Yes! Scope creep is a dangerous one and even experienced freelancers can get suckered by that one sometimes. Great tips, Laura.
20 Pricing Principles for Freelancers
If you’re a freelancer, you’ve been asked that question before. You may not have known what to say, or you may not have been comfortable with the price you quoted. That’s because pricing our services is one of the toughest issues that freelancers face.
No one seems to agree about pricing. There’s a lot of opinions out there and many of them contradict each other. What’s a freelancer to do?
This post is a bit different. You’ll find not one, but twenty different pricing principles for freelancers in one handy place. You don’t have to apply all of these principles if you don’t want to. However, in my freelancing experience, these really work.
Are you struggling with how to price your freelancing services? Here’s a checklist of principles to review before you set the right price for your freelancing services.
- Base Your Fee on Quality of Service, Not Quantity–You’ll wear yourself out if you are trying to do a high volume of work for a low fee. Instead of trying to charge the lowest price, concentrate on producing high quality services that justify a higher price.
- Your Price Should Cover Your Expenses and Allow a Profit–While this may seem obvious, many new freelancers have never run a business before. They’re not used to thinking in terms of profitability. Be sure to include overhead in your expenses.
- Update Your Price Regularly–Are you charging the same rate now as you did last year? The longer you go without raising your rates, the more likely you are to slip into the red. Plus, you are worth more now than you were last year because you now have more experience.
- Base Your Price on the Current Job, Not Promises–Fairly often a prospective client will contact me wanting a price break because in the future they *may* have a lot more work for me. However, unless they are willing to sign a contract now for that future work, they don’t get a break.
- Don’t Commit to a Project Price without Knowing the Scope–You need to know how much effort is involved before you can quote a price. You can’t do that unless you know the scope of the project. Scope creep in freelancing is a common problem, so get it in writing.
- More Work Should Equal More Pay–If the client adds a task to the project after you’ve accepted it, your rate should almost always go up. It’s best to point this out sooner, rather than later. Otherwise, you could find yourself working for a lower hourly rate than you were counting on.
- Free Work Often Doesn’t Pay–Occasionally, someone will ask you to donate your services. This may be coming from a charity, or a friend or family member. Think long and hard about whether you want to do this. Remember, free = no pay.
- Don’t Work for Anything Other Than Money–Another request *prospects* often ask of freelancers is whether they would be willing to work for exposure, or even whether they would accept a barter. While some freelancers do engage in barter, remember that money is what pays your bills.
- Your Prices Are a Guideline–Remember that your prices are a guideline. You are a freelancer, so you are in control. If you feel that a particular project is going to be more difficult than most, you can raise your rates to make up for the extra effort.
- Never Guess What to Charge–While you may want to give a ballpark figure to a client before you know the details of a project, don’t commit to a firm price without knowing the scope. (Hint: if you do give a ballpark figure, guess high and give a range.)
- Do Know What Other Competitors in Your Field Charge–As a freelancer, you should know what your competitors charge for their services. You can find this out through professional organizations (which often track such information) or by looking at competitor sites.
- Understand Pricing Packages before Committing to One–Pricing packages can be a great motivator for prospects who are undecided, but it’s important to put a lot of careful thought into any pricing package that you offer. Make sure that the package makes business sense.
- Put Date Limits on Your Pricing Proposals–The last thing you want is to have a prospective client pulling out a five-year-old proposal of yours and demanding that you honor the prices quoted. It could happen unless you include a date limit on your proposals.
- It’s Okay to Charge Late Fees–Your freelancer agreements should include provisions for late fees. Most other businesses charge extra fees for their clients who don’t pay on time. Remember, as a freelancer you are also a small business owner.
- It’s Okay to Charge More for Rush Work–Are you taking on a project with an extremely tight deadline? While I don’t generally recommend accepting rush work, if you do take it then it is okay to charge extra for it. Just make sure the client knows this up front.
- Lower Rates Don’t Necessarily Mean More Clients–There’s a common misperception among some members of the freelancing community that lower rates will lead to more clients. This is not necessarily true. In fact, if your rates are too low, many prospects may think that you are not any good at what you do.
- If Your Clients Say Your Rates Are Too Low, They Are–It’s a sure sign that you need to raise your rates if your clients are telling you that your rates are too low. Believe them and fix it. Remember, they didn’t have to say anything.
