If you’ve ever had a client balk at the price you are asking for your work, then you can probably relate to this post.
The purpose of this post is NOT to tell you how you should decide to charge your clients or how much you should charge. There are plenty of posts out there for that already. Instead, this post is intended to outline some of the pricing dilemmas that freelancers face and maybe provide a few tips to give you an advantage in the great freelancer pricing war.
At the end of the post, I’d also love to hear how (or if) you’ve addressed these dilemmas in your own freelancing business.
Hourly vs. Project
Freelancers, themselves, disagree on which method of billing a client is best. Those freelancers in favor of charging clients by the hour say that it protects them from scope changes, unexpected client meetings, and other time drains that could ultimately cause them to earn less. Those freelancers in favor of charging by the project say that they can earn more overall by working quickly and efficiently and that clients also like it because they know up front how much they will pay.
Guess what? Both sides are right.
In my opinion, there are times when it is appropriate to bill by the project and other times when it is actually best to charge an hourly rate. Charging by the project is the most profitable option if the project scope is clearly defined and you are very familiar with the work required. However, if the scope is vague or you have limited experience with a particular type of work you may actually be better off charging hourly.
The Trouble with Market Rate
Have you ever been told that you should charge market rate for your freelancing services? Me too.
The trouble with charging market rate is that there isn’t just one market rate. That’s because, as much as some people would like to tell you otherwise, freelancing really isn’t a commodity.
Think about it. When you go to the grocery store to buy a banana, they are pretty much all the same. You likely only have two choices to consider: organically grown or non-organically grown. Otherwise, bananas are basically all the same. There’s a clear market price for organically grown bananas and another clear market price for non-organically grown bananas. (Okay, possibly there’s a third market price for overripe bananas.) Your choice is easy.
It’s not that way when it comes to choosing a freelancer. All freelancers are not basically all the same. There are just too many variables to consider, which is why there isn’t a clear market rate for freelancing services.
Here are some of the variables that affect what a freelancer charges:
- Innate ability
- Specific training
- Years of experience
- Industry-specific knowledge
- Whether the freelancer is specialized
- The reputation of the freelancer
- The freelancer’s availability
- The freelancer’s reliability
- The cost of living for the freelancer
As you glance at the list, you can probably see why choosing a freelancer is more complex than buying bananas. And, those are just a few of the variables that affect a freelancer’s rate. You can probably think of others.
Charging What You Need to Live
Many freelancers will start with what they need to live on and calculate their rate from there.
While it’s true that you definitely need to be able to live off of what you earn as a freelancer, starting with your living expenses is not necessarily the best way to calculate a rate for yourself.
First of all, your client doesn’t really care about what you need to live. Okay–well, some of them may care, but your cost of living isn’t what’s going to drive a client to purchase your services and to pay you fairly.
If your cost of living isn’t what you should base your rates on, what is?
In my opinion, the answer is value. Clients and potential clients are very interested in receiving value. If you can demonstrate that you provide value through your services, clients are likely to purchase AND to pay what you ask too–which means that you can earn enough to live on (and then some).
The Volume vs. Quality Paradox
Sadly, there are always a few freelancers who think that they can make up for charging a low price for their services by taking on a high volume of work. Some may even try to charge the lowest rate.
At first, this strategy for getting clients may seem to work. If you have extremely low rates, “clients” will probably flock to you, looking for a bargain. When you need just a bit more money to survive, what do you do? Well, you have to take on even more clients so that you can earn more.
The trouble with this strategy is that when a freelancer’s volume of work increases, the quality almost always eventually slips. Sure, some freelancers will be able to maintain a high volume of work for a while.
But in the end, you’re not a banana (see my earlier illustration). You also don’t have an endless supply of time. There’s more to consider when determining your rate than just the dollar amount.
Should You Be the Middleman?
Another rate dilemma that freelancers face is whether or not to outsource their freelancing work. This strategy allows a freelancer to take on more work than he or she would be able handle alone. A freelancer who does this can transition from being the provider to being the client.
However, this strategy is not without its drawbacks. Here are few of those to consider:
- As a middleman, you are ultimately responsible for the quality that the end client receives. This may mean stepping in to revise or redo the work of one of your subcontractors.
- You have to make sure that you understand the end-client’s request and convey it to your outsourced workers accurately. A middleman can sometimes be the source of communication difficulties.
- You need to charge enough money for your services to be able to pay the freelancers you have hired AND take a portion for yourself. This may put your rates near the top of the market for your services.
How Do You Deal with These Dilemmas?
How are you faring in the great freelancer pricing war? How do you overcome some of these issues?
Share your answers.
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