s a formidable sum, I tack it on to my formal proposal as an administrative fee, making sure to break down each cost for the client.
In money matters, weigh each project independently, letting my gut instinct guide me.
Flying solo means a bit more upfront leg work.
Don’t worry, freelancing today means that most things can be taken care of with automation. Here’s some helpful tips to help protect your bottom line.
- Payment Policies. Develop and place sound payment policies and procedures into your contracts. i.e. late payments, payment failure and terms, extraction dates, due dates, etc. Spell out every detail in common sense jargon that leaves nothing to chance.
- Keep It Consistent. Prior to beginning a contract, be up-front and forthcoming about your policies and how you operate. Then, follow through! If you say, ‘I charge a 500% late fee for unpaid invoices past 10 days’ -do it. This gives people an instant out if you’re not a good fit, sparing you from potential payment ghosting in the future.
- Good Standing. This one is often overlooked, but lemme tell ya, it has saved me from many otherwise uncomfortable and possibly sticky situations. It’s all about rapport. Treat your clients like inanimate payment-making objects and they may return the lack of favor. You and that person are creating something larger than the both of you. Build a relationship founded on mutual trust and respect, and I guarantee the odds of NOT getting paid significantly decrease. When someone likes you… they’re less likely to stiff you.
- Rest Assured. Never begin a project without receiving some form of monetary assurance. When someone has skin in the game, the idea of pulling a disappearing act loses its attraction.
You’ve got options :
By The Hour
-Require clients to keep a card on file with an up-to-date signatory approval document allowing you to withdraw funds each month at a set date for the hours invoiced.
-Require clients to fund a working retainer which will be paid in advance of the work. Rather than invoicing every week, you will send in a summary detailing the work that you’ve done, how much will be taken from the retainer, and how much is left in the retainer.
By The Project
-Set-up an installment plan that allows clients to pay a set amount as milestones are achieved. Be sure to always have a project commencement fee.
-When a sizable project inhibits your ability to work with others on the side, I encourage clients to pay a generous sum up-front at a discounted rate, so that I can float my business operations, spending 100% of my focus on the task at hand.
Charging Your Worth
Setting your rates is not only about experience, industry, and target audiences. It’s also about confidence. I mean that.
I was born a writer, but at some point I stopped believing I could charge for it. My working experience said, entrepreneur – creative thinker – and big-haired boss lady. I mean, I wrote entire books in my spare time. How did I miss the fact that I could make money doing this?!
In retrospect, my first year of freelancing resembles $19 -50 / hr. of, “please sir, can I have some more.”
For each and every day of self-imposed peasantry, I had to explain my fees to my partner who thought even my worst pieces were Pultizer worthy.
He saw something I couldn’t see. Little by little his loving squawks drove me mad. I would tack on an additional $10 here or $25 there just to shut him up.
Then, It Happened
Until one day, I lost my shit and was determined to show him. So, I quoted a prospective client $10,000 for a project.
$10,000 DOLLARS! 4 zeros and the cost of my life for 3 months.
And, I got it. I FREAKING GOT IT!
The client literally responded with a, “oh, that’s not bad.”
NOT BAD?! $10,000 is thousanaire territory!
That’s the day, I realized I was the one squawking.
Thinking back on how much I lost by not having faith in my ninja skills makes me ill. I’ve changed my quoting tactics
NO ONE should feel bad for charging what you’re worth. Does the mechanic feel bad for charging you a house note for fixing the vehicle you will need to pay him?
Nope, because he’s confident in his work and expertise. A service that you can’t do yourself without devoting years to acquiring knowledge and slumming it in an open-air auto shop.
Setting your rates as a freelancer takes time. Wherever you are in your journey to hustling in your jammies from home -give yourself some grace.
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What do you do? How do you charge?
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