- Track Your Time to Understand Your True Rate–If you don’t track your time, how will you know what hourly rate you are really earning? Fortunately, there are plenty of tools available online to help you with keep track of how you spend your time.
- It’s Okay to Have a Proposal Rejected Due to Price–I know it hurts to have a proposal rejected, but stand your ground when it comes to your prices. If price is the main objection a prospect has, they probably won’t make a good client for you.
- Understand When to Use Hourly and When to Use Project Pricing–Hourly vs. project pricing is a lively debate among freelancers, with some preferring one over the other. Understand which one works best for the types of projects that you do.
I hope that I’ve taken some of the mystery out of pricing freelancing services. Did I miss any pricing principles?
Image by MinimalistPhotography101.com
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March 16th, 2012 at 3:17 pm
March 16th, 2012 at 3:52 pm
Sharon, You’re so right. Scope creep can be hard to recognize. It’s best to think about it early and watch for it throughout the project.
March 17th, 2012 at 12:10 am
Pricing is one of the aspects of freelancing that I have been having difficulties with. After 2 years, you’d think I already have a solid pricing plan. The problem is, most of the time, I really do not know how to do it.
Thanks for your advice, Laura!
Chatman R.March 17th, 2012 at 11:04 am
It seems pricing strategy can be summed up by knowing yourself, trusting your skills, staying aware of your limits, and how it all fits in with the market and freelancing environment. Confidence seems to be the core, but I may be oversimplifying here.
March 17th, 2012 at 2:23 pm
We have in the past done some work as discussed in #7 but they were done voluntarily.
Maybe it’s an asian thing, am not sure, maybe it’s karma or something but a few of us here felt that it’s okay to give back to society.
We didn’t do it for free though, just made sure it covered our basic operating cost that’s all, no profit. In the end, somehow we felt good doing it, no regrets.
March 17th, 2012 at 4:02 pm
Wowie–I hope this post helps you.
Chatman, If that summarizes how you price projects and helps you remember what to do, then that’s good.
Morgan & Me Creative–It’s okay to give back to society, but not to the point where you jeopardize your business. That’s why I say to think long and hard about it.
March 18th, 2012 at 6:27 pm
Ah, the contra or barter deal. I won’t do those unless I genuinely want the product/service (and that’s almost never). They always work out better for one party, and it’s not usually you.
March 19th, 2012 at 1:06 am
Great tips Laura..though i dont agree on point 14 becoz as a freelancer if u start charging late fees then chances are client not coming to you…sometimes even client takes work from his/her client and outsource and hence they are dependent on them for bills to be cleared…rest all points are more than agreeable and great tips too…
Keep Writing such awesome blogs !
March 19th, 2012 at 7:42 am
Lucy, I understand totally and agree. :) Usually, these deals are made by people who can’t really afford your services.
Ensemble–I understand your reluctance to charge a late fee, but remember that you and the client will agree about what “late” is. Regardless of his or her situation, a client should live up to their end of the bargain that they agreed to.
March 19th, 2012 at 11:11 am
These are all really good points that many of us have learned the hard way over the years. It’s important to be confident that your services are worth what you’re asking. Practice saying your hourly rate out loud so you aren’t intimidated when it’s time to tell a prospect you charge $75 or $100 an hour.
I would add one caveat to principle #8 “don’t work for anything other than money.” Sometimes bartering can create good business partnerships, but you have to barter for goods and services you would actually use and spend money on.
I have traded photography services with restaurants in exchange for free meals. I have also traded advertising and copywriting material with a landscaping company in exchange for free tree trimming and lawn mowing services. I got some great clips and I didn’t have to mow my lawn for the summer.
Barter does have value. Just make sure you’re getting value back, either in time or money. Be creative.
March 19th, 2012 at 10:01 pm
Hey Laura– Great post! I especially hate #4– if a client is already beating you up on price, and then promising more, I am sure they expect all of the work to be at the substandard rate. Why on Earth should we agree to something like that?
Setting writing rates is not difficult, but what IS difficult is knowing what you are worth and sticking to your price. I have done some project management work where I have hired the freelancers, and the thing that often strikes me is the wide range of bids on some of the projects. Most often, the price and the quality do not mesh…. so it is confusing on the client side, too.
March 20th, 2012 at 6:34 pm
I was recently given this tip: take the salary you would expect to earn in the position (e.g., $65,000), delete 3 zeros, and charge that per hour (e.g., $65). This is a great shortcut that seems to account at once for experience, market, and skill/task. It works best in a field with little overhead (such as editing or consulting).
March 21st, 2012 at 11:41 pm
Another excellent post, Laura! These pricing principles are a must for any serious freelancer.
Here’s the typical speech of some Project Managers (translation agencies):
“I appreciate that this rate may be lower than that which you are normally paid for this kind of work. However, please bear in mind that this client would provide you with high volumes of ongoing translation work.” What they DON’T understand is that there’s no benefit in working more (high volume) for less (money).
March 22nd, 2012 at 9:09 am
After 3 years, you’d think I already have a solid pricing plan. The problem is, most of the time, I really do not know how to do it.
Thanks for your advice!
March 22nd, 2012 at 8:41 pm
It did help me, Laura. :)
As a matter of fact, I was just talking to a prospective client from Odesk and the project was priced way too low. I stood firm and said what my rate is, and after a few minutes of deliberation, he did agree.
I have also created a pricing plan for all my services. Thanks again for your help and the other insights provided by other people here.
March 26th, 2012 at 9:06 pm
Great post! Sometimes we really need to step back and price on value / quality. I live by the rule that I provide more in use value than I receive in a dollar amount, and so far that has worked wonders.
March 29th, 2012 at 7:26 am
If you are a freelance worker, you have been requested that question before. You might not have known things to say, or you might not happen to be confident with the cost you cited. That’s because prices our services is among the most difficult problems that self employed face.
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M HasanMarch 29th, 2012 at 2:50 pm
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April 9th, 2012 at 9:24 am
This is brilliant – I wish I’d had this list when I was starting out! The “do this cheaply and there’ll be plenty more work” is one I get approached with regularly. Learning to stick to my guns not only meant I don’t sell myself short, it also means that clients who undervalue what I do get weeded out early on!
April 27th, 2012 at 6:08 pm
Excellent list… especially #16.
Low freelance rates definitely does not mean more jobs or more attractive bid. You’d run the risk of looking too cheap and being perceived as a low skilled freelancer. Bad freelance strategy!
PeterMay 12th, 2012 at 3:58 pm
“Don’t Work for Anything Other Than Money–Another request *prospects* often ask of freelancers is whether they would be willing to work for exposure, or even whether they would accept a barter. While some freelancers do engage in barter, remember that money is what pays your bills.”
I can not agree. Barter- yes, you are right it wont work. But working for exposure is sometimes necessary. In my case for example, I am starting as a freelancer, I need experience, exposure and cover letters. Especially if I want to earn money- no one will accept me without experience- even for data entry :/. Moreover I think that it is better to work for exposure at the beginning rather than working for 2$ per hour, If somebodys main reason to choose certain freelancer I am already standing on lost position cause there are thousands of freelancers from Asia or Africa that are working for 2$/h or even less. What is worther some people think that it is obvious that freelancers are cheap. Quite recently I saw project on oDesk: write businessplan, budget: 30$ (for whole job not per hour)
July 2nd, 2012 at 3:36 am
This is a very good article because it touches on many of the problems that I have. Unfortunately I either can’t find quality work because its not there or I’m freelancing in the work field (I am a programmer not a website builder). And scope creep or even flood is a massive problem. One way to combat it is to have rock hard requirements and a contract. The second issue is pay, which often gets beaten down to very low levels because – the end product is a website and the bespoke programming is ignored.
I was earning less that if I had a permanent job, so I’ve gone back to permanent work sadly.
July 24th, 2012 at 3:51 am
I would rank the ‘International Factor’ at the top: if you don’t get the real currency and transaction rate right from the start, the rest, shall we say, gets lost in translation….
September 30th, 2012 at 9:40 am
A very useful article explained in a nice way. After all it’s totally depends upon a freelancer how he deals with the situation but the suggestions in the article will help a lot to come to a right decision.
Thanks for sharing this article.
December 4th, 2013 at 10:29 am
Thanks a lot for this great information. I have been looking for this.
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